What to do if your startup fails

Failure in startups isn’t rare. In fact, it’s almost expected. Roughly 90% of startups fail, and yet the allure of entrepreneurship persists.

When your startup doesn’t pan out, it can feel like the weight of the world is on your shoulders. But failure is not the end, it’s simply a chapter. What you do next is what truly defines your journey.

If your startup has failed, here’s our practical advice on how to bounce back, learn, and build better based on our experiences as Australia’s largest innovation community.

Step 1: Stop and breathe

The collapse of a startup can feel like freefalling without a parachute. Before you do anything, pause.

Take time to process what happened. Many founders describe the aftermath of a failed venture as an emotional hurricane—guilt, exhaustion, and even shame. That’s normal.

Don’t rush into the next thing out of desperation. Whether it’s a new idea, a job, or a plan to pivot, take a breather.

Some founders take months; others need a year or more. This isn’t time wasted—it’s time invested in recalibrating yourself. Use it to recover emotionally, mentally, and physically.

You can also consider speaking with a professional support person, like a psychologist or therapist. Having a professional outside eye can give you the perspective to better handle the tough hand you’ve been dealt.

Step 2: Look back with a critical eye

Your startup failed, but why did it happen? This question is uncomfortable but critical. Every failure has lessons buried in it, waiting for you to uncover.

Reflecting on what went wrong is a way to learn from your past to make new decisions in the future. Some things to consider about your startup include:

• Was your idea too niche or too broad? Did you solve a problem people cared about, or did you fall in love with a solution that didn’t have a market?

• Was your execution flawed? Were you clear about your target audience? Did you pivot too often or not at all?

• Were you chasing external validation? Many founders fall into starting a company because of excitement or pressure. Did you build a business you truly believed in, or one you thought investors, or your friends, wanted?

Write these answers down. Be brutally honest, not to beat yourself up, but to understand. The more you understand what happened, the less likely you are to repeat it.

Step 3: Reframe failure as experience

Failure is a natural part of doing something new. For many founders, it’s tempting to view failure as a dead end—proof that they’re not cut out for this.

But that’s the wrong lens. Failure is information. It’s feedback from the world, telling you what doesn’t work. If you treat it that way, failure becomes a step forward, not back.

The key is reframing failure as a process of iteration. Startups are experiments. When an experiment doesn’t work, you don’t give up on science—you adjust the variables and try again.

Founders need to adopt that same mindset. Every failure is a data point that teaches you something about your product, your market, or your team. The founders who succeed aren’t the ones who avoid failure; they’re the ones who get better at interpreting it.

This doesn’t mean failure is easy to stomach. It can be painful, especially when you’ve poured everything into an idea.

But a failed startup doesn’t mean you’re a failure. You learned to build, to pitch, to lead, and to handle pressure. You’ve seen what works—and what doesn’t. Those lessons are now yours forever.

Investors and partners will value what you’ve learned. A founder who’s failed knows how to avoid pitfalls and focus on what matters.

If you let those lessons shape your next steps, failure doesn’t just make you experienced—it makes you dangerous (in the best kind of way).

Step 4: Decide what’s next

After reflection comes decision-making. What do you want to do next?

You have a lot of options, but here are some of the most common paths we see founders take:

1. Start again with the knowledge you’ve gained

If the itch to build hasn’t gone away, scratch it—but this time, do it with intention. Don’t rush. Validate your idea before you commit. Build on the lessons of your first venture. Consider bootstrapping instead of chasing venture capital if it aligns better with your vision.

2. Join a fast-growing startup

Many failed founders step back into the startup ecosystem by joining an existing company. It’s a chance to learn how others operate, build skills, and see growth strategies from the inside. Plus, the paycheck can help stabilise your bank account which can often be suffering after a major set-back.

3. Step away for a while

Some founders take a corporate job or move into a different sector altogether. The important part is to not think of this as giving up, rather, you’re giving yourself a chance to take a strategic pause. Stepping away allows you to see the bigger picture and potentially discover new problems worth solving.

Whichever path you choose, make sure it aligns with your values, skills, and goals and not someone else’s. Many entrepreneurs can start to feel trapped or unfocused once they leave the cover of their startup. Take the time to make the decisions you need to make.

Step 5: Rebuild confidence

Failure takes a toll on your confidence. It can make you question your abilities, your judgment, and even the decision to pursue a startup in the first place.

Rebuilding that confidence is important, not just to keep going, but to make decisions with clarity and conviction. Without confidence, you’ll hesitate, second-guess yourself, and risk missing opportunities.

Here are some ways to do that:

• Share your story: Writing and talking about your experience can be cathartic. Publish a post, start a newsletter, or share insights with other founders. It not only helps you process but also positions you as someone who has learned and grown.

• Connect with a community: Surround yourself with people who understand the startup world. Join founder networks, attend meetups, or participate in accelerators. Being around like-minded individuals can reignite your entrepreneurial spirit.

• Set small wins: Whether it’s launching a side project, learning a new skill, or even mastering a hobby, small achievements can restore your momentum.

Confidence doesn’t come from avoiding failure; it comes from knowing you can recover from it. The more you practice picking yourself up, the stronger your confidence will become.

Step 6: Build better systems

One of the most common reasons startups fail is poor systems—whether in planning, execution, or team management.

Startups move fast, and in the rush to build and grow, it’s easy to let processes slide. But weak systems compound over time, creating inefficiencies and confusion that can cripple even the best ideas.

If your startup has failed, use this downtime as an opportunity to upgrade your processes for the next venture.

• Validate ideas thoroughly: Talk to potential customers before you write a single line of code. Use tools like surveys, interviews, or landing pages to gauge demand.

• Focus on metrics that matter: Vanity metrics like social media followers or website traffic are distractions. Even financial raises can be a distraction if you don’t have a good use for that funding. Focus on revenue, customer acquisition and retention, and growth rates.

• Learn the art of saying no: Many startups fail because they try to do too much. Learn to prioritise ruthlessly to reclaim your energy and your time for what matters most for your company.

The startups that succeed aren't just the ones with the best ideas—they're the ones that build the best engines to drive them forward. At Stone & Chalk, this is one of the key factors we see in our most successful startups.

Step 7: Keep pushing forward

Success isn’t just about unicorn valuations or viral headlines. For some, success is a profitable, self-sustaining business. For others, it’s solving a meaningful problem or building a team you’re proud of.

Define what success means to you, and let that guide your next steps.

If you’re reading this, you already know startups are unpredictable. The uncertainty can be terrifying, but it’s also where the magic happens. If your first startup failed, it doesn’t mean you’re not cut out for this—it just means you’re human.

Many of today’s successful entrepreneurs have stories of failure. Before founding GoPro, Nick Woodman launched two startups, EmpowerAll (an electronics store) and FunBug (a marketing platform for sweepstakes), both of which failed.

Richard Branson has a littered history of spectacular failures that all form part of the journey that led him to spectacular successes. Famously, before co-founding The Huffington Post, Arianna Huffington was first rejected by 36 publishers.

These people didn’t stop—they iterated, learned, and grew. Failure is a feature of entrepreneurship, not a bug, and if you’ve failed, you’re in good company

Failure is a beginning, not an end

When your first startup fails, it feels like the end. It’s not. It’s just the beginning of your next act.

You’ve stepped into an arena most people never even approach, and though the outcome wasn’t what you hoped for, you’ve earned something priceless: scars that prove you tried, you learned, and you dared.

What you do next is up to you. Will you start again with a fresh idea, armed with the lessons you’ve gained? Or will you take a different path, applying your newfound wisdom in a new way?

Either choice is valid because failing doesn’t make you a failure. It makes you a founder—someone who embraces risk, tackles uncertainty, and moves forward despite the odds.

So take a moment. Breathe. Reflect on what you’ve experienced and how it’s shaped you. Then, when you’re ready, get back to building—whether it’s a new venture, a stronger you, or a different vision entirely. The journey isn’t over, it’s just evolving.