Entrepreneurs are facing a mental health crisis – here’s how to help them

Mental health is a pressing concern in the startup community. Entrepreneurs face a number of unique challenges, including securing funding and meeting demanding performance goals while trying to achieve work-life balance. These demands can take a serious toll on someone’s mental health.

According to a report from the Business Development Bank of Canada, nearly half of Canadian entrepreneurs experience mental health issues, primarily related to stress and finances.

Entrepreneurs are twice as likely to report a lifetime history of depression, three times more likely to have bipolar disorder, and three times more likely to experience substance abuse or addiction. They are also twice as likely to attempt suicide or be admitted to a psychiatric hospital.

Yet many entrepreneurs have difficulty accessing mental health support. Cost is the biggest barrier, but so is the risk of being seen as too vulnerable. Many entrepreneurs worry that appearing too weak or bearish will jeopardize their chances of getting funding.

Entrepreneurship is the backbone of economic growth, so the importance of mental health support for entrepreneurs cannot be overstated. Recognizing and addressing mental health is not just a matter of compassion, but also an essential investment in society as a whole.

“The Founder’s Dilemma”

Apple founder Steve Jobs once compared starting a business venture to launching a rock into space. In other words, it’s very difficult. Many people are attracted to entrepreneurship, but few are commercially successful. And there are many people who quit for reasons they shouldn’t.

Noam Wasserman, dean of Yeshiva University’s School of Business, wrote about the “founder’s dilemma” in 2008. According to him, this dilemma revolves around the tension between accepting funding from outside investors and resisting losing control of one’s company and, in some cases, being forced out altogether. It is said that they are doing so. .

Fifteen years later, the landscape of the startup industry has changed. Early investors can now secure generous stock option grants and loans from the founders. Carrying large amounts of debt amid financial uncertainty puts a company’s flexibility and ability to innovate at risk.

Some founders, out of financial self-preservation, find themselves stuck in a cycle of constant fundraising to pay off debt. The strange urge to balance short-term funding with long-term operational excellence can spell trouble for any entrepreneur.

mounting pressure

Startup founders face more pressure today than they have in the past 20 years. Entrepreneurs are now wondering whether the effort is still worth it.

First, their fundraising runway is a cliff. In the first half of 2023, global venture capital funding fell by 48% compared to last year. In North America, venture spending in the second quarter was the lowest in three years.

Second, talent is scarce and expensive. Third, exit opportunities such as initial public offerings or sales to larger companies are disappearing for late-stage founders. This will lead to job cuts as early financial backers look to liquidate their investments while pressure mounts to find a “path to profitability”.

according to crunch base newsMergers and acquisitions of U.S.-based venture capital-backed companies this year are expected to be the lowest since 2013. Investment in areas thought to be booming only last year, such as health technology, has shrunk dramatically.

In this environment of high interest rates, scarce capital, and no exit, startup founders are facing a financial and mental health crisis.

Addressing mental health challenges

Previous research on business and entrepreneurial mental health can lead us to promising new solutions. In the current investment environment, there are many potential low-cost or no-cost solutions to founder mental health issues.

First, outside investors in private ventures need to be qualified not just in terms of net income or net worth, but also based on their commitment to public health in general and mental health in particular.

It builds on the wisdom and research behind the Founder Mental Health Pledge, pioneered by serial entrepreneurs Naveed Lalani and Brad Baum and supported by founders around the world. The pledge aims to eliminate the stigma around mental health and treat it as a business expense, including therapy, coaching and group support.

Investors should recognize the importance of protecting the mental health of founders by documenting potential harms that could befall the startup on term sheets. In practice, this could mean paying extra for mental health benefits or membership in a peer support network for founders. This strategy increases investor awareness and reduces the stigma around mental health issues.

Second, companies should establish specialized advisory boards dedicated to protecting the mental health of their founders. This will encourage founders to speak up to the committee about the difficulties they have encountered. This would be another important step in the uphill battle to destigmatize mental illness and steer founders toward mental health support.

Perhaps the most important way we can help entrepreneurs is by sending honest messages about their challenges and difficulties. and Hope. Growing a business venture from birth to commercial maturity can be emotionally exhausting. But with the right psychological support, entrepreneurship can inspire passion and purpose, resulting in prosperity.