As venture capitalists, we see many promising business plans from talented founders. However, the stresses of starting a company can take a toll on mental health especially since Covid. Studies show over 70% of founders report some impact on their mental wellbeing[1]. While passion and vision are critical, we must also evaluate how a founder's mental health could affect their ability to lead a successful startup.
- Look for self-awareness and maturity. Founders who are open about their mental health needs and actively manage them signal responsibility. Seek out those who prioritize self-care and have supportive personal and professional networks.
- Scrutinize financial planning more than usual. Impulsivity or unrealistic projections may reflect impaired judgment. Look for pragmatic financial models with executive pay aligned to value creation.
- Assess the team dynamics. Diverse, complementary teams tend to be more resilient. Watch for "red flags" like frequent turnover or poor communication that may indicate unmanaged mental health issues.
- Consider market viability to another level of detail. Evaluate the business model, competitive landscape, and addressable market.
- Provide mentorship. All founders need guidance navigating startup life's ups and downs. Be available as a sounding board and connect founders to resources like coaches, therapists, and peer support groups.
With awareness and support, founders with mental health issues can channel their creativity to build sustainable, impactful companies. As investors, we have an opportunity to foster an ecosystem where mental health is openly addressed so founders can fulfill their visions. Evaluating founders holistically is key to funding resilient startups poised for long-term success.
Times are different now, investors should be more aware of what to look for and how to help founders more going forward.
Citations:
[1] https://www.pnas.org/doi/full/10.1073/pnas.2215829120
[2] https://executive.berkeley.edu/thought-leadership/blog/impacts-poor-mental-health-business
[3] https://hbr.org/1985/05/how-to-write-a-winning-business-plan
[4] https://www.nature.com/articles/s41598-023-41980-y
[5] https://www.forbes.com/sites/melissahouston/2023/05/31/the-impact-of-mental-health-on-business-owners/?sh=266080683e41
[6] https://www.crowdspring.com/blog/what-investors-want-in-a-business-plan/
[7] https://www.forbes.com/sites/annefield/2023/04/29/startup-founders-report-entrepreneurship-is-taking-a-toll-on-their-mental-health/?sh=266a8c8e2192
[8] https://www.forbes.com/sites/tracybrower/2023/02/28/mental-health-delivers-big-business-benefits-3-strategies-for-success/?sh=2667109b3c8d
[9] https://www.linkedin.com/pulse/what-do-investors-look-business-plan-mike-kovach
[10] https://finance.yahoo.com/news/72-startup-founders-report-impact-190904214.html
[11] https://www.paychex.com/articles/human-resources/workplace-mental-health-effects
[12] https://startupnation.com/start-your-business/investors-business-plan/
[13] https://www.fastcompany.com/90969820/will-your-startup-fail-personality-traits-for-success
[14] https://hbr.org/2021/10/its-a-new-era-for-mental-health-at-work
[15] https://www.indeed.com/career-advice/career-development/business-idea-evaluation
[16] https://www.sciencedaily.com/releases/2023/10/231017215925.htm
[17] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9969895/
[18] https://www.investopedia.com/financial-edge/0412/5-essential-steps-to-evaluating-your-business-idea.aspx
[19] https://link.springer.com/article/10.1007/s11187-018-0059-8
[20] https://blog.exit-planning-institute.org/how-owning-a-business-impacts-mental-health-and-stress-levels
[21] https://www.entrepreneur.com/starting-a-business/5-things-investors-want-to-know-before-signing-a-check/234536
[22] https://grepbeat.com/2022/07/13/startup-lifes-dark-secret-founders-often-face-mental-health-challenges/
[23] https://www.putnam.com/individual/content/perspectives/8047-mental-health-is-a-business-issue-how-companies-are-supporting-their-employees
[24] https://aofund.org/resource/what-do-investors-look-for/