I Lost $9 Million... What Nobody Tells You About Startups

By Art Harrison • June 1, 2025

The brutal truth about startup failure from someone who lost $9 million. Real lessons about what actually kills businesses and how to avoid the same mistakes.

I'm going to tell you about the most expensive education I ever received. It cost me $9 million, two years of my life, and nearly destroyed my confidence in my ability to build anything meaningful.

But it also taught me more about entrepreneurship than the previous decade of "successful" ventures combined.

This isn't a motivational story about bouncing back. It's not a feel-good narrative about learning from mistakes. It's the brutal truth about what actually kills startups—and what that means for your business dreams.

The Setup: How I Built a $9 Million House of Cards

In 2007, I had what seemed like the perfect business opportunity. A technology solution that could revolutionize how companies managed their data. Early customers were excited. Initial sales were strong. Investors were interested.

Every metric suggested we were building something significant.

So I did what most entrepreneurs do when things are going well: I scaled everything. Bigger team, bigger office, bigger vision, bigger promises to customers and investors.

Within 18 months, we had 40 employees, offices in three cities, and contracts worth $9 million. From the outside, we looked like a massive success.

From the inside, we were bleeding money faster than we could generate it.

What Really Killed the Business

When people ask what went wrong, they expect to hear about market changes, competitive threats, or economic downturns. But those weren't the real problems.

The real problem was that I built a business based on what I wanted to be true instead of what was actually true.

Mistake #1: Confusing Revenue with Profit

We were generating millions in revenue, which made me feel successful and important. But our costs were higher than our revenue, and I was too focused on growth to pay attention to unit economics.

I knew we were spending more than we were making, but I convinced myself that scale would solve the profitability problem. "We just need more customers," I told myself every month as the losses grew larger.

Scale doesn't fix broken unit economics—it amplifies them.

Mistake #2: Building for the Business I Wanted, Not the Business We Had

I wanted to build a technology company, so I hired engineers and developers and focused on building sophisticated software solutions.

But our customers didn't want sophisticated software. They wanted simple solutions to immediate problems. They were paying us for outcomes, not technology.

I spent millions building capabilities our customers didn't value while neglecting the simple services they were actually buying.

Mistake #3: Optimizing for Vanity Metrics

Employee count, office size, revenue figures—these made me feel like a "real" entrepreneur. But none of them measured what actually mattered: customer satisfaction, profit margins, and sustainable growth.

I was optimizing for looking successful instead of being successful.

The Moment I Knew It Was Over

The end came suddenly, even though the warning signs had been there for months. A major client canceled their contract, citing performance issues we'd been ignoring. Two smaller clients followed within weeks.

Suddenly, we couldn't make payroll. Investors stopped returning calls. The team that had believed in the vision started updating their résumés.

I spent the next three months having the most painful conversations of my professional life: laying off people who had trusted me, explaining to investors why their money was gone, and admitting to my family that the business they'd supported was dead.

The financial loss was devastating, but the psychological impact was worse. I had failed in the most public way possible.

What Nobody Tells You About Spectacular Failure

Here's what you don't hear in the "failure is valuable" narratives:

Failure is only valuable if you survive it. Many entrepreneurs don't recover from major failures—not because they can't, but because the psychological damage prevents them from trying again.

The shame of public failure can be more limiting than the financial loss. You start second-guessing every instinct, every decision, every opportunity.

But if you can process the failure correctly—if you can separate the lessons from the shame—it becomes the most valuable education you'll ever receive.

The Hidden Benefits of Spectacular Failure

Three years after losing everything, I started another business. This time, I made none of the mistakes that had killed the previous company.

I focused on profit margins from day one. I built only what customers explicitly valued. I optimized for sustainability, not growth.

That business sold for more than I had lost in the failure, and it took half the time to build because I wasn't making the same expensive mistakes.

But the real benefit wasn't financial—it was psychological. Having survived spectacular failure, I was no longer afraid of it. This freedom from fear of failure allowed me to take calculated risks that more cautious entrepreneurs avoided.

The Failure-Hardened Entrepreneur Advantages

1. Accurate Risk Assessment: You know the difference between risks worth taking and risks that can destroy everything.

2. Customer Focus: You've learned that customer satisfaction matters more than internal metrics.

3. Resource Efficiency: You know how to build lean, profitable businesses instead of impressive but unsustainable ones.

4. Emotional Resilience: You can handle setbacks that would devastate first-time entrepreneurs.

5. Credibility: You can speak honestly about business challenges because you've lived through them.

How to Fail Forward Instead of Failing Out

The difference between entrepreneurs who recover from failure and those who don't isn't talent or intelligence—it's approach.

The Failure Recovery Framework

Phase 1: Process the Loss (1-3 months)
Allow yourself to feel the disappointment fully. Don't rush to "lessons learned" before you've grieved what you lost.

Phase 2: Extract the Education (Month 4-6)
Systematically analyze what went wrong. Separate the factors you could control from those you couldn't. Focus on the controllable factors.

Phase 3: Rebuild Your Identity (Month 7-12)
You're not "someone who failed"—you're "someone who tried something difficult and gained valuable experience." This identity shift is crucial for future attempts.

Phase 4: Apply the Lessons (Year 2+)
Start something new, but apply everything you learned from the failure. Don't make the same mistakes twice.

What This Means for Your Next Venture

If you've never failed at anything significant, you're at a disadvantage. You haven't developed the skills, resilience, and market knowledge that only come from things not working out as planned.

If you have failed before, you're not behind—you're ahead. You have education that can't be bought, only earned.

Either way, your goal shouldn't be to avoid failure—it should be to fail intelligently, recover quickly, and apply the lessons systematically.

If you're paralyzed by fear of failing again, read about why fear of failure is actually fear of something else. If you're stuck in analysis paralysis because of past failures, understand that more analysis won't prevent future failures—but it will prevent future attempts.

Your Failure-Forward Action Plan

This week: If you've failed before, write down three specific lessons it taught you. If you haven't failed yet, identify one small experiment you can try that might not work.

This month: Apply one lesson from past failure to a new opportunity. Or, if you're failure-inexperienced, deliberately try something with a reasonable chance of not working perfectly.

Long-term: Build a systematic approach to testing ideas quickly and cheaply so you can collect failures (and lessons) without risking everything.

The entrepreneurs who succeed long-term aren't the ones who avoid failure—they're the ones who fail forward faster than their competition.

If you're ready to stop fearing failure and start using it as education, the FSTEP program provides structured practice taking calculated risks and learning from results. You'll discover that building entrepreneurial confidence comes from evidence of your ability to handle uncertainty, not from avoiding it.

Remember, your failures don't disqualify you from future success—they qualify you for it. The question isn't whether you'll fail again (you probably will), but whether you'll fail forward or fail out.

Choose to fail forward. Your future success depends on the education that only failure provides.

For related insights on handling setbacks and building resilience, explore what happens when your superpower stops working and learn about turning small actions into big results.

Ready to Take Action?

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Video Transcript

let's talk about what it's like to lose $9 million which is still hard to say and what that number really means because sometimes numbers aren't exactly what they seem to be so it started about 8 years ago 8 years ago a friend of mine came to me and he had an idea for a business initially I pushed him away but he came back and the second time I decided that I would join him as his co-founder so I quit my job and I went all in and I took a 15% stake in the business it might been more I said yes the first time but 15% of what could be huge was still a lot I had this blind confidence that it was just going to work out that it was meant to be and if you know anything about me if you've watched my videos you know that's just how I am I can't help but be optimistic and believe that things are just going to work out and this time I think I was kind of right not exactly but it did work out at the time it felt like things were going slow but in hindsight things went really really fast we won our first big clients in a few months we started hiring people and before we knew it we had 20 employees working with us in a small office we hadn't raised any money we were just running a sound business but then just before the pandemic we decided we were going to go big we had interest from investors and we decided to take them up on it and we raised a round we raised $2 million on what we found out was a $15 million valuation of our business this thing that we had just started 2 years before was now worth $15 million so suddenly it wasn't just a couple of guys it wasn't a small team and a small office we were a legitimate company we had investors we had a board of directors and we were telling everyone that would listen about what we were doing our friends and our family were so excited and exactly one year later one year after we raised 2 million we went back to the investors and this time we raised $15 million the $15 million was on a $60 million valuation that's what they said our company was worth now 3 years later $60 million and we owned it at least a piece of it it honestly felt like we couldn't do wrong like the good times were never going to end like we were set for life we owned a piece of that business but I'm making a video about loss and I'm telling you about how I lost $9 million so obviously something went wrong the valuations you get as a company they're kind of like Monopoly money they're just made up seriously someone just comes along and they base it on projections or optimism or potential or they look at what your competitors are doing or what they're valued at and they say well that's what you're valued at now doesn't matter how much money you're making this is what your company's worth and we all just kind of accept it we signed some papers and that is the value of the company but it's not actually real it's not real until you sell that business it's just numbers on paper until then but when you're in it if you're me it starts to feel real and the reason it really started to feel real was not just the hype it's because I learned about something at that point that I didn't know about before something called a secondary round now if you're not familiar with a secondary round like I wasn't think of it like this think of it like you're holding a lottery ticket and the draw is just starting maybe it's already been going a few numbers have been called then you don't know if you're going to win but so far so good and then imagine someone comes along and they say hey hey hey I'll give you some money to buy a piece of that ticket right now doesn't matter whether it wins or not I want to be a part of it they're not going to give you as much as you would get if It ultimately is the big winner but the money they give you is yours to keep no matter what win or lose that's what a secondary round is and Founders can do that they can sell some of their shares whenever they're raising money for their company and that's what I did and it was exciting I've never seen that much money arrive in my bank account at one time as I did when I participated in a secondary round but doing that seeing that money come in selling my shares for this arbitrary value that someone had put on my business started making me believe that that number was real that whatever value they put on the company that I owned a piece of that and that it was mine for forever I started believing the fantasy but obviously it's just that it's a fantasy it's not real We Grew From 20 people to 100 but somehow the more more people we added the bigger we got the less we actually seem to get done I don't know how that happens I've heard other people talk about it but it still is so confusing to me how do you do less with more people all I know is that this success and this money that used to feel inevitable that felt like it was guaranteed and that it was mine started to feel shaky it started to feel like things maybe weren't actually going to work out and a lot of the time the work wasn't as fun anymore it started to feel like work because because we had to answer to other people because we were pushing to meet arbitrary objectives I started to wonder about the value I was bringing to the business was I actually worth $9 million was the business really worth $60 million it just didn't feel right to me anymore but despite that despite any doubts that I had greed was still finding a way to get into my head as the value of the company kept going up and up I had opportunity to do secondary a second time when we raised $60 million and this time I could have sold way more shares than I did I could have drisk more but I didn't and I wish I had but I was starting to get greedy I started believing that the company's value was only going to go up for forever and I started to question things that in hindsight don't make any sense but I started to say things like why would I sell these shares right now for $2 or $3 million when they're going to be worth $30 million a year from now that's ridiculous or even worse I started to have these irrational fears because I only own 15% of the business I was scared that I was going to sell too much now for a few million dollars and that in 5 years when the business sold for 500 million or some insane number that people would assume I got half of it and I'd have to explain to them that I only made 5 or 10 or $15 million because I sold too early because I never owned 50% of it and that's insane even if that was the case there's nothing wrong with making $5 or $10 million is nothing to be ashamed of but that's how I felt at the time I know how ridiculous it is now now but when you're caught up in these cycles of money of thinking that everyone around you is going to get rich that the cash is never going to end your mind plays tricks on you and they did for me and I'll admit it it was Dumb and I was greedy and I could have come out of it even better than I did but I was focused on this future imaginary money and when I look back I honestly wish that we hadn't raised nearly as much money or maybe even raised any money at all and of course when I say that that would mean that I never got to do secondary so maybe I don't wish it entirely but I honestly think from a business perspective that we would have been better if we had never raised any money because I think when we did it we weren't ready we had a good product we had people that were seeing value in it we had a great team but we hadn't figured out how to scale we didn't know how to lead people how to convey the vision that we had and taking that much money that quickly and that early made us skip some of the steps that would have actually taught us what we needed to do there was a a really smart guy that worked with us for a couple of years who said something that still sticks with me today he said you guys should be so proud you have done amazing things it just so happens that you did all of those things in the first couple of years before you raised any money and I think he's right we were great when we were Scrappy but we didn't know how to do it at scale as time went on we just kept making more and more mistakes I honestly believe that we would have been better off staying a small independent company that we could have grown slower been smarter about it I think I would have had more fun I think we would have sh shared the upside with a small team that we had originally built and that I think it may have ultimately been a more successful and sustainable business but that's not what happened and that's just my kind of personal opinion because after that second Rise honestly nothing went right not only did we hire poorly as I said but we got caught up in a perfect storm of bad events that were happening around the world the economy was tanking the war broke out in Ukraine the investors started backing away from everything they were expecting more than half of their companies to just fail and it was brutal we were burning so much cash because we had expected to be able to raise money whenever we needed it so we had hired way ahead of the money we were making and then it turned out we weren't going to be able to get any more money and we were really left with two options we could either sell the business for much less than it was worth or we could basically run it into the ground and that sucked that felt so bad at the time and it still feels bad now and that brings us back to the $9 million to how I lost 9 million well remember when I said that the company was valued at over $60 million well I can't tell you what we sold it for but it was far far less than that and after we settled everything that had to be settled my share of it which was now whatever 10 15% it was basically gone that $9 million didn't exist anymore my shares were basically worthless and that's why I shared the bit about secondary earlier on it wasn't that I wanted to brag or make you know that I'm doing really well it's that I wanted to point out that sometimes drisking yourself even when things are looking amazing can be one of the smartest decisions that you'll ever make you should never ever put all of your eggs into one basket no matter how promising that basket may seem to be you should always find a way to drisk yourself and maybe that means being really conservative with your savings putting money somewhere that you know is safe and secure maybe it's about making sure that your partner if you're in a relationship has a stable job with a ition and benefits when you go off and chase your dreams so that one of you is in a good position if things go wrong I can't tell you what's right for you because I don't know your individual situations I'm always going to be the first person to tell you how satisfying and rewarding it can be to take on some risks and to chase your dreams but I can also tell you that you should always take a little bit off the table that you should always mitigate your risks when you have the chance even if you're just doing it a little you don't have to go 50/50 but if you can take enough off that you know that it's going to be successful outcome no matter what happens believe me that peace of mind that security later on will do wonders for you and just your mental health and actually there's a lot of stories that happen in companies when they're created when they're sold that a lot of people don't share and they don't talk about not just the financial part like I'm sharing right now where you can make money even if the business doesn't go the way you expect it to go but there's also other stories and stories that I feel really deeply stories about guilt and hurt these are stories that I have and I I sleep with and I I wrestle with every day and every night I have guilt around the fact that I even sold those shares sure they were great for me it was a good outcome but there were other people that worked with us we had employees that we gave stock options to in their early days who we really dreamt of sharing the wealth with that we were excited to see it impact their lives just like it was going to impact ours but they ultimately got nothing because they're not allowed to participate in those secondary rounds and when we finally sold there wasn't any anything to go back to them and the way that I kind of find peace with all of these things the way that I reconcile the money I made the decisions I made and everything else is by looking at the good things that also happen because the reality of every situation is there's good and bad for us we did incredible things we did a lot of things the whole story was amazing it was a story about two guys that met when they were 5 years old that's when I met my partner who started something from scratch who grew something that employed hundreds and hundreds of people that impacted their lives and their families that a POS positive way something that still lives on we build something that companies and people are still interacting with to this day it was objectively an unquestionably a success and I have to remember that instead of just thinking about the money I lost and the people that were impacted along the way I don't forget about those things but I just think about the good things that's one of the things that losing $9 million taught me it taught me that it's fun to go after dreams that there is a huge upside and that it's exciting and that it easy to feel invinci and only to think about the good things when stuff is going well but that you have to remember the whole story and you have to really put value on the things that are real not just the things that are on paper that's where real peace of mind and happiness come from and that's kind of my last takeaway here I know I'm getting a little sappy but success can be whatever you want it to be if you choose to look at a situation for what could have been then yeah it might feel as like a failure if I choose to look at this whole experience as a point in my life when I lost 9 million if that was the only story I told then yeah that wouldn't be a good memory that would be a failure but I never actually had that money I never actually lost that money instead when I think about it I think about all the things that are real the things that I actually gained honestly if you could go back in time if you could tell younger me art from 8 years ago what I would eventually accomplish what I would gain personally and financially I would sign up again without any hesitation even knowing what the bad things would be because it was more than I had even envisioned when my friend came to me that first time and said hey you should do something with me it was remarkable it's just that I got caught up in what could have been for a little while and I started believing the hype instead of believing what was real that is how I lost $9 million that's what I've been up to for the past year what about you what have you been up to have you lost I don't know 10 million someone done anything worse than I have I would love to hear about your losses your gains I'd love to know how you look back on them now how you've bounced back how you tell the stories I would love for you to share whatever you're willing to share in the comments so that other people can see that we all go through different things maybe you're going to be the next person to be in the position to gain or to lose $9 million well if that's the case then I recommend you watch this video because I have a new dream and I'm going after it right now I'm using the lessons that I learned and I'm sharing that dream with you so you can follow the same steps and maybe be in a position like I was to see some amazing outcomes and that's it until then I want you all to just have fun keep trying things and if anybody sees 9 mill or finds it let me know because I kind of lost it you can send it my way would be great or even half of it quarter just write me a check I'm game anyway