What Psychology Teaches Us about Dealing with Setbacks

This post is part of Tech Cocktail’s “Psychological Guide to Starting Up,” bringing you insights on the psychological and emotional challenges of startups throughout June.

The answer to the question “How should you deal with setbacks?” seems easy. Especially for entrepreneurs, setbacks are a part of life. You pick yourself up, learn, and move on.

But that’s only half the picture. That’s what you do. But how should you feel? And how do you make sure you don’t feel discouraged, like a failure, frustrated, even if you’re learning and moving on?

This question belongs to the realm of psychology, where researchers study how human beings cope with pain, stress, and setbacks. They classify behaviors as “adaptive” or “maladaptive” depending on their tendency to produce positive or negative emotions. Here’s what we can learn from them.


Self-compassion. One study showed that being compassionate toward yourself – rather than blaming yourself – makes people happy and less angry at the end of the day. And, they actually take more responsibility than the self-blamers because they are able to admit their mistakes without feeling like an utter failure. If you’re not naturally self-compassionate, you can induce self-compassion by writing a letter to yourself as if you were your friend.  

COGNAME cofounder Bennett Collen stumbled upon a similar idea when he realized that business failures shouldn’t tarnish your self-image.

“Setbacks are not personal. Regardless of whether or not the entrepreneur could have done something differently to avoid the setback, it is not a reflection on the individual,” says Collen. “It is critical for the entrepreneur to compartmentalize those ‘business-related’ feelings and not let it affect their self-image as a whole.”

Positive reframing. Positive reframing, or being able to see the benefits even in bad circumstances, is associated with self-esteem, optimism, and hardiness. It’s particularly useful for those who suffer from the doubts and worries of perfectionism, who have trouble using other methods to feel better. For example, entrepreneurs might try to focus on the lesson learned when their marketing flops, or the helpful advice they got from a VC who rejected them.

“I try to find an important lesson in every setback, or at least see the positive side,” says Dr. Brent Coker, founder of Webreep.com, who used to use self-blame. “It makes me feel better when I realize an important lesson I’ve learned from it, or the upside of not having a situation that I previously wanted.”

Acceptance. For setbacks that can’t be changed or remedied, acceptance is the proper attitude. If you don’t accept something – the flaws in your product, or how late the project will be – you’re basically in denial. And denying reality certainly won’t equip you to handle it.

“You can’t even begin to be an entrepreneur if you cannot accept, or learn to accept, failure. . . . You have to be prepared to live with your mistakes,” says Randy Thompson, founder and CEO of VA Angels, who used to deal with setbacks by avoidance (like ignoring a letter in the mail).

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Social support. Social support comes in two types: intellectual support, which includes advice, assistance, and information; and emotional support, which includes comfort, understanding, and sympathy.

“Don’t keep it to yourself, like I used to,” says Thomas B. Cox, CEO of GrowthMaps. “Have good supports and advisors who can listen to you vent, rub you down, and cheer you up.”

Surprisingly, seeking support from friends and family can sometimes be negative. If emotional support degenerates into venting, you’re simply rehashing and re-experiencing bad emotions. Also, too much overt support can be discouraging because it can make you feel helpless, like an object of pity. If they want to help, friends and family should offer discreet support and encouragement.

Humor. Humor is a shorter-term strategy that can lighten the mood or dissipate anger when a deal falls through, a team member quits, or user numbers stagnate. Humorous people tend to see the positive more – a coping strategy discussed above – and be more optimistic.

But humor is a short-term solution. And be careful – it could be just a shield to cover up negative emotions in front of others. The entrepreneur who jokes about eating ramen all the time, who is really struggling to make ends meet, is not necessarily coping well.

Distraction. As another short-term strategy, distractions like family, movies and music, and yoga can help stop the constant stress-parade. Unfortunately, distraction isn’t particularly effective for doubt-prone perfectionists, perhaps because they can’t forget about their unachieved goals.


Ruminating. Besides behaviors like substance abuse, ruminating on what went wrong is one of the most common unhealthy ways of coping with setbacks. It’s like venting, but to yourself – it serves no purpose, wastes time, and brings up bad emotions.

“Never wallow in the bad days,” says Christy Cook, president of Teach My.

When we asked entrepreneurs how they deal with setbacks, a few responded with various versions of “just suck it up.” But just sucking it up for too long can drain your willpower and deny your (quite natural) emotions. Since setbacks are par for the course in startup life, take a cue from psychology and deal with them the healthy way.

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Written by:
Kira M. Newman is a Tech Cocktail writer interested in the harsh reality of entrepreneurship, work-life balance, and psychology. She is the founder of The Year of Happy and has been traveling around the world interviewing entrepreneurs in Asia, Europe, and North America since 2011. Follow her @kiramnewman or contact kira@tech.co.
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