How My Startup Experience Taught Me to Prioritize Founder Wellbeing as an Investor

By Diana Narvaez, Flourish Ventures (as published in Epoca Negocios, translated to English)

Throughout my career, I’ve worked in industries known for being intense and prone to burnout, such as investment banking and management consulting. But it wasn’t until I transitioned to a startup that I realized how unique the stress is for entrepreneurs.

In September 2020, I joined a ride-hailing and last-mile delivery startup in Colombia that had thrived before the pandemic. However, like many companies, it had suffered from the impacts of chaos and uncertainty and, at that point, had only a few months of cash left. My priority was to help the founders raise funds, and we were in a race against time since most funds don’t make investments at the end of the year, and we needed to attract a new investor.

We fell short of our target, and by December 2020, we had 60 to 80 days of cash on hand. The stress caused by this inability to raise capital was extreme, unlike any other I had experienced in my corporate career. In the face of this crisis, we had to make critical decisions to survive that would affect every one of our 150 employees. We laid off part of our team, closed operations in some countries, and reduced operations in others, which provoked adverse reactions from some customers.

Just a few weeks before our cash flow ran out, many restrictions imposed due to the pandemic were lifted. People returned to the streets and started using our services again, and by the end of the month, to our surprise, the company was cash flow positive! There was light at the end of the tunnel. Month after month, the startup continued to perform well, which reduced the pressure to raise funds again.

Throughout this ordeal, the two founders and I spent countless hours on the phone every day, filled with anxiety and trying to turn things around without additional funding. It was all up to us, as there was no playbook, script, or guidelines on handling a complicated, high-stakes situation. Today, as an investor, these experiences make me so committed to prioritizing founders’ well-being.

The connection between founder wellbeing and company success

The idea that investors should care about or prioritize entrepreneurs’ well-being may seem unusual. Still, I believe there is a strong correlation between the physical and mental state of founders and the performance of their businesses. With fundraising increasingly challenging and entrepreneurs and their teams facing increasing pressures along the way, I believe it is essential to understand their specific challenges and ensure they have access to the most effective tools and support resources.

Flourish recently partnered with Endeavor Insight on an original research study to learn more about the needs and challenges of high-impact entrepreneurs in Brazil. It showed that 92% know an entrepreneur who has faced mental health challenges in their journey.

The survey also found that the company's financial situation (60%) and fundraising (36%) are the two most significant external stressors. 75% of entrepreneurs feel pressured by people's expectations; 70% feel lonely throughout their journey; 61.9% feel they are sacrificing their current lives for future success; and 54% consider mental health a taboo subject in the ecosystem. Despite this scenario, only half of entrepreneurs seek professional help.

There’s no way around the stress of being an entrepreneur, but it can be managed. According to Endeavor’s data, having a physical activity routine, getting enough sleep, and eating a quality diet are the most common wellness practices among entrepreneurs, and those who don’t incorporate these types of actions face a higher incidence of symptoms of malaise.

Additionally, more experienced entrepreneurs prioritize family and friends. 83% say their relationships with family have been affected during their journey. Still, those with more experience share their mental health challenges more often with family, friends, and even colleagues, and direct teams. Emotional intelligence also makes for a healthier, more high-performance leadership journey, and founders can apply it by avoiding micromanagement, being open to vulnerability, listening, and being pragmatic when dealing with ever-changing scenarios.

What this means for investors

In venture capital, only 1 in 10 ventures succeed. In addition to putting all their effort, time, and energy into the startup, founders invest their savings and those of family and friends. As a result, if they fail, they may feel like they are also risking their well-being. This is a lot of pressure and can often be a lonely path. In addition, they may feel that asking for help puts them in a vulnerable position. They fear that if they share their challenges with investors, they will be judged or criticized for making a wrong decision.

As investors, we can find this difficult to see as entrepreneurs try to portray a positive image. However, this dynamic also leads to a need for more transparency, which makes it difficult to provide support. That’s why investors need to offer empathy and understanding. By listening to founders and anticipating what they’re going through, investors can help ease the mental burden and remove at least some of the day-to-day stress, putting them in a better position to move the startup forward.

My experience on the other side of the table has made me a better investor. It all starts with respecting the founder’s time, actively listening, coming prepared to the meeting, leading valuable conversations, and offering support and feedback even if we decide not to invest. Empathy may seem like a “soft” skill, but it is one of the most important skills an investor can have. It is a skill we must learn, cultivate, and train for the overall health of our ecosystem.