Denis Shafranik, Concentric

Entrepreneurs are often stereotyped as supremely confident – slick salespeople who ooze self-assurance. And yet, off the record, if you ask the average entrepreneur how they’re feeling, there’s every chance they’ll paint a very different picture.

Mental health issues amongst founders have been widespread for some time. Back in 2015 US academic researchers found that almost half of entrepreneurs were dealing with at least one mental illness, with 30% battling with depression and 27% suffering from anxiety. And there is ample evidence that, even before the pandemic, the problem had worsened, with research in April this year showing that two-thirds of founders were feeling down or depressed, and more than half feeling anxious. “People who are on the energetic, motivated and creative side are both more likely to be entrepreneurial and more likely to have strong emotional states,” explained one of the studies’ authors, Michael A Freeman of the University of California. Apparently, many of the behaviours typically identified as symptoms of mental illness could also be crucial to an entrepreneur’s drive and success.

Considering the prevalence of mental health issues amongst founders, it is interesting that there are few studies on the issue amongst startup investors, given that many face similar conditions and challenges. Investors suffer equally from imposter syndrome, are under pressure to deliver results in an uncertain environment and, in case of younger funds, risking the majority of their net wealth. In fact, most are themselves entrepreneurs, working long hours and seeing their work-life balance eroded, leading to burn-out, stress, and anxiety. Added to this are the tensions of founder conflicts and the pressures of making major funding decisions, not to mention feeling a lack of control over business performance.

The Covid effect

Much has been written about the impact of Covid-induced lockdowns on employee mental health and wellbeing. Concerns abound regarding how fully remote-based teams are coping with isolation, problems stemming from a lack of face-to-face contact with colleagues, or the risk of working hours spiralling out of control.

For founders, there are a host of additional challenges to add to this list. They’ve had to make huge, pressurised decisions at speed – regarding business strategy, team priorities, cost-cutting measures to preserve cash runway etc. – without the opportunity to test them out or run them by the wider team. In many instances, they’ve been forced to lay off talented team members and valued colleagues and friends, simply because the impact of the crisis has been too sudden and severe to mitigate.

Some founders have had to deal with funding pressures as investors have battened down the hatches. Others have experienced the pain of seeing investors write off their prospects entirely. Uncertainty is always a key driver of stress and anxiety, and it has never been higher with the effects of the pandemic largely undiscovered.

There’s little data at this stage to show the full mental impact of Covid on founders. But with wider studies suggesting that 90% of US adults are experiencing emotional distress caused by the pandemic and that depression amongst British adults has doubled, it would be a mistake to underestimate the health consequences for the entrepreneurial community, or the further challenges awaiting founders in the months ahead.

Changing workplace habits may create longer-term issues

The world is currently in the process of post-lockdown economic rebuilding, with many countries looking to encourage employees back into the physical workplace to try and hasten the recovery.

However, the initial evidence suggests that the way people are choosing to work remains fundamentally fragmented. There is far more remote-working than pre-crisis; indeed, many companies have abandoned their offices altogether in favour of fully-remote working models. Other businesses are experiencing ongoing disruption as physical meetings are axed, events are postponed, or employees are simply refusing to return to the office due to safety concerns.

My concern is that, over time, too much physical distancing will lead to mental distancing, causing more misunderstandings between founders and investors, or within founder leadership teams. Human interaction forms a crucial role in building trust, and trust is fundamental to successful investor/founder relationships. Face-to-face contact also provides a far better outlet for people to vent, seek comfort, or provide reassurance and support when times are tough.

Future communications technology developments will likely be able to alleviate some of these issues. Nevertheless, I feel that a hybrid model of remote and office-based working is essential to prevent mental health issues from becoming more prevalent amongst founders and investors alike. We have certainly encouraged our own team and those founders we work with to reconnect in person as long as they feel safe to do so.

The right characteristics, and the right support systems

When considering whether to invest in a startup, we have always looked to identify specific characteristics amongst founders.

In our view, ‘Resilience’ should rival ‘Ambition’ as a key founder trait. Similarly, we believe it’s important for founders to demonstrate humility and self-reflection. Going forwards we will be augmenting our focus on specific founder characteristics with a continuous programme of support and mentorship for senior team leaders in all of the businesses in which we invest. It will become part of our lead investment requirement to make sure that startups can dedicate funding and time to addressing mental health issues upfront.

Giving specific consideration to the Covid crisis, we know that it’s common for issues such as burn-out and depression to manifest themselves ‘after the event’, once adrenaline levels have subsided. Therefore, as activist venture investors, we’ll be doing everything we can to support our founders in the months ahead – whether they need a sounding board for their business plans, an impartial view on a big decision, or simply a supportive voice to reassure them as the pandemic continues.