I'm going through this same process of admitting failure right now, and it seems like everybody gives people in our position the same advice: "Don't worry about the investors. They knew what they were getting into." In our case, this is simply not true, and we can't be the only startup in this position.

All of our funding so far was raised from my personal friends and family. None of them ever invested in anything even nearly as risky as an early-stage startup before, but they trusted in me enough to take the leap. I dread the day I have to tell them that they aren't getting their money back just a few months after sending optimistic status update emails telling them all about our user acquisition efforts and new product developments. It is very difficult for me to not think of our failure as a betrayal of their trust. I intend to pay all of these family members and friends back with my own money, but until then I can't imagine escaping this guilt.

Has anybody else gone through a similar thought process? How did you deal with it?