We're Shutting Down and I'm Scared

http://startupsanonymous.com/story/were-shutting-down-and-im-scared/

by danaseverson • 12 years ago

388 190 12 years ago

iterable• 12 years ago

Stay strong dude. I'm sure you'll make it through and figure it out. Many have made it back from far worse situations. You can do it.

danaseverson• 12 years ago

It's not me, just sharing. :) Thanks though.

piratebroadcast• 12 years ago

Get over it and work for someone else, run a few side projects/experiments on the weekend and after hours. Your wife is counting on you.

alxjrvs• 12 years ago

I came here to make this comment. I completely sympathized (and still do) for his position - but the luxury of something like "Not working for someone else" is the first to go when you are in dire straits. If you have debt, a home, and people who count on you, you take whatever work you can find. I'd call up Chuck E. Cheese and see if I could get my first job back before I would decide to just fail on my responsibilities.

When your luck is down, the room for luxury is low. "Not working for someone else" is a ridiculously large one, and your wife is not in the wrong for thinking similarly.

Still, to be constructive: Consider work that can sustain your responsibilities, albeit at a non-optimal rate. You founded a startup, a task that requires endlessly marketable skills in a growing field. It ended, and perhaps it ended poorly - but you can, and will, endure.

ojbyrne• 12 years ago

"We didn’t leave enough money in the bank to pay off our debt, so now we need to tell people we can’t pay. Are they going to come after me, or my house and my car? I’m broke and I’m scared."

Hoping the "well-known accelerator" knew their stuff and the company was structured appropriately so that's not an issue.

kordless2• 12 years ago

Speaking from experience, failure is essential to becoming a good entrepreneur. I've heard we learn more from failure than any other learning technique. At no time are you more present in this life when you are failing, of that I can personally assure you.

I applaud your ability to share your failure with others, even in an anonymous way. Wherever you go and whatever positive choices you make next will guide you to the thing you were meant to do.

asmallfish• 12 years ago

Sorry to hear it. I'm sure you can land another job fairly soon if you were running a startup. Go take a small vacation to clear your mind first.

jonhmchan• 12 years ago

This is a dark time, but you can work for someone else. Most of us do.

perishabledave• 12 years ago

Agreed. It's about priorities, if he values his family more than the comfort/luxury/whatever-it-may-be of self-employment then you do what you have to do; not saying it would be easy.

eli• 12 years ago

"Will [out investors] forgive us? Will any investor ever trust us again?"

These are professional investors putting money into an early stage startup, right? I'm certain they were aware going in that they might not get their money back. (And, in fact, that this was the most likely outcome.)

dchuk2• 12 years ago

If you can run a startup, you're employable as a consultant to at least enough people to make ends meet. Reach out to your personal networks and try and stem the tide a bit.

We've all been there at some point in our life, there's nothing shameful about working for others to make ends meet. And even though most of us hate the idea of working for other people, at some points in life you have to put your ego and pride aside and just bite the bullet and do some damn work to pay the bills.

Life is long, failure is temporary. You didn't crash an airplane with 300 people in it, you just didn't succeed at business, an extremely common occurrence. Just keep truckin'.

(I realize OP is not the anonymous poster in question)

walden42• 12 years ago

Reach out to your personal networks and try and stem the tide a bit.

I'm not in OP's position at all, but I'm wondering what you mean by this. Would you just call/email people you know and ask if they need help with their business?

dchuk2• 12 years ago

Generally, you'll end up connected to similar guys in your field after you've been running a startup for a while. You can reach out to them and say that you're offering XYZ consulting services in an effort to pseudo-bootstrap your company while still working on improving traction for your company. Most business people will actually really respect that, in fact.

It really depends on how well you've networked though. At the very least, you can start picking up random gigs on Craigslist or even contract work if you have any technical skills to at least keep money coming in in the short term so you can afford some breathing room.

smtddr2• 12 years ago

There are all kinds of failed start-ups. As long as you know you didn't scam anyone and you can explain to your investors what happened and show accounting-books detailing how it all unfolded, and you learned something during this whole experience, you'll be alright in the long term. You can always try again. Maybe YCombinator(or GoogleVentures or whoever) should have a support-group for failed start-ups so people can share their experiences and know that they're not alone. Assuming you're in tech, investors know the gamble. I'm sure they know at least half the start-ups they invest in ultimately fail.

That said, one slightly harsh bit of advice:

>But, I can’t imagine working for somebody else. I wish my wife understood that.

You need to get over that. Working for someone else(after a short break perhaps) is basically recharging your funds and your mind while you think about your next company. For all you know, you might run into your next co-founder in your new job. It's hard to think about the distant future when you're not even sure how to put food on the table tomorrow.

GuiA• 12 years ago

Hi!

As your post seems to indicate, you're scared shitless right now and it seems like the entire world is coming to an end. Trust me, even if it really seems that way, it's not.

For now, grit your teeth and go through the bad stuff. Tell your wife. Be honest with her. No matter what, she's your wife for a reason- she'll support you through all of this. If you neglected your relationship with her a bit because of the startup thing, then she comes first now. Then tell your investors. Tell your employees. Tell whoever else you need to tell. Be honest, genuine and straightforward. The next few weeks are going to suck big time, but you'll get through them.

Once the big stuff is behind you, take a few weeks to breathe, if possible financially. You're coming to the end of a long, arduous journey, and that's always something hard to process. Try to find joy in the little things that you didn't have the time for during your founder mode. Have brunch with your wife. Go take a walk alone in the forest. Read a book. Take time to recover.

You will find another job. You don't realize this right now, but having run a startup for 2 years gives you more skills and experience than others have developed in a lifetime. If you have to take a job right away because of financial hardships, take something low stress (consulting/freelance could be a good choice, for the flexibility, although it can be hard to get started with no leads). Now is probably a bad time to do another startup. Also, you probably want to use this as a lesson to remember that you should always have ~6 months of expenditures in the bank that you NEVER touch precisely for situations like this one.

Don't worry about the investors. It's part of their job - you're not the first startup that they funded that failed, and you're not the last either. Be professional with them- if you want to do a startup again in the future they will remember your honesty and ethics more than the fact that your startup failed.

You ran a startup for 2 years. Solely by doing that, you've gone further on the path of entrepreneurship than 99.999% of people who call themselves "entrepreneurs" have. Take time to grieve, but also take time to see all that you have accomplished.

If you still feel depressed after a month or two, go talk to a professional therapist/psychiatrist. Sometimes we need a little external help.

It's going to be OK. :)

jlebron2• 12 years ago

I haven't started a company (yet!) and can't imagine what the OP is going through but reading this made me feel better :). I will definitely save this for future reference for when I do start (and more than likely fail) my first company. Thanks and cheers!

keithpeter• 12 years ago

The bit about 6 months money in the bank sounds good to me (never ran a startup but been made redundant &c)

oscargrouch• 12 years ago

i thinks this piece of advice its cool in almost all of it.. but there are some pieces of it that i think sounds a little overoptimistic:

she's your wife for a reason- she'll support you through all of this

Maybe not.. a lot of marriages brake because of financial bankrupcy.. but this guy will have to face it anyway.. it will depend of how much the materialistic/spiritual type she is and how much she love him.. this will be definetly a good proof of love from her, if she stands up with him... (but these sort of people are rare)

they(investors) will remember your honesty and ethics more than the fact that your startup failed

I think it will be harder for him to raise funds later if he try to do it again some other time.. but nothing that will do things impossible for him.. also there are other ways (you know, companies existed before VC funding :)) .. but maybe this make his charisma and charm to raise even more money.. like superpowers that come from a mature characther

This guy need to face the truth no matter how hard its gonna be.. and i dont think trying to make things look better will help him much.. there are times life sucks, and this can be a proof of the strenght or weakness of our character..

Let me make it clear that you advices are very nice.. i was just spoting some overoptimism in some areas and i dont think in that particular case, this would help.. its reality time for him now.. time to take the red pill .. the blue pill will only make things worse..

Again, everything can serve for good in our experiences.. even, and specially the ones that are bad.. it needs a superior point of view to spot the good things from everything and make ourselves better.. but we have a lot of examples out there of people that just can't see the things that way.. and never "come back".. its important to know this and never be one of them..

Its the end of a war or its just the end of a battle in life?

Xcelerate• 12 years ago

Maybe not.. a lot of marriages brake because of financial bankrupcy.. but this guy will have to face it anyway.. it will depend of how much the materialistic/spiritual type she is and how much she love him.. this will be definetly a good proof of love from her, if she stands up with him... (but these sort of people are rare)

Rare, but hopefully that's the case with her. A good person stands by their partner's side in times of trouble.

tptacek10• 12 years ago

Been there.

* If your payables and debts are all in the company's name, nobody is coming for your house. The likelihood that your business was going to die before you could pay all your debts was priced into your contracts. If you have employees, pay them and get them off your books first; employee wages are, depending on the state you're in, the one likely exception to that rule.

* If they were in your name, well, that sucks, but still nobody is coming for your house. Your credit rating will probably absorb all the damage. I've had shitty credit all my life, so much so that it used to make it hard to get checking accounts (I'm not a deadbeat, I just don't have revolving credit, and do have billing disputes that I don't have time to resolve). Shitty credit is not that big of a deal. Just don't use credit.

* It sounds like your wife is right. The existence of startups isn't a guarantee that you'll never need to work for someone else again. The normal life cycle of a startup founder is, (1) work for someone else, (2) start company, (3) run company into ground, (4) goto 1. Think of it this way: had your company been successful, it almost certainly would have left you in a state where you'd be working for someone else for a couple years during your earnout. "Not working for someone else" was never really on the table.

* Getting a company funded and then running it is a resume plus. You won't have more trouble getting another job than you did getting the one you left to start this company.

* Your investors expected you to fail. The odds were always overwhelmingly that you would. The whole startup investment model is, put money into 10 companies, hope 1 succeeds. Your investors are professionals. Let their problems remain their problems.

* Are you going to get ridiculed for failing? Obviously, you're not an HN reader. You'd have gotten ridiculed for succeeding. Ridicule is the air we breathe. Why do you care?

* Most small companies start from nothing. That's good news, because "nothing" is an easy state to achieve. Give yourself a couple years, and then try again.

ye2• 12 years ago

[deleted, i'm an idiot]

tptacek10• 12 years ago

In the US? What's the kind of company you're thinking about that (a) allows for external investment and (b) doesn't have limited liability?

tjbiddle2• 12 years ago

I'm mimicing tptacek's question here, but what type of corporation (Assuming this is in the US) wouldn't protect assets?

Even an LLC with just one person operating it (Which the IRS still sees as a sole-proprietorship I believe) still has their personal assets covered.

na852• 12 years ago

Why do you care?

You know, some personality types cannot help but be concerned with how they're perceived by others. They're hardwired that way. It's the classic misunderstanding between extraverts and introverts.

dwaltrip• 12 years ago

I would argue 99% of people care a great deal, whether they like to admit it or not. We are social creatures. Caring about these things (within some range) also gives a higher chance for reproductive success, so as you said, we are hard-wired to care.

philjr• 12 years ago

People who don't care about other people's opinions aren't that common and aren't called extroverts. They're generally called sociopaths :-)

patio114• 12 years ago

In addition to Thomas being right about employee wages being able to "pierce the veil" in many states, they're the people most at risk in this situation, so you owe it to them to make sure they're taken care of. It's the one circumstance where I would backstop a company problem with personal funds. (If your company was also behind on e.g. rent or hosting, on the other hand, that risk was priced into contractual terms, like Thomas said. I'd generally prefer to make vendors whole where possible but I wouldn't lose sleep over it.)

With regards to your own situation: you're in the best hiring market in the history of ever. Reach out to your incubator's network and you'll have attractive job offers starting as early as you can accept them. That isn't the whole of the solution set: Big Daddy G and the rest of the tech industry are hiring like mad, too, and they are also throwing around signing bonuses large enough to cover your last few months of salary nonpayment.

P.S. to other HNers: "And then we didn't pay ourselves salary" strikes me as something I hear from a lot of failed funded startups which magnifies the personal financial risk of doing them significantly without meaningfully increasing the chance you'll pull things through. I'd strongly consider not doing that, again, unless the alternative is missing payroll for your other employees.

ThomPete• 12 years ago

Agree.

Not paying yourself is fooling yourself into believing you have a sustainable business.

What you have is a source of revenue (not income) and it should be mentally in the "side projects" category. I.e. you should probably have a job and do this on the side.

The stories about people who didn't pay themselves but finally made it are far between and is not recommended IMHO.

Swizec• 12 years ago

I ran my first startup as a "We don't pay ourselves" kind of thing. Actually mostly me, the other founder was side-jobbing as a freelancer.

I'm not sure how big a factor it was, but being dirt poor did not help that startup. And it just hurt all that much more when it all came tumbling down.

tptacek10• 12 years ago

The dumbest thing I've ever done in my career was to start a "founders don't take salary" company after earning a windfall from the sale of the last company I'd been at. Most companies fail. That company was no exception. The personal cost was spectacular.

Most HN'ers seem to be in their mid-20s. Something you'll learn when you cross 30 is that time is more valuable than money. You'll never get the years you spend chasing a doomed idea back. If forgoing a salary seems to be a make-break issue for your idea, pick a better idea.

MortenK2• 12 years ago

I'm surprised that both you and tptacek seem to think it's much less of a deal to pay back vendors. Say the vendor is a startup or otherwise small company who's survival is hinged on getting paid what you owe. It's okay to stiff them, because we can get away with it legally?

I think it's downright dishonorable to leave vendors hanging like that.

Terminate your venture in time, before you can't afford to pay what you owe. There shouldn't be any difference whether it's an employee or a vendor.

piyush_soni• 12 years ago

Good pieces of advice. Thanks for writing.

dctoedt• 12 years ago

At the top of your payment priority list: Remit to the U.S. Treasury the required withholding for employees' federal income-tax and Social Security / Medicare tax. The IRS will come for your house if you don't.

tptacek10• 12 years ago

I wrote a comment here about how the IRS is actually not that unreasonable when it comes to owing more than you can pay (been there, too!), but then reread DC's comment and saw that he's talking about withholdings for employees. Yeah, don't fuck around with that.

tempAccount00• 12 years ago

2nd that - my parents lost their business. Before they did, their idiotic "accountant" lied to my dad about having paid withholdings. They went into receivership actually owing a great deal in taxes that they could have paid (they paid other creditors first). My parents lost everything and are still in deep trouble w/ the IRS. Pay your taxes before anything else.

opendomain• 12 years ago

THANK YOU! I came in here to write something similar, but you said it much clearer. I was lucky - when my first Startup Free.TV died, the company did not go bankrupt, but it did kill my credit. I was also worried about what I would tell my wife - the great news is is was VERY hard, but she stood by me and we are still married ten years later. I have eventually gotten the courage to start another startup, but now is that I now know how the system works and will not sell equity for peanuts anymore. This does hold me back - I would not say I am scared, just more careful. There IS life afterwards. If you want to talk, email me HACKER at Free dot TV

dkersten• 12 years ago

Having been through shutting down my previous startup just a few months ago I can say that my experience mirrors this quite closely. Its scary and stressful at the time, but at the end of the day, nothing bad happened and nobody ridiculed us. In fact, everybody (including our investors - some of which are involved with us again) was quite positive and everybody sees it as a positive learning experience. And being able to say that we're on our second startup has been beneficial too.

atmosx3• 12 years ago

It is useful to have around @tptacek when the topic is not NSA-related, he speaks wonders. Good!

smtddr2• 12 years ago

http://idioms.thefreedictionary.com/_/dict.aspx?rd=1&word=a+...

ceph_• 12 years ago

* Are you going to get ridiculed for failing? Obviously, you're not an HN reader. You'd have gotten ridiculed for succeeding. Ridicule is the air we breathe. Why do you care?

Haha, so true. Failure is lauded; success is criticized and mocked mercilessly.

pmorici3• 12 years ago

"Shitty credit is not that big of a deal."

You realize that your credit record effects more than just your ability to get credit and other financial services right? Insurance companies will sometimes deny coverage based on information in your credit record. ie: health insurance.

[0] http://www.consumer.ftc.gov/articles/0152-how-credit-scores-...

tptacek10• 12 years ago

Health insurance companies can no longer deny coverage based on credit scores, although apparently credit scores can impact your rates. Like I said: I have a very crappy credit score, and it's had no impact on my life (including the times I've tried to buy private health insurance, which was a nightmare for reasons having nothing to do with credit and everything to do with the fact that the ACA hadn't passed yet). Other than, yknow, to keep me out of the market for credit. A good thing.

Either way: the author is worried that someone's going to come for their house because of their startup debts. I don't think it's productive to mine for reasons to be anxious. Bad credit score? Join the club; there are millions and millions of us: we're called "Americans". Nobody is taking the house.

danbmil995• 12 years ago

agreed, this has changed drastically in the last 25 years. Sucky credit has gone from a minor annoyance to a pretty serious life issue. If you are letting your credit suffer for your company, you are doing it wrong. That sort of risk is precisely what investors are for. Working for a reduced salary, with pretty much zero job assurance, and bad or nonexistent bennies to begin with, and working nights and weekends, letting your personal and social life suffer, is punishment enough. If you get pressure to put more personal financial skin in the game, play good/bad cop with your spouse or life partner (ie use him/her as an ironclad limit on how far you can go towards financial armageddon)

3327• 12 years ago

The only thing we have to fear is fear itself.

sneak• 12 years ago

Think of it this way: had your company been successful, it almost certainly would have left you in a state where you'd be working for someone else for a couple years during your earnout. "Not working for someone else" was never really on the table.

Wow, I'd never really thought about it that way before. You're completely right, of course.

It's just rather depressing. Maybe I'll go re-read Rework.

mathattack• 12 years ago

* Ridicule is the air we breathe. Why do you care?*

I like a lot of your posts - this is one of the best things you've written. Reminds me of Feynman. http://en.wikipedia.org/wiki/What_Do_You_Care_What_Other_Peo...

danbmil995• 12 years ago

(1) work for someone else, (2) start company, (3) run company into ground, (4) goto 1.

So true, it hurts.

eoghan• 12 years ago

If you're in SF, LMK if you want a sounding board and someone to talk to in confidence. I'll buy you a beer. Help you get your head straight. eoghan@intercom.io

mbesto2• 12 years ago

And if you or anyone else wants another sound board, I'm here as well (SF or Palo Alto) - mbesto@gmail (I can relate 100% to the OP's struggles)

stevanl• 12 years ago

Same goes if you're based in London. My email is stevan@litobac.com. This too shall pass.

rbanffy• 12 years ago

In the unlikely case you live in São Paulo, Brazil, rbanffy@gmail. The beer is on me.

riddlemethat• 12 years ago

If you are in Chicago let me know lanecampbell at outlook dot com

fredgrott• 12 years ago

What I am interested in is the thought process involved in balancing things like fund raising, paying one cofounder and not others to stretch it, when to pull back, etc.

Obviously, investors want the dev cofounder paid to get product out the door..

But I am more interested in the decision process...

Let me clarify.. certain small business industries have these accounting/financial tools to help determine decision trees such as pay off debt now or later, etc.

Is there a similar set of financial ratios/trends to assist in the above decision trees?

dclara3• 12 years ago

I don't know about his kind of tools, but I agree with you that doing business has rules to follow.

Cofounders should be paid if the company has received external investment already. Employees should be paid even if the company is not making money.

Looks like OP is very young, all he and his cofound concerned is about the product and market, etc., not including how to run a business. In business, cash flow is always the no. 1 concern. If there is not enough fund, don't hire, no lease. Based on my previous job experience, $1M cannot afford a team in office. $3M can only have 1 years expense. Startup's burn rate is super high. Founders need to have plan B in place. It is said, "Failed to plan is plan to fail".

Emotionally, it's hard to accept the pitfall from owing $1m to negative. But how about if you never had that $1m, was that going to feel better? It's all about expectation and planning.

So the most important thing is to learn what can be avoided from this lesson. A lot of people are helping him to get rid of fear on the emotional side. It's sad that I didn't see much help on the business side to help other failed companies as well. Emotion is temporarily. Closing out process is a must to go. But how to prevent the 90% of the failed companies to avoid the pain is more important.

A lot of people care about it, but I didn't see any experts helping outside the YC meetings, although here is YC extension forum.

ig1• 12 years ago

Talk to your accelerator and your other investors (assuming they're typical startup investors), they'll have seen plenty of other startups fail and will be able to give you advice how to handle the situation.

They'll also know which of their other startups are hiring and should be able to setup introductions to help you and your employees get accelerated interviews, etc. to help with the transition.

skwirl• 12 years ago

I don't have any particular advice to give, but, assuming nothing improper happened here, if you gave it your best, there is nothing wrong with failure. Failure is part of the system. Your investors and employees realize that startups are a risky venture. There are plenty of jobs out there and your employees will land on their feet.

I have nothing but respect for startup founders who did their best and came up short. I hope that the experience you've gained serves you well throughout your career and one day you can look back and appreciate the experience. Good luck going forward.

DanielBMarkham• 12 years ago

It's not as bad as you think. You're alive. You have your health (hopefully). Tomorrow you'll most likely be alive and still have your health. This is the starting point.

Those that love you came along for the ride. If you tried as hard as you could, and you took this gamble with their blessing, you do not owe them an apology -- although it wouldn't hurt to give one. They'll still love you and you'll still be making decisions together.

Debt is bad, but they don't throw you in jail for being in debt, at least in the states. Do some studying on dealing with creditors. It's a game like any other game, and it helps if you know the rules. Plenty of folks in debt who are living happy and fulfilled lives. It's not the end of the world.

As to whether you'll be viewed as a failure or not, this depends on your peers and your culture. I suggest you hang out with people who view this as a badge of honor. Life sucks enough without having friends who stomp on you while you're down.

Family is another matter. Can't pick your family. But you can set some ground rules for interacting with them. If you need money from them, be prepared to do things you wouldn't normally do. After all, it's only fair to let them drive a bit if you're needing their help.

It's nothing but a thing. It can be hugely disasterous, or it can be a slight bump in the road. The difference is all between your ears, inside your head. You get to decide how to view this part of your life -- great adventure continues or yet another failure. I suggest you choose wisely.

diydsp• 12 years ago

yeah, my thoughts echo what most other people said: just keep your eyes wide open and observant so you can use this experience for next time! e.g. keep a journal and write stuff down so you remember...

I was at a code review recently with several people who had clearly never been through a major failure such as a start up going under (i've been through several...) and the difference in our viewpoints was apparent to me. This is valuable experience you're getting.

pdq• 12 years ago

This reminds me of the "My Startup has 30 Days to Live Blog": http://mystartuphas30daystolive.tumblr.com/

paulrademacher• 12 years ago

I'm pretty sure that was fake.

hidingmyname2• 12 years ago

OP here. It wasn't.

poulsbohemian4• 12 years ago

About 18 months ago I was laid off from an executive position at a company I'd been with about 5 years. At the same time, I was trying to bootstrap a business on the side, I'm the sole breadwinner in our household, three little kids, and I had a house that was underwater that we couldn't sell due in large part to all the foreclosures in the area that were the competition. To make it worse, we had moved to a very remote, rural area for family reasons, so had two houses to cover, and zero job possibilities anywhere in the area. Eighteen months later, that side project has folded (which I'm ok with), the other house is sold, and I'm doing well consulting (and with minimal travel). Will your story 18 months from now be rosy and happy? I don't know, but I suspect if you are the kind that would take the risk to start up a business, you are the kind that will hustle to do whatever it takes to first reach a point of survival and then the road back to thriving.

flyinglizard• 12 years ago

How you deal with the process and its fallout will be a defining moment for you as a person. Be upfront, be honest, and don't worry to much. Life goes on. You're in the best place and time there ever existed to fail and move on.

The best advice I can give you is that the sky will clear the moment you absolve yourself of the responsibilities. You'll be a free, earning man again. Things will only look up, and very quickly the ideas will start flowing again.

Take your wife for a talk. Explain to her how it's going to be, and that you'll be looking for a job the moment you've turned off the lights. You will have some peace, comfort and certainty soon that will allow you to think clearly, and later on, establish a learning process of everything you've gone through.

Someone around these parts said that the most difficult part of being an entrepreneur is managing your own psychology. It's time you get a hold on yours and own the situation.

Good luck!

akbar501• 12 years ago

1.) I hope you are over playing the despair part, but if you really feel that every sucks then you should speak a professional to help give you perspective. Seriously, your mental health matters.

2.) Create a list of everything you need to do, then start to work through it.

a.) Have a conversation with your wife. Inform her about what's happening, what issues you're facing, and ask her about her thoughts. Get on the same page, that way there are two of you working through this. What's her game plan? She'll likely have some action items that should go onto your list.

Get your emotions out, but then move on. I've been doing the startup thing for 14+ years and married for 8+. I cannot emphasize enough that you should not overburden your spouse. She's got a lot on her plate now, so get your emotions out once (if you're into that), then stay upbeat.

b.) Schedule a meeting with your investors. Have a set agenda, use a PowerPoint (or other presentation software) that outlines your current status, etc. Also, show that you are a professional by showing them you have a plan/budget/timeline to shutdown the business.

Your investors are professionals. They know that a large percent of early startups fail. What they will want from your is professionalism.

Also, ask for their input. What do they need you to do?

c.) Legal: Speak with your attorney (this can also be before #b). Get their input on your legal checklist.

You must shutdown the business correctly. Your attorney will be a big asset. Keep your meeting with them professional and focused. Don't waste time on emotions in this meeting.

d.) Schedule a team meeting and speak with your employees. Help them transition if you can. If you're overwhelmed, which it sounds like, then tell them you'll be happy to give glowing references. This is easy and will require minimal work on your part while keeping the relationship alive.

As with #a, don't overburden your employees with your emotions. Sorry, but complaints flow up, not down. They will have their own pressures, and your job as a manager is to help assuage their fears and help them see that everything will be ok.

e.) It sounds like you don't have kids. Yah! Seriously, grab a beer. This is so much easier without kids.

f.) Fill-in this list with input from everyone above plus your co-founders.

g.)It's only Tuesday. Get moving and this done before the weekend.

3.) Debt: To any first time founders, please allocate budget to shutting down a business. Experience matters here, and it's best practice to know your shutdown costs, to budget for them, and to have the professionalism to shut the business down when you have just enough money to close up shop. You should pay debts, invoices that are due, employee salaries, legal fees to shutdown, etc.

To the OP, create a list of assets/liabilities. If you can sell assets to pay for liabilities then do it. Be cool about who you owe money to. If these are other small businesses / startups, then try to make your debt whole.

pbiggar• 12 years ago

I've been there. I shut down my YC startup about 3 1/2 years ago. It was covered in the press more than my launch was! Shutting down was a huge weight off my mind - we weren't successful and nothing was going to make it so.

You raised money and have employees. Worry about the employees. Get them new jobs in great startups by actively going through your network and making sure they get new jobs that they'll love with teams they'll enjoy.

Dont' worry about the investors. They've lost money before. If you raised from non-professionals, then you may have to apologize. Mean it.

Tell your wife, obviously. You probably don't need to worry about money too much - now you can take a low-stress job at high pay and get back what you lost doing the startup.

Also, please feel free to reach out: paul@circleci.com

mbesto2• 12 years ago

Here's one of the most important lessons I've learned about startup life:

There is a fundamental difference between being poor and being broke.

Being broke implies you don't have enough cash or expected cash flow to cover your debt - but it doesn't mean you haven't accumulated wealth. Being poor means you neither have cash nor wealth. The OP is simply broke, but not poor.

Knowledge from failing a business is (IMHO) one of the greatest, if not the greatest, ways to accumulate intelligence in business. That is extremely valuable.

sayemm• 12 years ago

"Knowledge from failing a business is (IMHO) one of the greatest, if not the greatest, ways to accumulate intelligence in business. That is extremely valuable."

Amen.

dsr_• 12 years ago

Reminder for people who are running startups and are in serious relationships: nothing should be a secret from your spouse/partner. Especially money.

Maybe they're supporting you so you can recycle every dollar of revenue back into the business. Maybe you're gambling your shared savings on the success of your venture. Maybe you've got a good financial position and your family will be safe no matter what.

It doesn't matter. Tell your spouse. Get their advice. You don't have to take it, but they are a valuable resource to you, someone you can trust to listen to you, keep your secrets and have a different perspective.

It should not come as a surprise to him/her that the shutdown is likely; the shock of "no, it's definitely over" should only be a small bump.

Then you can both live through it, and go on to the next thing you have to do.

bksenior• 12 years ago

THIS! I can't get behind oscarthegrouch who thought it was important to articulate the worst case scenarios in a case like this, because regardless the next steps are the same, but this advice is gold.

Dont get to this point and surprise your partner. She is as much your partner financially as your co-founder, treat her like that from day one.

johnjlocke2• 12 years ago

This point cannot be stressed enough. If you hide stuff from your spouse about money, you're going down a real bad road. If your life at home is shaky, there is no way you are going to be able to lift a business successfully. The two cannot be siloed off from one another.

chernevik• 12 years ago

This.

If your spouse / partner _doesn't_ want to have these conversations, you have larger problems. One signpost that my marriage was doomed was my wife's shock at the possibility the business might fail, and her refusal to discuss the possibility.

timmm• 12 years ago

We are smarter than this. Why do we accept this as a normal part of our industry. There are ways to avoid this, the anxiety, heart ache, and lack of dent in the universe.

Let's learn from this.

tobinharris• 12 years ago

Think of the first time you had to build a solution to a problem you didn't understand. It's scary with lots of unknowns.

Seeing your company collapsing is scary, and you don't know how to deal with it. There are lots of unknowns.

In the end, you'll find a way of coping that works for you.

There's good advice here in these comments.

Personally I'd recommend finding someone experience to guide you through the closure. That's what I did (accidentally).

You'll look back in a year and think "That was scary shit but I learnt a shit load".

panther2k• 12 years ago

I'm there right now (minus the high-profile accelerator and funded part so I had even less success). It sucks. I'm exhausted. But I'm broke so I need a job. I can hack stuff together but I'm more of a junior level dev so not sure how attractive I am to a Silicon Valley startup.

I thought I knew what it took to be successful, so I quit my wall street job and drove out to San Francisco to JFDI. I even lived in my car for nine months to save money. It would be worth it once the business took off. It never did. So I started another one, which failed too. When you work non-stop, every waking hour for almost two years and fail at everything, you realize you don't have it all figured out. At all.

The scary part of failing is asking yourself, what the heck do I do now? And you don't know the answer.

Probably should have made this a throwaway. Oh well.

yuhong• 12 years ago

Probably should have made this a throwaway. Oh well.

I prefer that the problems be fixed properly if possible.

laureny• 12 years ago

But, I can’t imagine working for somebody else. I wish my wife understood that.

She's understood it long enough to let you pursue the dream of your life at great costs for her, maybe now it's time for you to do some sacrifice for her and go work for someone?

You're not the first one to have to do that and, you know, survive.

Seriously.

MidsizeBlowfish• 12 years ago

This. She worked to accommodate your dream, have the decency to to swallow your pride for a bit.

avenger123• 12 years ago

Thank you. This was my sentiment but didn't comment on it. There are very few things in life that are only "one time only".

Build the cash reserves, get back on a stable financial ground and go ahead and try again.

Sometimes the myopic tendencies of these stories really drives the point of how self-absorbed one can get with this. Working for someone else likely means a nice office, nice chair, nice desk, nice computer and monitors and the ability to sit down for 8-9 hours a day and use your mind and likely a decent salary.

I think for the vast majority of people in the workforce that do don't software development, that's not surviving but thriving.

tod222• 12 years ago

I caught this too.

So did one of the commenters: [1]

Sorry it didn’t work out.

“I can’t go much longer without a paycheck. But, I can’t imagine working for somebody else. I wish my wife understood that.”

Change your perspective on this.

I’m a co-founder of a successful and growing business. I’ve got around $2M liquid and who knows what on paper. I’m decently rich headed for pretty damn rich. In the last week, I’ve changed light bulbs, picked up bugs with my hands (no tissue close, wanted to get it and call the bug guy before people saw it), swept the floors, took box trash out to the dumpster, cleaned some toilet stuff (will leave it there) and just generally served people on my team in any way I could. I find ways to do it because they are talented, could work anywhere and choose to work here. So I serve them. Also, I have deep relationships with them and I love them. I want to win with them.

From your words, I worry that you don’t understand the point of the game you are playing. If you want to run any successful team be it a business, a non-profit, a 5th grade little league ball club – you are servant in chief. Others exist in the world. You aren’t really ever by yourself or for yourself. Work on being and building a team. Make meaning and tie it to production. Start by being the best teammate you can be. Being an employee in an intense and well managed company is a good place to learn this skill.

To me the key point was this:

If you want to run any successful team…you are servant in chief.

Most managers completely miss the "servant in chief" bit.

[1] http://startupsanonymous.com/story/were-shutting-down-and-im...

wehadfun• 12 years ago

could you sell?

danthewireman• 12 years ago

A big first professional failure is like breaking up with your first girl/boyfriend - it feels like the entire world is ending. After you find out that it didn't, it can be wildly liberating because you won't really be scared of failure any more. I recommend a few massive fuckups in any career.

mindotus• 12 years ago

If you are in the NYC area coffee or drinks on me! Just shoot me an email to john@minus.com

Just remember it's not the end and there is much more to look forward to perhaps in a future startup months or years down the road.

aaronpeck• 12 years ago

I think what you're going to find out is letting go will actually be a huge relief. You're going to bumble around feeling like a worthless piece of shit for a few weeks and then ideas will start boiling over in your mind. Before you know it you'll be writing a business plan or prototyping something new and you'll be armed with this failure as a roadmap of what not to do. You sir will be a-ok.

PS. Not having any money at least once in your life is something everyone should go through. You'll be surprised at how well you eat and live when you thought you'd be homeless. You'll also realize how much bullshit you have in your house or services you pay for that you really don't need. Good luck - you won't need it.

apapli• 12 years ago

Completely agree. It's amazing what we don't need and I'll expect you find your confidence in 12 months is through the roof. The shackles you thought were binding you are were actually made of sand.

So all the very best, and remember this will be an awesome war story for you to tell in the future.

BeccaCory• 12 years ago

The comments below the post are what makes this really worth reading.

yungether• 12 years ago

These posts are like torture porn.

terra-cheng• 12 years ago

I think the story is not real. It's just to sell of the website Startup Anonymous.

atmosx3• 12 years ago

I don't have any advice to offer, but it's the best story/post that I've read about startups. I think is exactly what you have to read, before jumping into the startup wagon. Then, you're ready to go, if your gut can take it

ninive• 12 years ago

I'm a CTO and a serial entrepreneur, and i'm into this business since i was a kid. 6 years ago after a very intense splash in a huge famous company in US, I've decided to take a break, and fly to the Caribbean to open a sushi restaurant. My girlfriend is a successful F&B manager so i took all the suggestions I can handled from her, and opened it. After 12 months, was a complete failure. The first of my life. I was really scared to lose everything but just the time to close and open my eyes, solutions were there. Time and focus are very helpful. I didn't drop. I've found a re-start partner, took my girlfriend with me in business to advice and manage, changed style, and finally sold it to at least break even all the debts and have some vacation, ready to go back to the Internet. The break lasted 4 years at the end, and was the most important time of my life, looking at it from here now. The major growth of your soul. Keep the energy and focus, be sincere, and for sure something good is going to happen. And your second time is going to be ridiculous easier, trust me. Good luck.

72deluxe5• 12 years ago

Sounds like you went to some exotic places and tried some interesting things though. Likely a worthwhile experience!

I would like to visit the Caribbean. Even America would be good! Must save up...

throwaway5752• 12 years ago

It happens. Tell your wife. Inform the board. Hire a lawyer to deal with the debts. Inform the employees, giving them some idea of severance and resources to transition elsewhere . Figure out how money you have left and do an orderly wind down. Send out rfps to see if anyone will buy all or part of the company. Then get a new job.

patrickod• 12 years ago

Take some time to decompress. The winding down period is stressful and it seems you're already feeling the effects.

As many have mentioned you've only enriched your resume with this experience. Use it to find yourself work, your incubator network should be full of people looking to hire.

I've gone through this and it's stressful as all hell but you'll make it through. With your nose right up against it the problems seem much more formidable than they are in reality. Employees come first in terms of settling debts. Deal with vendors after that.

One point I'd really stress is that you should talk to people about it. Feel free to reach out (p@trickod.com)

informatimago• 12 years ago

Perhaps now would be a good time to read or youtube about The Venus Project, (and perhaps also about money as debt), to get some perspective.

shmerl• 12 years ago

I’m broke and it’s not fair to my wife to go any longer without pay... I can’t imagine working for somebody else.

In such circumstances one might need to do what's required, and not what one would like to. I hope his wife will explain that to him.

paultannenbaum• 12 years ago

I sympathize with most of this post, but the one thing that I don't get is this line:

"I can’t go much longer without a paycheck. But, I can’t imagine working for somebody else. I wish my wife understood that."

If the author really is as down and out as he claims to be, I think somebody offering him good money to get his life back on track might be something that is welcome. He can always work for himself once things straighten out.

omegote• 12 years ago

I can’t imagine working for somebody else. I wish my wife understood that.

Seriously?

300bps2• 12 years ago

In fairness, I'm sure Bill Gates, Warren Buffett and Larry Ellison couldn't imagine working for somebody else either.

peterjancelis2• 12 years ago

Sure but they earned that right.

MichaelGG2• 12 years ago

Seriously. I'm 32, and never had a "boss" per-se. I've had consulting clients, and I've been at a company before, but always on my own terms.

I recently started work with a part-time client in a more traditional arrangement and it's quite...trying. I had thought it'd be the opposite: someone else is running things, you just show up and get things done. If they make poor decisions, whatever, it's their money and time. In practise, I'm finding it extremely difficult to deal with. I'll stick it out because I said I would but it is not as pleasant as I had thought.

It's not a good thing, and I wish as a teen I had been subjected to higher work discipline. Yes, I know, I'm whining about first-world problems (while living in a third-world country).

paulhauggis• 12 years ago

It's the same with me. I can usually do it for about 3-4 months...and then the mis-management, ridiculous decisions, and the blame game (IE: I get blamed for a poor planning decision) gets to me and I want leave.

Now, I only work part-time for someone while my company is growing. It makes enough now to pay me and the other 2 founders a comfortable salary..but I can juggle both until my company gets too busy.

UweSchmidt• 12 years ago

It seems like you are the one who has the higher work discipline already, and that many people who find it trying to become a freelancer or entrepreneur should have been subjected to such an experience as a teen.

Being self-organized, selling solutions instead or just fulfilling a specific role (even if done excellent) is awesome!

72deluxe5• 12 years ago

I am not yet 32 and I have worked for companies as an employee. Also, when I was utterly broke I did freelance work on the side and different languages and skills. It helped me get another job in fact!

I think the important thing for me now is that at the end of the day I can go home and not really have to worry or think about work until tomorrow. If money was the most important thing in life (or I was deeply in debt again), I would be working all evening as well, but money isn't the most important thing. Time is. Time to read, time to play with my cats, time to reflect.

My know a few who work for themselves and they seem constantly restless and with worry about how to make ends meet when not enough work is coming in. The idea of working for yourself seems romantic and "free" but it can be quite stressful, particularly with a family and children.

datahack• 12 years ago

Ha! Not to worry. I got myself 700k in the hole in the 2008 financial crisis trying to "do the right thing." Spent four years digging out of that mess in a situation where I had to run a company successfully at millions in revenue just to stay afloat. That is a hell of a lot worse than folding the company, and if I knew the hell it would take to dig out, I might have folded! But we're free and clear and making money now so it was worth it. This would be the fourth company I started. The previous three I went through the same thing you're talking about. Got to the point where I started to wonder if there was something wrong with me, or if I wasn't cut out to be an entrepreneur.

I know that feeling of strain and staring at the ceiling wondering if I'm going to survive. No way out. It sucks. That's entrepreneurship. That's why I'll never tell anyone to be in business for themselves. You have to really want it for the right reasons or you'll never be able to survive this kind of thing — it will break you. I've actually seen quite a lot of entrepreneurs get "broken" when things got super, super bad to deal with. It's overwhelming.

But, the way to deal with it is this: what is the TRUTH of the situation. What are the real FACTS? The truth is, it's not that bad. It's not like you're being chased by ruthless drug lords down a dark street. You're folding a business.

Whenever you find yourself afraid, find the fear, then find the truth. Keep working through those until you feel better. It actually works. If you stick to the facts, you'll get through it.

Also, dude, you need to keep pushing. Get yourself shut down with class, get honest with your wife, and you'll come out swinging. It might sound crazy now, but the average entrepreneur who makes it has a few of these under their belt!

Also, awesome piece of advice here: http://leadercast.com/en/ Watch the video from Rorke Denver. Here's the cliff notes (pdf): http://leadercast.com/en/downloads/LN_CalmisContagious.pdf

Now is the time of your testing. How you behave when the shit hits the fan is the question of what kind of leader you'll find yourself to be, so don't let yourself down. Be calm, be brave, face fact, and dive in! It's time to learn as much as you can about what you did to get here and what you can do next time to avoid this outcome!

peterjancelis2• 12 years ago

You really should look for a job. There's nothing wrong with it. Look at it as starting a consulting business with just 1 client, get to know your 'client' and start suggesting ways you can make more money together - then charge a cut to do so.

72deluxe5• 12 years ago

Good idea on rationalising it in your mind. Good idea.

Grokit• 12 years ago

I'd say the best thing you can do is learn the lesson that you should have had a contingency plan for this situation. Particularly since failure is the most likely outcome of any startup. I know though, that only happens to the 'other' guys.

hidingmyname2• 12 years ago

I wrote http://mystartuphas30daystolive.tumblr.com

Like you, I raised money, went through a top accelerator and had a wild ride that doomed in failure.

It's ok to be terrified. It's ok to hurt. Fear paralyzes. You will pull your socks up and do what you need to do. It'll hurt more than you know. You'll quickly separate your real friends from the rest. And then something amazing will happen, your life will go on.

The first thing you'll notice is how much of life you've missed while riding the startup "high life". Big things like love, family, reality will suddenly become clearer and no longer dimmed by the tinnitus of whatever TechStars derivative you've been through.

The next is that you're a hell of a lot wiser. You'll find a job and you'll start performing. You'll look like a legend because the pace and agility you learned to work at during your startup days will make you a rockstar anywhere you decide to put your talents to use.

Your performance will bring more money, and power (to a degree) than you've ever made before. You'll make up for lost time.

And then, like all of us, you'll hear the siren song of entrepreneurship beckon you out into the world again. You'll pick up the pieces and start anew.

Ride the wave, brother/sister. Godspeed.

sytelus• 12 years ago

ummm... Didn't we invented a marvelous escape hatch called "aqui-hires" exactly for this situations? If you have even moderately connected investors, you should be able to get aqui-hired in a week or two, very likely sipping pina colada on a Caribbean beach to stretch out before you start the new job with giant bonus vesting schedule that beats any of your colleges. Plus you get to update your Linked-In profiles with "CEO & Founder of Fantastic Startup (Acquired by whatever)". There are no loosers in startup world anymore, AFAIK.

herdrick2• 12 years ago

Easier said than done.

clarky073• 12 years ago

It's interesting, currently my business (bootstrapped and small) is doing just fine. Profitable, making more than I used to working for someone else, and I'm STILL scared shitless most of the time. The wife and I want to build a house and have kids and that sort of thing, and it all scares me.

The really interesting thing though is that in general working for yourself is not much if any more risky than working for someone else. Sure if you are at Apple or Google it's unlikely they are going out of business, but companies big and small go bankrupt all the time. Layoffs happen all the time. That's the way things work. You just have to make yourself valuable and work hard. Especially in our business, if you are remotely competent it isn't hard to find work right now.

I really should find a way to feel less stressed. Things are mostly fine, and I know for a fact that I could get a job tomorrow if I wanted/needed to. "Failure" for me would likely mean taking a high paying dev job at a great company that I respect. I should just relax and do good work and hope for the best. It's hard though, and I see where the OP is coming from.

72deluxe5• 12 years ago

No point working all the time to accumulate all you can only to die early from a heart attack.

Working for someone else means you can go home and not think about work until tomorrow. And you can read a book and develop hobbies, learn to play an instrument, tend a garden and look after a pet.

I do not envy you. I have had to work very hard in the evenings to get out of sticky situations, and despite the romantic view of working for yourself, I like to go home and forget the day.

Take some time off.

clarky073• 12 years ago

That's the interesting thing. I made more money than I've ever made last year while working fewer hours than I ever had. Things are going well for all intents and purposes, but building a house and having a kid or two is scary on many levels. Being responsible for yourself is pretty easy. Being responsible for a spouse adds a little bit to it. Being responsible for a kid on top of that (and having the spouse quit working to take care of it) adds significantly more.

CmonDev• 12 years ago

I thought start-ups are about spending someone else's money and never your's.

mironathetin2• 12 years ago

Been there too. Here is the lesson to learn: If you got funded and have to pay invoices, employees (including yourself), never hope for more investment. Shrink and - if necessary - finally close your business before (!!!!) you run out of money. This is true for startups, businesses, household budget, pocket money, girlfriends (hrmmm), etc.

Startup is a high risk, the statistical odds are against you. Investors know that. If they see you fail, they will not tell you, they will simply stop to invest (and may be think, you will go on to save their a...). Hope that you may find new investment means, you did not start looking early enough to know the odds.

I (we) were at the same position in 2001 when the internet bubble burst. I am happy to report, that our business needed heavy investment (like yours did) and it became clear to us, that there will be no more investment for internet business in the foreseeable future. So we did shut down with money on the bank, paid our debts, bought out our gadgets from the company and divided the money that we paid for the gadgets among the shareholders (us :o). Both of us founders saw the startup as a business not as our baby. So we were able to look at it from a kind of outside perspective. This was not the reason why it failed, though, but it lifted us at eye level with the investors.

The way we handled it allowed us to book it as a very interesting experience. We were immediately able to look forward.

But, here is the positive side: You got investments (a lot even), you survived for 2 years, which is great. Now get together with your co-founders in a nice place, drink a bottle or two of good wine and analyze your mistakes.

Sorry to say this now that it is late for you. But next time ...

mironathetin2• 12 years ago

Here is another thread about failure: Post mortem and lessons learned: This is the right attitude IMHO.

http://elnorr.com/2014/01/27/post-mortem-thanks-lessons-lear...

dodyg• 12 years ago

I've been having my business for 10 years - which almost died twice.

The business is not about you. Yes you are the founder but you are just part of the machination to make it work.

When the business fails, it's not a judgement on your character or your moral. Failure sucks. Tell the truth your employees ASAP. Deal with the fall out directly.

If you need to downgrade your lifestyle, do it. It is better than having the anxiety to put up with un-affordable lifestyle.

More importantly - don't be an ass to your wife. If you need to get a job, get a job. There's plenty of time to try again in the future.

gavinbaker• 12 years ago

It is hard to be where you are. Thankfully life does move forward.

In my case we had a couple million invested in the world changing idea. Saying we failed was very very hard. Hard to tell my friends, our industry partners and my parents.

What I did - was take a long walk to my favorite rock on the lake. And I sat there in the cold and watched birds fly and fish eat and the sky change. I cried tears of frustration and of grief, for the possibilities that wouldn't be.

I then went back the office and made a list of things we needed to do. In my case our investors saw it coming because we'd missed key milestones for additional funding. Our team was small and I'd been open with them about missing the milestones.

We negotiated out of our contracts and made our final payments. In our case our board had made it clear we needed "wind down money" in the bank and we had it.

It wasn't easy, not by a long shot. At the end I was drained. I took two months off. I slept, I prayed, I read and I journaled. You may not be able to do all of that, but give yourself a break.

What I wished I had was someone to talk to who understood what I was going through. Plenty of people fail in business, but not many have a lot of money backing it, a lot of people believing in it and you feel like you let them down. Take up the offers of help to talk in person. I'd be glad to sit and listen if you want. The good news is that the sun will rise tomorrow and it will be a new day. And while it won't feel great, you will get through all of this.

richardlblair• 12 years ago

congrats! You failed! I'm serious. I know it's hard to see now, but so often life's greatest successes are born out of failure.

Hang tight. Things will work out.

rdl• 12 years ago

Most debt dies with the company. Tax debt (especially employee payroll withholdings) is really the only kind of I know which carries on, along with any personal debts which won't get reimbursed (which I got burned by, on credit cards, several times).

It's all surprisingly easy to walk away from, at least in the US, and particularly with normal professional investors.

sjayman• 12 years ago

This too shall pass

We're Shutting Down and I'm Scared

Related Stories