The UK’s Office for National Statistics suggests that about 50% of businesses fail within three years, while in the US, as many as 90% startups are estimated to collapse.
With such high stakes comes a natural fear of failure—what if I lose all my money by investing in my startup? What will my friends and family think of me? Will it destroy my self-confidence?
So, to what extent does fear of failure stop people starting a business, can it be overcome, and can it even be a good thing?
How does fear of failure manifest in business?
Fear of failure can manifest itself in several ways. You might have a fear of letting people down, from friends and family to investors. Also, with the importance of personal brand in career success, you don’t want to be labelled a failure.
Fear of failure can simply be a lack of belief in your own abilities or a fear of the unknown—especially in a country or industry where entrepreneurship is uncommon. This fear is often embedded in the culture of a country, and its acceptance of entrepreneurship as a career option.
What impact does location have on fear of failure?
Some cultures are more forgiving of failure, such as the US, where failing is commonly considered a learning experience, and laws make it reasonably easy to start a new business.
Conversely in some other countries, such as Japan, where it is normal to work in a corporate environment and work your way up, entrepreneurship is more unusual. Therefore, it feels like more of a risk, and may result in a culturally humiliating loss of face.
Interestingly, fear of failure reduces venture creation and interest in entrepreneurship in developed countries. In developing counties, venture creation levels can still be high despite a high fear of failure. This is because some people in developing countries are starting a business out of necessity to earn money to live, and despite their fear of failure, they have little choice.
India reports a high fear of failure among potential entrepreneurs, but still has a relatively high startup rate. This is partly due to many microbusinesses being started by people— particularly women in rural areas—where businesses, such as food making or crafts businesses, can fit around childcare. The higher the rate of this necessity-driven entrepreneurship, the less likely fear of failure becomes in inhibiting business goals.
This contrasts with opportunity-centered entrepreneurship in countries where there are good employment opportunities available. It can feel like a bigger gamble to leave a good job—but a potential entrepreneur may decide to start a business due to seeing a great opportunity that they feel they can't ignore.
Fear of failure can also have an effect even once your business is up and running—you might aim lower due to a lack of confidence or procrastinate, avoiding doing important and difficult tasks in favor of keeping to what you know and avoiding making important decisions. This can lead to the business becoming risk averse, which damages its entrepreneurial character.
Can fear of failure be a good thing?
However, in some cases, fear of failure can actually be a good thing. Firstly, it might prevent people from attempting to start a business they don’t have the skills or the aptitude for. For example, people who have seen SharkTank or The Apprentice and get caught up in the perceived glamour of entrepreneurship. In these instances, fear of failure could stop them from wasting investors (and their own) money and time, and instead allow them to focus on something they will be good at.
For those who do go ahead and start a business, fear of failure can spur you on to succeed. If you have invested a lot of money and time, it is hard to back out—so you put all your effort into making it a success. This might be especially important in a culture that is intolerant of failure, or where you feel you might be letting down your family and friends. Women entrepreneurs have reported fear of failure is also an incentive to work harder and ensure success to prove doubters wrong, especially in a male dominated society.
Fear of failure has also been found to have some other interesting effects for women entrepreneurs. Because of this fear, they often hedge their bets slightly in case their venture goes wrong, continuing to work on smaller side hustles to generate some money and thinking about a Plan B, while still working on their launch venture. This can be sensible risk management, though it could potentially dilute their effort on their main business, making it less likely to succeed.
How can fear of failure be overcome?
Some issues, such as the culture of the country in which we live in, are difficult for us to change by ourselves. However, fear of failure can be overcome with education—learning about entrepreneurship through events and activities, especially those of a practical nature, can give you both the skills and the belief to start your business.
Interestingly, entrepreneurship education or involvement in a b-school incubator can also give would-be business owners a better sense of what running a startup might really be like, and the hard work involved.
You can also boost your confidence by gaining a mentor and speaking to others with more experience to sense check your decisions. Keeping a sense of perspective and participating in activities that improve your mental health and reduce stress can also help reduce your fear of failure and channel your energies into making your business a success.
One thing is sure: almost all successful entrepreneurs say it is better to act and fail, than to do nothing. Many well-known entrepreneurs have had failures—Richard Branson with Virgin Cola, Bill Gates with Traf-O-Data, and James Dyson made thousands of prototypes over more than a decade before his vacuum cleaner was perfected. These entrepreneurs have learned and grown from their failures, and these experiences have benefitted their businesses, so it's important not to lose faith and overcome this fear of failure.
