How much confidence is too much confidence when building your new startup?
The rise and fall of confidence new founders experience along with their inherent cognitive biases. Featuring real life stories from The Ask community.
Welcome back to another bi-weekly post from me, Ellen Donnelly, writing about founders starting businesses and how you can design your entrepreneurial path on your own terms.
If you’ve not subscribed yet and need some tactical and moral support in your company building journey: here’s your cue.
This week we’ll be exploring the confidence curve that all new founders go through as they build their businesses: why they tend to get out of the starting blocks with high confidence before the inevitable crisis of confidence and how to navigate a way back to self-belief.
I believe that company building is personal development — you learn and grow so much in the process of creating a business that you change as a person in the process. The level of confidence (self belief, mental fortitude and decisiveness) can dictate the course of your company more than the right product, tool or strategy ever can.
But is there such thing as too much confidence?
Let’s dig into it.
Phase 1 — The Arrogant New Founder’s Illusory Superiority
Oh the ignorant bliss of the new startup founder.
The moment you first decide on building your business, tell your friends your grand plans, picture your future life of riches and press releases marvelling in your genius.
Upon just starting out, everything seems so easy and clear.
A new founder tends to believe that the market has been sized up, the product roadmap is obvious and it will be a straightforward path to success (thanks to our selective perception to recall only positive of stories of entrepreneurship).
Anything is possible when you don’t know what you’re talking about.
In these early days you don’t know what you don’t know and so it creates a heady concoction of opportunity, excitement and illusory hope.
Founders by their very nature are optimistic. They are mission orientated, visionary and trailblazing people accustomed to making things happen. To build a business from scratch requires a firm belief in yourself and your capabilities.
And this is exactly how it should be.
Founders starting the next big thing need to have an excess of confidence. When you’re aiming to change the world, pretty much everyone will tell you that you’re nuts — and confidence, even arrogance, is needed to push through.
— Jeff Booth, Arrogant enough to launch, humble enough to last: The Founder’s Dilemma
New founders have to back themselves as they have no evidence yet of what they will create, no one else will be. They may remain skeptical, ambivalent or cautionary until there is proof in the pudding.
As investor Graham Duncan explains, startups are so awash in ambiguity that is the founder’s responsibility to hold that ambiguity. There is tension in the fact that as you create something from nothing, there is an inevitable cognitive dissonance. This cognitive dissonance, Duncan explains, is “borne of having to act as though everything is going to come together when there’s obviously a real chance, for reasons outside your control, it may not.”
Holding out an illusion in your own greatness to make your business happen is a good thing, to an extent.
The challenge lies in knowing to what extent you hold false hope or over-confidence.
Many of you will be familiar with the Dunning-Kruger effect and how confidence is bestowed upon those who have no reason to be confident. It is a hypothetical cognitive bias that states that people with low ability at a task overestimate their ability.
When you embark on a new project such as starting a business, you don’t know what challenges lie ahead of you.
Concepts such as sales, product development, industry regulations and audience development can sound relatively straightforward on the surface. Then you get into the details and realise just how much there is to it. How much should you learn about design, marketing or finance for example, when there are literally entire industries dedicated to each field? There is an infinite amount you could know.
When I started building The Ask I had the arrogant optimism shown at the start of the curve.
In my mind, all I had to do was explain concepts about careers and people would want me to be their coach, subscribe in their thousands and pay me inordinate amounts of money to teach my wisdom. I thought I could amass thousands of subscribers, run a thriving content and coaching business and create passive income streams all within my first year and that everyone would instinctively grasp the value in coaching.
Ha ha ha.
I was like a piece of A4 paper standing on its side before toppling over. High confidence, no foundations.
Building a company has been like creating paper mache — solidifying parts of my offering, my knowledge and experience slowly over time, piece by piece, until my flimsy piece of paper could be ready to stand up on its own.
For example, after a year of running this newsletter I now get clients reach out to me cold for coaching. But when I started, I assumed that would happen instantaneously.
I’m not alone in this high confidence phase. I asked some of my clients and community about their relationship with confidence upon starting out.
Claire laughed when I showed her the Dunning-Kruger graph and said:
When I started, I completely underestimated the time it takes to be confident that you know enough to be making the right decisions in business. As an example, I set as a goal to be making revenue within 6 weeks (I kinda laugh thinking about it now, I would have had to create, market and sell that service extremely fast).
Same for Mel, who chose to launch a new proposition when the pandemic hit to pivot her entire business with a new offering.
The new idea just took hold of me and, to be honest, I didn’t really think it through. I dove in head first making everything happen and for a while it was magic.
But for Mel, Claire, myself and many others, the confidence you start out with soon begins to wane.
Enter the next stage of the confidence curve.
Phase 2 — The Trough of Sorrow a the Founder Faces Reality
Following the initial excitement and expectation, the reality kicks in. Y Combinator, the leading global startup accelerator, sees this stage in founders almost universally once they encounter the initial set backs. The name of this stage? The Trough of Sorrow.
Realising what you don’t yet know (but need to know to be successful) can feel unsettling. Suddenly your goals feel too big and you are out of your comfort zone. It can feel so insurmountable, and even mentally exhausting. Especially if your money is on the line this phase may put strains on your wellbeing, relationships and peace.
What’s important to note about phase two is that it can typically last a lot longer than phase 1.
The definition of a start up is a company that is confused about the following:
1. What its product is
2. Who its customers are
3. How to make money
As a result, until all these three questions are resolved, the confusion lasts and the unease of phase two may continue.
Hear from Mel again about her own experiences:
I then started to learn a bit more, uncovered a whole ream of things I hadn’t realised would be involved. I experienced the dark underbelly of the work I had chosen. I woke up with headaches and went to bed with anxiety. I felt like I didn’t know what to do next, who to turn to, or what to expect, let alone how to prepare or react. Turns out the business model still needed ironing out, our pricing wasn’t quite there, our target market wasn’t defined yet and our product needs improving. This all happened in about 9 months.If I look back at when my confidence was sky high, it was probably out of ignorance more than anything.
It was a similar situation for Claire, who says:
As time went by, I got increasingly frustrated with what I perceived as a lack of progress - whilst I was learning everyday, I felt it didn’t result in anything tangible and just couldn’t see myself getting closer to that goal.
Everyday was throwing a new thing that I felt I absolutely needed to understand or research or do before I could actually launch, and it really tested my mental resilience. I felt like the more I knew, the more aware I became of what I didn’t know.
In my own case, I’d say the period of July 2020 -February 2021 was one of relatively constant questioning about my business. Not because there weren’t successes, but because of the stark contrast between the reality of my business and what I had set out to build and the timelines I’d imagined.
Phase 3 — The Gradual Return to Self-Belief and Clarity
Many new founders will call it quits at phase 2.
The decline in confidence begets many founders to the point of no return. Either they run out of money, hope or sanity.
But it’s the founders who accept this confidence dip and use the time to reflect and take stock who can eventually find clarity and confidence again.
In fact I would argue that founders should be grateful that the confidence crisis is so universal.
Not only does it represent an opportunity for growth and self-improvement but it also creates a hurdle that so many never overcome.
It’s what makes what they do so rewarding, knowing its not easy and not everyone will push through it. For founders who overcome the trough of sorrow they are wiser, more pragmatic and resilient as a result.
As Seth Godin talks about in The Dip — it separates the beginners from the masters. Only those who are supposed to make it will surpass the dip (our trough of sorrow).
Diagram of The Dip as described by Seth Rodin.
What happens after you come out of the crisis of confidence/dip/trough of sorrow (call it whatever you want) can be really magical.
You’re on the ascent. Maybe not forever, but for the time being and your level of confidence and clarity is well earned and extremely enjoyable.
With my business, there has been a shift since around Feb/March this year.
The main difference has been in cracking the code on my niche (I’ve doubled down on founders deciding which business to build) and being open to other revenue streams I’d previously discounted.
During periods of doubt, rather than give up or assume I was doing it wrong, I got curious. What wasn’t working? Why? What did my business need more from me, or less? Critical self-reflection has been essential to this process and enabled me to get back to a place of absolute clarity on my mission and vision, and with greater confidence than before.
I’ve also invested almost £10k in coaches (business and personal) in the last year and that has been so valuable. I’m a better coach for working with a coach and this May is set to be best sales month for The Ask so far.
With my clients, having a coach has helped them to navigate these cycles of confidence too. It’s all very meta I know (happens a lot in this newsletter).
Catherine and I have been working together for over six months. When I showed her the graph she said:
There have been many micro and macro fluctuations in between these phases. There is a huge difference in how I approach confidence dips now compared to before working with you.
Understanding and just accepting that there are going to be dips is key. I know how it doesn’t mean I won’t make it as an entrepreneur, because everybody goes through this.
Something you [Ellen] said that really stuck and helped me in the process was that I was comparing myself, hence deflating my confidence, to the future self I will need to be when my company is super successful vs. judging myself fairly on what I need to be right now. Whilst I fluctuated a lot more at the beginning, I’m now a lot more stable as the business is more tangible and I’m learning to manage myself more. I used to have weeks where I was ready to accept the award for being the best founder in the world then three days later feeling totally stuck and telling myself I was an impostor and didn’t have the skills to make it. It’s really about learning your triggers, being prepared for the rollercoaster and having support helps a ton.
What about the others?
Whilst still in phase two, Mel is at least philosophical about her journey:
I am currently in the valley of despair, but the good news is it can’t really get any worse! I know now what I didn’t know before, and at least I can move forward armed with that knowledge, not sidelined by it. If you know how hard things are going to be at the start - nobody would bother starting anything!
Claire’s been climbing out of the trough lately. She says:
Slowly I realised I was doubting my decisions (and myself) less and less. Maybe I gained confidence because I started seeing patterns, or I started trusting that I know a bit more than the next person about the issue and that totally justifies me building a business around this. Soon some pretty big chunks fell into place. Still a lot to do but I have a lot more clarity and momentum now.
So — what are the key takeaways here?
If it was easy everyone would do it
How you navigate the dip is what will make or break you as a founder
It’s ok to get support in your journey. Most successful founders have teams of advisors, mentors or coaches, it doesn’t have to be a lonely road
Company building is the biggest personal development journey you’ll ever go on
If you’re just starting out, enjoy that feeling (!) the reality will kick in soon ;)
If you got this far, thank you as always for reading. I spend a good chunk of time on these newsletters and your feedback always makes it worthwhile. I reply to every email and see every ❤️ you click so feel free to let me know you’re reading with a hello in one form or another.
Ready to work with me one-one in coaching?
Until next time ✌️
Ellen Donnelly, Founder + Chief Coach, The Ask.