I ran across Startups Anonymous, and a post entitled, “We’re Shutting Down and I’m Scared” caught my eye.
For better or worse, I’ve either been through or participated in shutting many companies down, so I thought it would be fun and potentially useful to provide my blow-by-blow advice:
After over two years, backing from a well-known accelerator, nearly one million in funding and a decent amount of traction, we’re shutting down.
> Over half of all *VC* funded startups go belly up, so you’re definitely not alone.
I’m scared. I’m also sad, disappointed, ashamed, embarrassed & deflated. But mostly just scared.
> That’s natural. The way to get past the fear is to take action.
Nobody but my cofounder and I are aware we’re shutting down yet. It’s been a few days since we made the decision and I haven’t even gotten up the courage to tell my family.
> The sooner you tell them, the better. If the situation were reversed, would you want to know as soon as possible, or later, when there wasn’t any time for you to help?
We haven’t paid ourselves a salary for some time with the hopes that we would raise more money, but also because we couldn’t afford to. My wife was counting on me to raise more money, now I have to tell her the news.
> You’d better tell her right away. She is an equal partner in your life. And if she leaves you over money, you’re better off without her.
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.
> It’s called piercing the corporate veil. As long as you didn’t sign any personal guarantees, legally you have no personal obligations.
Our investors believed in us. They believed in what we were building and our abilities to execute on the vision and future we painted for them. Now we need to tell them that we lost their money. Will they forgive us? Will any investor ever trust us again?
> Over 70% of pre-A companies lose all their investors’ money. If you have professional investors, they know it’s simply part of the game.
What are we going to do now? I can’t afford to start from scratch again. I’m broke and it’s not fair to my wife to go any longer without pay. Even if I could, what would I even do? Will I be able to get a job? I can’t go much longer without a paycheck. But, I can’t imagine working for somebody else. I wish my wife understood that.
> The sooner you tell friends and family, the sooner they can help you find a job. And I don’t give a damn that you can’t imagine working for somebody else–upgrade your imagination and do what you have to do to support your family. I’d wash dishes or clean toilets if I had to. It’s not like I don’t do both at home for my own family!
Are we going to get ridiculed for failing? What’s more scary, is anyone even going to care? After all, maybe that’s why we didn’t make it.
> You won’t get ridiculed for failing because nearly everyone fails. As long as you didn’t do something incredibly stupid and/or illegal, no one will give a crap. In life in general, no one wastes any time thinking about your problems, except maybe your mother. We’ve got our own problems to worry about. Get your life in order, build up some cash, and rehearse the following line:
“My last startup failed. Here’s what I learned….”
Good luck next time!