The Real Reason Startups Fail: It's Not What You Think
There's a dangerous myth in the startup world that causes endless suffering and sets founders up for failure.
It goes something like this: "We're running out of money. If we don't raise more capital soon, we're done."
I've sat across from hundreds of founders in this exact situation—eyes bloodshot, shoulders tense, their world seemingly collapsing around them as the bank account dwindles.
But here's what I've learned after all my years of coaching some of the world's most successful startup founders:
Startups don’t fail because they run out of money.
They fail because their founders run out of energy.
When a founder runs out of emotional, mental, and creative energy, the company no longer has the fuel needed to sustain itself. Think about it. The company didn’t exist and had no money before it was started. It was only the founder’s creativity, energy and vision that attracted the capital in the first place.
From my experience, if the founder still has the energy and drive, they can attract the capital.
Now, this doesn’t mean that you should keep going as a founder. You may realize that your initial idea or product or business model didn’t work and choose to stop the experiment. There is NOTHING wrong with that. It can be just as courageous and virtuous to choose to stop and it is to persevere. But if you want to keep going, here’s what I want you to know:
When Energy Trumps Money
Most people think of startups in financial terms: runway, burn rate, cash flow.
But there's a parallel resource that's far more precious: your creative energy.
I once had a founder who had two weeks of runway left. We came up with a basketball metaphor that resonated with him: “It’s the fourth quarter, two minutes on the clock, and you’re down by 8 points.
How do you want to show up?” I asked him. “Give me the ball, coach,” he replied.
He rose to the challenge, got in action and within a week had over $1mm in checks to keep the company going…
While his bank account was nearly empty, his energy reserves were full—and that’s what made all the difference.
How Energy Depletion Affects Outcomes
For startups that have a viable product and business model but are still struggling, here's a pattern I've observed repeatedly:
When founders are forced to shut down their companies due to "running out of money," the root cause is usually energy depletion that happened months or even years earlier.
The real sequence typically looks like this:
- Founder's energy starts depleting (often unnoticed)
- Creative problem-solving and clarity of thought diminishes
- Team morale and performance decline
- Opportunities get missed
- Decision quality deteriorates
- Financial problems emerge
- Fundraising becomes harder
- "We ran out of money"
By the time they hit step 8, most founders have been running on empty for so long they can't see how their depleted state contributed to the outcome.
So what exactly causes this energy depletion, and how can you prevent it? Let's look at the specific traps founders fall into—and how to escape them:
Energy Traps and Escapes
The energy crisis doesn't happen overnight. It's a slow leak that builds gradually until you're running on fumes. Here are the major energy traps founders fall into—and how to escape them:
Trap 1: The Victim State
The Drain: Operating in victim consciousness," where every challenge feels like an existential threat directed at you personally. Your system constantly floods with stress hormones.
The Escape: Practice the shift to creator consciousness. When something goes wrong, ask "How am I creating this situation?" and “What is this here to teach me?” instead of "Why is this happening to me?" This simple reframe activates your creative brain instead of your threat response.
Trap 2: The Resistance Loop
The Drain: Constantly fighting against reality with thoughts like "This shouldn't be happening," “We’re not where we should be” or "We should be growing faster." What you resist, persists—and depletes your energy.
The Escape: Practice radical acceptance. Before trying to change anything, fully accept what is. This isn't resignation—it's the foundation for clear, effective response instead of draining resistance.
Trap 3: The Identity Delusion
The Drain: When your sense of self fuses with company performance, every business challenge feels like a personal failure. This doubles the emotional cost of everything you do.
The Escape: Create psychological distance between yourself and your startup. Remind yourself: "I am running this company, I am not this company." Separate your Being (Who you are) from your Doing (What you do). Treat it as an experiment you're conducting, not a referendum on your worth.
Trap 4: Dirty Fuel
The Drain: Using anxiety and fear as motivation. While effective short-term, it's like running a high-performance engine on low grade fuel—eventually, the system breaks down.
The Escape: Replace fear with genuine inspiration. Connect to what truly excites you about your vision. Use creative tension (holding both current reality and desired future simultaneously) to generate cleaner motivational energy.
A Founder's Most Important Runway
A founder I worked with was down to three months of runway. Instead of immediately rushing into fundraising mode, he took five days completely off—hiking, sleeping, disconnecting entirely.
His team thought he was crazy. "We're about to run out of money, and you're going hiking?!"
But when he returned, he had clarity he hadn't experienced in months. He saw a pivot opportunity the team had missed, restructured their approach, and closed a bridge round within weeks.
His explanation: "I couldn't see what was right in front of me because my energy was so depleted. Those five days gave me back my runway—my personal runway."
That's the thing about energy—when you're depleted, you can't see solutions that might be obvious with fresh eyes.
This Week’s Energy Practice
Conduct an energy audit:
- Track your energy levels throughout each day (rate from 1-10)
- Notice what depletes you (people, activities, thought patterns)
- Identify what renews you (might be smaller than you think—a 10-minute walk, a deep conversation)
- Implement one energy preservation practice (saying no, delegation, letting go of a "should")
Your startup's true runway isn't measured in months of cash—it's measured in your capacity to bring creativity, presence, and inspired action to each day.
Final Thought
Most startups don't fail because they run out of money.
They fail because their founders run out of energy, which eventually leads to running out of money.
Treat your personal energy as your most precious resource—more valuable than cash, more important than headcount, more essential than your product roadmap.
Because ultimately, the most successful founders aren't the ones who raise the most money or work the most hours.
They're the ones who learn to maintain their energy through the inevitable ups and downs of the journey.
Your startup needs you at your best.
With love,
- Dave Kashen
P.S. I've found that having the right support system is one of the most powerful ways to maintain and renew energy, which is what the IGE community provides. We are in the process of filling the spots for the founding members. It is invite only but If you're feeling the call to join us, YOU CAN APPLY HERE.
