Most of the start-ups that actually fail, fail because the founders quit.
I’ve invested in about 80 companies and roughly 20% of them failed as of now (failure to me is determined that the investors got less than 100% of their money back). Generally, this is due to the founders quitting, wanting a break, or just being tired. Essentially the founders gave up and the business failed.
There is nothing wrong with people giving up. Sometimes in the face of overwhelming evidence, it makes sense for a founder to quit and do something else … that is what a rational person would do.
But as an investor, you’re best with a completely irrational founder that will will not rest until she succeeds. One that will not take failure as an option. I’m not sure how you identify this founder … things like grit, perseverance, and tenacity are really hard to interview for. But they are likely the number one indicator of not investing in a failure.
In fact, if the founders never quit, the start-up, by definition, will never fail. It may never succeed widely, but it won’t fail.
Of course, entrepreneurs that would not quit might not be the folks that lead to a super success. If Google was going sideways in the early days, would Larry Page stay there or would he leave and go do something else? We will never know the answer.
But I have seen plenty of entrepreneurs who quit on the first sign of failure. They get punched in the nose once and they just leave the fight. Sometimes I am shocked that a company is shutting down just a year after they raised a seed round.
Alternatively, I have seen entrepreneurs who keep getting knocked down and back up. Then they get knocked on their butts and get up again. Then they get knocked on their butts again and get up yet again. These resilient entrepreneurs fail all the time … but they would never let their companies fail.
Note: I personally have done both. I was involved with a company when I was younger that failed … partially because myself and the other founders gave up. And most recently I was involved in a company where many more sane people would have given up and we turned it into a roaring success.
Auren Hoffman, former CEO of LiveRamp. started and sold 5 companies (and many more that failed)
Source : Quora