Ask HN: Tell us about your experience shutting down your company.

https://news.ycombinator.com/item?id=3744415

by lazyjeff • 14 years ago

15 1 14 years ago

news.ycombinator.com

Hacker news is all about "start ups", but the inescapable truth to every company is that it will eventually shut down. I would love to hear your story shutting down a startup: did you continue any relationships with your investors? what did you do with your customer base? what happened to the code, furniture, and bank accounts? was your last act the proverbial "shutting off the lights"?

tildeequals• 14 years ago

I managed the engineering team at an East Coast startup that produced a Rails app and served as a Rails consultancy on the side. For a good stretch of the company, our consulting revenue actually matched our burn rate, but most of our clients dropped off over the last nine months of the company. The credit crisis affected both our ability to raise funding and the economic viability of our clients.

In life and in death, we focused on our duties to our employees first, our investors second, and our app users third. While we did a good job for our consulting clients, they were much farther down on our priority list. When our CEO decided that running out of cash was inevitable, our first concern was to figure out how to place our employees (about 15) into new jobs. We let everybody know that they were going to lose their jobs about a month before the last paycheck. We also spent a bunch of time figuring out how to transition everybody's healthcare, helping with resumes, and making sure everybody started unemployment insurance claims. As you might imagine, we were not able to accomplish much that last month in terms of actual work. We gave our few contractors the same advanced warning, but we didn't do anything else to help them transition.

About three or four folks from the team were able to find work on their own pretty quickly. We helped a couple folks from the team form a new company to take over what was left of our Rails consulting work. For our other employees, our CEO sent out everybody's resumes to local companies that he knew - one company ended up hiring three people from our team. We also found short-term contract jobs for a couple folks while they figured out where to go next (one went to the West Coast, and one went to India). A few of us talked about starting our next company, and my two co-founders at my current startup are from that team. In the end, there was only one guy who was unemployed for an extended period of time even though we kept on trying to ferret out contract opportunities for him, and he ended up landing on his feet a few months later.

Our CEO wanted to keep the corporate legal entity around for his next venture, so he bought out all of the investors for 1 cent per share, which enabled them to write off the loss on their taxes. He had written a couple of withering status / strategy updates to them while we were losing our contracting clients, so nobody was surprised in the end. I'm not sure how many of them would invest in our companies again, but all of them appreciated being kept in the loop, and I think all of them understood that we had given the company our best effort. I can say with confidence that none of the investors were angry. The code still lives in a github account, and we also have a patent. From time to time, we talk about the possibility of using those assets to launch related startups.

Unfortunately, we were not able to tie things up as neatly with our users. For a couple months after we laid everybody off (including me), we paid a reduced contracting rate to a few members of the core app team to keep the site running and clean up the code while we tried to find a buyer for the technology (and presumably, some of the talent). Due to the nature of our app, we needed a rather complex hosting environment, and we were paying several thousand dollars per month in hosting costs at that point. We tried to find a buyer and renegotiate with the hosting company until a couple weeks before we shut the site down. Ultimately, we ended up posting a shutdown notice for a brief period before the service terminated completely. We had a few thousand (non-paying) users at the end, and we only ended up hearing from about 5 or 10 afterwards. Nonetheless, I do wish we had handled the situation more gracefully.

During our last month, we arranged for most of our equipment and furniture to be transferred off to current and former employees (we didn't have enough stuff to warrant an asset sale). We had inherited a bunch of our furniture from another startup in town, and ironically, some of those same folks came back and took furniture for their new startup. Our landlord was concerned about getting his last month's check and actually locked us out while we were shutting down; our CEO had to meet with him to assuage his concerns. In the end, there were a few large pieces of furniture that we had to pay somebody to haul away. On that last day, our cleaning lady came by to do an extended cleaning; I had a few drinks in the middle of the day and our CEO ended up helping her haul a bunch of trash and recycling down to the dumpster. I came back in the evening to drop off keys, and I think I was the last one from the company in that office.

Needless to say, shutting down the company was pretty painful. It took me quite a while to recover, and I was grateful for the support of my friends from the company through that process. I often try to find meaning from painful experiences, and I certainly learned a lot during the ups and downs of that startup. However, in this case, I felt that there wasn't much emotional growth to be gained from the actual experience of shutting things down. I just tried to focus on surviving and figuring out the steps towards building our next company.

Ask HN: Tell us about your experience shutting down your company.

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