How much confidence is too much confidence when building your new startup?

A look into the rise and fall of confidence that new business owners experience, and the cognitive biases that are at play in their psyche. Featuring real life stories from The Ask community.

As investor Graham Duncan explains, startups are so awash in ambiguity that is the founder’s responsibility to hold the tension inhere within that ambiguity. The tension is a cognitive dissonance that exists due to the act of creating something from nothing. A cognitive dissonance which, 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.”

So, maintaining the illusion of your own greatness in order to make your business a reality, is necessary.

The challenge lies in knowing to what extent you hold false hope or are being over-confident.

Many of you will be familiar with the mental model known as the Dunning-Kruger effect. It shows us that confidence is often bestowed upon those who have no real reason to be confident aka people with low ability at a task overestimate their ability to complete it.

When you embark on a new project such as starting a business, you don’t know what challenges lie ahead of you. That’s why I’m adapting that curve for the purposes of this post to show you what is happening in the mind of the new business owner.

I call it the Confidence Curve.

What I’ve witnessed time and time again through coaching early stage founders and business owners is that there’s an inherent confidence curve that almost every founder goes through.

Confidence is not a straight line through: starting low and gradually increasing throughout the lifetime of running a business.

Instead what often occurs is that many people tend to get out of the starting blocks with high confidence before an inevitable crisis of confidence occurs. Those who survive the crash manage to then navigate their way back to self-belief.

I’ve said it before and I’ll say it again: company building is personal development.

You learn and grow so much in the process of creating a business that you literally change as a person in the process. Not only this but the level of confidence (self belief, mental fortitude and decisiveness) you have, will 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 of your grand plans, picture your future life of riches and the press releases that will marvel at your successes and genius.

Upon just starting out, everything seems so easy and clear.

A new founder tends to believe that the market has already been sized up, that the product roadmap is obvious and that it will be a straightforward path to success.

Thanks to our selective perception to recall only positive of stories of entrepreneurship and others in our circle, we see evidence that things generally work out.

Anything can feel possible when you don’t really know what you’re in for yet.

In these early days you don’t know what you don’t know which in turn, 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 in “Arrogant Enough to Launch, Humble enough to last: The Founder’s Dilemma”

New founders must back themselves when there is a lack of existing evidence for what they will create, as no one else will be backing them in return and its right that others can remain skeptical or ambivalent until there is the proverbial proof in the pudding.

When you start a business, concepts such as ‘sales’, or ‘product development’, ‘industry regulations’ or ‘marketing’ might sound relatively straightforward on the surface.

Then, you get into the details and realise just how much there is to it.

For example as a business owner how much do you really need to learn about design, marketing or finance etc when there are literally entire industries dedicated to each field? There is an infinite amount you could attempt to know.

When I started building The Ask I had the arrogant optimism shown at the start of the confidence 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 maché — 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, a year into running The Ask newsletter consistently I would get clients reach out to me cold for to enquire about coaching.

But when I started writing, 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 quickly, 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.

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Phase 2 — The Trough of Sorrow when the Founder Faces Reality

Then, following the initial period of excitement and expectation, reality soon kicks in.

Y Combinator, the leading global startup accelerator, sees this reality kick almost universally in founders occur whenever they encounter initial set backs.

The name of this stage? The Trough of Sorrow.

Realising what you don’t yet know (but will 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 one.

The definition of a new/startup 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 needed 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, my first year of running The Ask was marred with constant questioning about my business. Not because there weren’t any successes, but because of the stark contrast between the reality of my business and what I had set out to build and the associated timelines that 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 so many founders to the point of almost no return. Either because 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 will 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 of their competitors will never overcome.

It’s what makes business building so rewarding when it works out. In knowing that it is not easy you realise that not everyone will push through it.

Founders who overcome the trough of sorrow are wiser, more pragmatic and resilient as a result.

The Dip

As Seth Godin talks about in his book of a similar nature — The Dip — it separates the beginners from the masters. Only those who are supposed to make it will surpass the dip/trough of sorrow).

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 at this stage, your level of confidence and clarity is well earned and extremely enjoyable.

With The Ask, a big shift happened when I doubled down on early stage business owners seeking clarity on what they are building. As well as 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 a lot of money in external coaches and mentors which has been immensely valuable. I can safely say that I’m a better coach for working with a coach and my revenue always surpasses those investments.

With my clients, having a coach has helped them to navigate these cycles of confidence too.

Catherine and I had been working together for over six months when I showed her the confidence curve 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. I have a dedicated programme for those wanting to create a one-person business around their entrepreneurial calling for example.

• Company building is the biggest personal development journey you’ll ever go on

Most importantly, remember, if you’re just starting out, enjoy that feeling (!) the reality will kick in soon ;)

Ready to work with me one-one in coaching?

Get in touch for a consultation here. We’d spend 30-60 mins on a free coaching discovery session designed to help you see whats keeping you stuck in your entrepreneurial path and I’d present a bespoke plan to move you forward, should we work together.

Until next time ✌️