
Ask HN: Keep the company or start a new one? - outofcash
Hi HN, we have a startup that has been running for 3 years and went to 2 pivots. We now have a business model that works, we have been steadily growing our revenue at 50% &#x2F; months for the last 8-10months.
We raised money early on and used that money to go through the different phases and through the pivots as well. 
We are now running out of cash (1month left at the bank), but given our growth rate and low expenses (only 4 small salaries), we will breakeven in about 4-5 months.
Assuming no investor wants to put back some money (given how long it took us to growth and find a business model that works, I can understand), but we (the cofounders) don&#x27;t want to give up the company.
So are thinking of not getting salaries for a month of two, but then shall we bankrupt the company because of that? And investors will lose their % in the company. 
Or how do you suggest we go about it?
Any input is much appreciated.
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mikekchar
I am not an entrepreneur (I don't even play one on TV), but I've been in a
fair few startups. The way I've seen it work is:

You are dead in the water. In a month you can't meet payroll. But you have
revenue growth and potentially data to show that you will eventually break
even. You need bridging financing. Go to your investors and ask for it.

They may think that your growth potential is not enough. That's totally fair
and is their choice. So what they are going to want to do at that point is
write down the loss. So you aren't really hurting anybody by bankrupting the
company.

If you are intent on continuing beyond that point, make sure that you get
agreement from all your investors that they don't mind. Likely they won't. If
they _do_ mind, press them for that bridging financing. They can't have it
both ways.

After you have washed yourself clean of the original investors, you may
actually be lucky enough to find new investors for your new company. As long
as the gap between the previous company and the new company is not too long,
you might be able to keep your staff (but make sure to properly terminate them
so that they have reasonable choices).

The very first startup I worked in, the founders were miracle workers. They
ran the company into the ground, eating up something like $20 million. Their
investors gave up and wrote off their loss and the founders found another $2
million from someone else. They ran that company into the ground. Then they
got agreements from the staff to work at a new company doing similar work (a
complete rewrite!) for a cut in the action (something like $100k each as a
signing bonus). I think they got $10 million for that. They ran _that_ company
in the ground, but by that time had such an impressive reputation for raising
money that they could easily get money for new startups.

It sounds insane that you could run the same company into the ground 3 times
(spending tens of millions of dollars... much of it as their own salaries) and
come away with a good reputation. But remember that as an entrepreneur _you_
are as much of a product as your company. As long as you are seen as a mover
and shaker and as long as it looks like you are taking appropriate risks, you
will simply just make yourself look good by keeping the deals rolling.

But of course, whatever you do, make sure you have a good lawyer. Pay special
attention to what they say because it is incredibly important to get the legal
side of it right.

Good luck!

~~~
outofcash
Thanks, very inspiring story. I didn't know that's something others actually
had done.

