The Light on the Other Side of a Failed Startup

Launching or joining a startup comes with several short-term risks, the most obvious of which is a trip back to the unemployment line. Each year, thousands of entrepreneurial minds pour their money and/or sweat equity into a product, service or even just an idea, only to see it fail.

So now what? With the national unemployment rate still hovering at 9%, finding a job is a difficult proposition. But is it even trickier following a failed venture?

Related: The Biggest Challenge for Startups

Black Mark Against You or a Badge of Courage?

Resumes with startups or other opportunities that didn't go as planned are common, says Brett Good, senior district president at national staffing firm Robert Half International.

The downsizing of "tried-and-true" organizations and the lack of job creation in recent years has compelled people to pursue riskier ventures than they might not have otherwise, says Good. "Hiring managers recognize that now."

The key to differentiating yourself from others in a similar situation is to position your experiences positively, even if they eventually resulted in a failed undertaking, experts say.

Startup experience, whether a success or failure, can speak volumes about a candidate's passion and ambition, "which I think are hugely critical in ultimately guiding them to success," says Jamie Hall, who has made many technology hires out of startups as co-founder and chief technology officer of Boston-based JNJ Mobile, which operates MocoSpace, a mobile social network with about 15 million members.

While having a track record at a successful venture is ideal, experience with failed startups can help foster many qualities that are attractive to potential employers, including an entrepreneurial spirit, an agile mind-set and the ability thrive in an environment that doesn't require a lot of structure, says Jennifer Marotta, founder and president of Arlington, Mass.-based staffing consultancy firm Boston Recruit.

To impress these characteristics upon a hiring manager, candidates must be able to articulate what they learned from their experiences while also highlighting their own accomplishments, says Good.

Whether it is reestablishing credit facilities or renegotiating covenants on loan agreements, experiences gained from failed startups can help develop skill sets that are highly sought after in the workplace, he adds.

"One of the more important things is to look for someone who is humble, who has learned from the experience, especially if it is a failure," says Hall. Someone who is aware of what their limitations are and where they need to grow can be a valuable asset, Hall adds.

Always Be Forthright

The worst thing that you can do to compensate for a failed startup -- even if it was short-lived -- is to omit it from your resume, particularly if it creates a gap in your work history, experts say.

Often times candidates "try and skirt the issue as opposed to hitting it head-on, and hiring managers will be much more concerned about what looks like a veiled attempt to omit something versus [the truth]," Good explains.

"I encourage candidates to be forthcoming about their wins and losses, as well as their skills and areas for development and improvement," says Marotta. "Address it confidently, factually and positively on your resume and during interviews."

Joe Redshaw, recruiting and retention manager at application performance management vendor dynaTrace, suggests that candidates should always document a short-term startup on their resume, even if it is in the past and is sandwiched in between two lengthy stays of employment. Doctoring a resume to detail only the years of each particular stretch of employment -- rather than the months -- will often foretell a more direct line of questioning.

"If a recruiter or someone who is interviewing you is good at what they do, they will find the gap and ask what you did in between," says Redshaw.

Even if they don't, word tends to travel fast. "People know people," says Good, and public record can shine light on most any venture, no matter how brief.

Be Armed with Answers

Depending upon your position within the startup, you should be well-prepared to answer questions in interviews about why the company failed, experts say.

"If you are a senior level controller, CFO or VP, I would expect to have a fair amount of dialogue around what transpired, why the organization failed and what could have been done differently," says Good. If you were just a "worker bee," you might only have to tell the story and move on from there.

In addition, executive-level candidates should expect that hiring managers will conduct behind-the-scenes research to identify some of their shortcomings.

"You would want to dig in to the business model, you would want to talk to any investors that may have gotten on board, as well as some of their first hires," says Hall.

References are an integral part of validating why a startup failed and who was ultimately responsible, adds Redshaw.

Be Wary of a Creating Trend

While most hiring managers and recruiters agree that a failed startup on a resume is not major cause for concern, multiple short-term ventures will raise a few eyebrows.

"Having one or two failures is fine -- people can learn what NOT to do, and it shows they are risk takers -- but if someone has a string of bad startup experiences, you'd have to question their decision making," says Marotta.

If you have worked at multiple startups and none of them have taken off, that tends to raise a bit of a red flag, says Redshaw. "I think it is looked upon as maybe the individual is an extreme risk taker, or maybe they didn't research the startup well enough."

You have to look at the pattern, he says. Hiring managers will notice excessive job-hopping, even if you have good reasons for each stop. Ultimately, "they will ask 'why is it going to be any different here?'"

Every company looks for "stick-to-itiveness," says Marotta. Nothing says "perseverance" like picking yourself up after failing at a startup and trying to do it all over again.

Write to Beecher Tuttle here.