Katelyn Bourgoin knew she had a problem when her debt topped $100,000. She had to take drastic action – not just with her personal finances but with the company she’d founded. 

As the CEO of Vendeve, a female-focused networking platform, Bourgoin had racked up heaps of personal credit to launch her business, which had once been called “the next LinkedIn”. But she had been logging 100 hours a week and drawing no pay for months, and in early 2017 she realized the business was the source of her growing depression. Bourgoin had to pull the plug on her company and return to marketing to pay down that mountain of debt.

“As soon as you reach a certain amount of debt, it just wreaks havoc on your mindset,” she said. “The chances of being successful in a tech company are so, so low and that’s just demoralizing.”

Debt is a common burden shared by many startup founders, but it’s also a subject they rarely discuss. Startup pay is often sporadic and rarely secure, and credit is readily available. It’s not unusual for entrepreneurs to rack up problematic debt as they struggle to get their businesses off the ground. Given that about 90 percent of startups fail in their first five years, debt and other factors combine to create mental health problems for startup executives.

“The way we’re setting up businesses to grow is a breeding ground for mental health issues,” said Michael DeVenney, a chartered financial analyst and head of The Mindset Project, a comprehensive study of the mental health of Canadian entrepreneurs.  “That whole idea of working 70 to 90 hours of work every week is ridiculous. It’s almost seen as a rite of passage and that’s not healthy.”

Two years ago, the Mindset Project surveyed over 500 entrepreneurs and interviewed almost 100 and found over 40 percent felt their mental health had declined since they started their businesses. DeVenney, who is a long-time sufferer of depression himself, blames the problem on the pressure founders feel to grow their business too quickly.

When starting a business, founders already have a full plate, worrying about customers, sales, investors, marketing, manufacturing, and so on. When coupled with massive personal debt, it can turn bleak fast.

Kyle Racki, the Co-Founder and CEO of Halifax-based Proposify, went through his own “journey through hell” with his personal debt, which topped at around $150,000.

“In 2013, I was standing in this exact same spot,” said Racki, who was speaking on his phone from a beach in Halifax. “It was one of the worst years, I had recently broken my toe so I was in a cast and I was so close to calling Kevin (Springer, Proposify’s Co-Founder) to essentially ‘break up’ with him and the business.”

But he and Springer pushed on with their company, which offers software for writing business proposals. They gained clients and attracted investment. Now, Proposify is valued at about $30 million and is expected to reach $5 million in annual recurring revenue this year.

Nobody knows how big the problem of founders’ debt is. But conversations with entrepreneurs and others indicate that it’s a major problem to those who launch startups.

Steven Carr, the President of Sand Hill Financial, which provides accounting and advisory services to startups, calls it “the ultimate form of gambling.” He has seen founders run into debt when market validation and business models are not clear.

“Founders are really good on the technical side, but I’ve gotten balance sheets from some and they don’t balance,” he said. “And when I ask if they know about double entry accounting, they don’t. They run their business like a chequebook.”

Starting a business is a brave choice. Debt is scary. It’s a hole founders fall, or sometimes jump, into with no clear idea of ever finding their way out. But the process is survivable.

Today, Katelyn Bourgoin is a freelance growth strategist and trains her clients in the importance of customer discovery, helping them avoid her past mistakes.

“Starting a business feels like you’re drowning and your feet are on fire,” she said. “You feel that you need to move incredibly fast and there’s no doubt about that. But the No. 1 mistake that’s made is moving quickly without gathering the insight. There’s a good chance that you won’t succeed if you do that.”