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Entrepreneurial failure is prevalent, and particularly when the COVID−19 crisis exacerbates the economic recession, it becomes even more prevalent. Entrepreneurs experience an intensive emotional crisis when their ventures fail, and this deleterious impact, including stress and emotional pain, may prevent failed entrepreneurs (FEs) from restarting, hence, how they cope with failure has received increased attention in recent years. However, most of the extant literature focuses on success rather than failure, and there is very limited literature on how FEs cope with the psychological and emotional crisis caused by failure. This study focuses on FEs’ use of optimism and defensive pessimism as coping strategies within the mental simulation theory with respect to their re-entry intentions. It examines the impact of career ambition and public self-awareness on optimism, of the fear of failure (FoF) and self-doubt, on defensive pessimism, and of coping humor as a moderator. We used structural equation modeling to analyze the data of 277 Korean FEs who have actual entrepreneurial failure experiences and actively prepared for their re-entry. The results show that career ambitions and public self-awareness have an impact on optimism, and FoF and self-doubt lead to defensive pessimism. Coping humor also has a moderating effect on the path from defensive pessimism to the intention to re-enter. This study advances the literature on coping mechanisms that FEs employ to manage the negative impact of failure and prepare for their subsequent re-entry. Its theoretical model, based on the mental simulation theory combined with social comparison theory, provides a possible integrative framework that includes both the pervasively held view of entrepreneurs’ optimism related to overconfidence and their defensive pessimism related to their vulnerability due to their ventures’ failure. Thus, this study makes theoretical contributions to the literature of entrepreneurial failure, as well as practical implications for policymakers and educators who assist FEs in successfully coping with entrepreneurial failure and re-entry.