
On Shutting Down - craigcannon
https://blog.ycombinator.com/shutting-down/
======
Jach
There's a kind of shutting down not covered here: getting acquired. Too often
a phrase similar to "our incredible journey"[0] appears, in which case as an
end-user you know the time for enjoying the service is at an end just as
surely as if the startup went bankrupt.

[0]
[https://ourincrediblejourney.tumblr.com/](https://ourincrediblejourney.tumblr.com/)

~~~
hodgesrm
It's pretty easy for founders/execs at that point to make regrettable comments
along the line of 'this is going to be great for our customers'.

Sometimes being honest and taking care of your customer/employees/other
stakeholders requires you to say "I don't know" or "this will be a change"
instead of what you think they might like to hear.

~~~
ChrisSD
It's not always possible to make such statements, depending on the terms of
the buyout. That goes doubly so if the founders/execs have a continuing
relationship with the buyers. Even if it turns out to be a short term
relationship.

~~~
Dylan16807
"I don't know" shouldn't be hard to say. If the terms require you to _actively
lie_ , well, that's shameful to accept.

------
philip1209
YC has talked about how startups die of suicide, not homicide. Shutting down
is a hard decision, and there always seems to be pressure to do it. Raising
money looks like success to others - so it's tough to declare later that you
have made nothing of value and will close shop.

Here were my shutdown articles after I closed Staffjoy:

[https://blog.staffjoy.com/staffjoy-is-shutting-
down-39f7b5d6...](https://blog.staffjoy.com/staffjoy-is-shutting-
down-39f7b5d66ef6)

[https://blog.staffjoy.com/denouement-
abe7d26f2de0](https://blog.staffjoy.com/denouement-abe7d26f2de0)

~~~
boznz
I guess retirement is a form of suicide. I run a successful one-man
programming business but it too will need to shut-down as I would like to
retire in 4-5 years.

It is especially hard as the company is totally viable, in a great location in
the world and has great customers who are really happy to keep giving me work,
this means I cannot really shut-down until they are taken care of by either
selling off the company to another programmer who will support them or
transitioning them (very expensively I guess) to another system

I wonder how many people in the same position are thinking this far ahead

~~~
existencebox
Selfish response: Why not sell it?

I've worked for larger corps for most of my career but have certainly
cultivated the desire to be the maker of my own success. That being said, I've
had remarkably little luck in finding any side effort enough traction to get
off the ground, and hit my stride the most when I can improve a system with a
proven value prop. (Without sugarcoating it, I'm a terrible "idea guy")

Later in my life if I get a degree of financial stability, I'd like to buy or
work for a proven small company (working for would be hard but not impossible
given the aforementioned desire to be the driver and recipient of the fruits
of my labor) and taking over from someone in your situation sounds almost
ideal.

------
iandanforth
YC provides a toolkit for starting up and incorporation. Do they also provide
a toolkit for shutting down and wrapping up legal / tax obligations?

~~~
akharris
This is a great idea. We've thought about this a fair amount but have not yet
found the right solution to implement.

~~~
iandanforth
In my imagination this would initially be like your SAFE template or perhaps a
checklist. A legally vetted document that tries to take into account the
interests of both founders and investors while covering the important bases.

I'm glad it's being thought about one way or another!

~~~
jacquesm
> tries to take into account the interests of both founders and investors

Customers first, employees second, founders third, investors last. You may
want to think over why the last two are in that order, my reasons are simple:
investors know the risks going in, and they will not eat one sandwich less.
Founders need to be able to get on with their lives too.

~~~
irq11
Unfortunately, the legal obligations are almost reversed.

~~~
bradknowles
Which is why you have to go out of your way to do them in the order specified.

You have to operate within the confines of the laws at each step, but if you
don't take care of the employees before the founders and the investors, then
they're going to get screwed the most.

------
clarkevans
What to do when a company has found a market, reached sustainability with
regard to its employees and customers, yet probably will not be providing the
anticipated return for its investors? I'd like to hear about ways this has
been bridged. Have there been any SV "exits" to a ESOP? Unfortunately, an ESOP
requires at a minimum 30+ people to be legitimate exit option and quite a bit
of administrative attention and expense. It seems an unlikely path for a
technology startup.

~~~
dbcurtis
The dreaded "zombie". Profitable enough that the investors can't pull the plug
by force. Not growing enough that anyone will make any money out of it. It is
my observation that because of "natural attrition" often both the management
and employees tend to get replaced with B-players over time. The investors
lose interest, their money is gone, their incentive to care a whit is gone, so
they apply their attention where it has the chance to make a difference.

~~~
TeMPOraL
Dreaded by everyone except the users/customers, who come to depend on the
service the startup provides.

~~~
rightbyte
... and the people it employs? I see alot of winners in "zombie" startups. I
wonder what the ROI of the average business is. Pizza places, AI shops alike.

~~~
lotsofpulp
Problem is when someone bigger comes and puts you out of business. Like a
fancy new pizza place with modern decor or a Costco or amazon or Uber. You
need the ROI to keep placing other bets to increase your chances of survival.

~~~
Zombiethrowaway
If you care for your pizza, your customers and employees, you will stay in
business for a long time, regardless of who opens a shop next door. Staying
power, habits: those are huge positive factors for businesses.

~~~
lotsofpulp
“Mom and pop” businesses around the country show otherwise. A few restaurants
with a very loyal customer base or outlier popularity might do well, but
certainly not most. Same with hotels, rental cars, airlines, retailers, etc.
There’s just advantages to scale that can’t be matched, and if there’s margin,
someone is going to want a piece of it.

------
artur_makly
this is the best shutdown i've seen to-date:
[http://vmashup.com/BDMLAWn6](http://vmashup.com/BDMLAWn6)

------
cool-RR
The author writes about the founder in an idealist way, i.e. searching for the
most effective and honest way to manage a shutdown.

I'm interested in the moral dilemma, especially regarding employees.

Aaron writes: _" The biggest emotional investment that founders make –
especially early on – is convincing great people to take a leap of faith and
accept an offer to work their butts off on a long shot. This dynamic is why
transparency around the decision to shutdown and the timeline of it is so
important."_

Imagine you're a founder and your company is on its last legs. You can make a
last-ditch effort to pivot and save the company, but that means that if you
fail, which is likely, your employees will get shafted. Can you really
communicate this transparently to your employees, and risk having them start
searching for a way out, dooming your chances to succeed in turning around the
company?

------
andrewstuart
When shutting down, founders need somehow magically to know how to do it
"right" or as best possible, when they have no experience of that.

I think investors should consider requiring founders prove they know how to
shut down properly before giving money to grow in the first place.

Here are the basics:

\-- what the ethical issues, how to "do the right thing"

\-- how to shut down when they can still do so without debt being incurred.

\-- what to say to which staff members and investors and when to say it

\-- what the legal obligations are

\-- how to either get acquihired, or how to find jobs for existing exployees

\-- what legal bombs to avoid and how

\-- what the biggest legals traps are in shutting down, such as leases which
will remain fully payable

~~~
sontek
A lot of founders are first time founders. They barely know how to run a
company let alone shut one down. I think it is fine for investors to invest in
great inexperienced people.

Maybe it would make sense for the investors to mentor them during the shutdown
to make sure it is done correctly, since investors have been through it many
more times.

------
DonHopkins
>Because of this difficulty, we’ve evolved a set of terms that often mean
“shut down” without saying “shut down.” In no particular order these are:
pivot, hard pivot, rebrand, strategic shift, change customer focus, and
platform switch.

How about "serialize"? As in "I'm a serial entrepreneur, so I'm serializing my
current project, and spinning up a new one!"

------
cyborgx7
Building a sustainable business that meets customer demand and is able to pay
employees, without the need for growth, is called a zombie and needs to be
shut down?

You know, sometimes I forget that this stuff if just a "get rich quick"
scheeme, but then an article like this comes along and reminds me.

------
simonebrunozzi
In the case of a startup shutting down, what would be the best way to try to
resell the technology that the company has built (with the hope of recouping
some money for the investors)?

------
chiph
I once called a friend that I hadn't talked with in a while, only to find out
that he was helping load their office chairs into a U-Haul for their new
owner. Awkward.

------
craftyguy
To be clear, since now ycombinator is in the business of clickbaiting titles,
this is a blog about shutting down a company, not a blog about ycombinator or
HN shutting down.

Edit: the original title was 'Shutting Down'

~~~
croddin
Most real shutting down announcements are titled with some spin that makes it
sound like the opposite though like: "The next chapter of advancing
Y-Combinator"

------
dooglius
I think that "On Shutting Down" may have been a better choice of title here

~~~
akharris
Good edit. Hadn’t thought of that. Changed.

~~~
richardbrevig
"Shutting Down Your Startup"

------
shshhdhs
Oh man, for a few seconds when I saw "Shutting Down (ycombinator.com)" on my
aggregator, I thought HN was shutting down! And then I was like, "Oh, April
Fools.. wait, it is December". Man, that scare woke me up more than this
coffee sitting next to me would.

~~~
vernie
I was scared that tech pedants would need to find a new place to bicker.

------
exogeny
I don't know Aaron at all, but I'm curious about what kind of bonafides you
must have to be a Partner at YC. Do they mean partner in the financial sense
(ie: he bought into it) or in an operational sense? If it's the latter, at
first glance there's a bit of strange optics to have someone in that role
whose only notable experience to my knowledge in the startup world ended in
failure.

~~~
zapita
When your job is to help startups, your experience of failure is much more
valuable than your experience of success, because it’s much easier to learn
from your mistakes.

In any case, YC partners quickly accumulate enormous experience from the
failures of all the startups they’re helping. I bet Aaron has personally seen
hundreds of startups fail, and has learned from every single failure in order
to better help his next batch of startups. That experience probably eclipses
whatever else he did before YC.

To me that’s YC’s biggest competitive advantage: they aggregate the learning
experience of thousands of startup failures, and use it to keep their success
rate above market.

------
jacquesm
To avoid further cardiac anomalies maybe change the title a bit?

~~~
dodopok
I thought the same thing

~~~
garysahota93
Same. I was really worried for a second... semi- (unintentional I hope) click-
bait....

------
discreteevent
Fuck it. Move on.

------
sandov
This is like a FREE BEER ad.

------
humbermetallic
The worst thing is to keep beating up the dead horse. At least in the gaming
industry, you can clearly see some companies "milking" the brand of games,
Bethesda and Blizzard have been doing nothing else recently IMHO. But as long
as it sells I guess the company is still satisfied with chosen politics, even
though it's profit over quality.

~~~
eropple
Blizzard released Hearthstone in 2014, Heroes of the Storm in 2015, and
Overwatch in 2016. It's very difficult to characterize that as "milking". And
Bethesda has Starfield in the pipeline, though it's a next-gen title at this
point.

~~~
Jach
I also don't think Blizzard or Bethesda are particularly good examples of game
studios "milking" it. Sure you can use the "new IP" filter to describe those
who are "milking" and those who aren't, but to me it's ok to reuse existing IP
if there's a significant new spin to it (rather than beating a dead horse).
Take Doom 4 (2016) as an example from Bethesda via id, rather than being a
knockoff it totally revived the series, capturing what it means to be "Doom"
while also feeling fresh against all the other FPSes at the time. In contrast
look at Nintendo's parade of 2.5D Mario side-scrolling platformers since New
Super Mario Bros DS. They're all basically the same. Yet even then they can
still sometimes produce something greater than that with Odyssey.

~~~
eropple
To be honest, I was trying to respond in good faith and not consider other
Zenimax/BGS properties outside of Bethesda proper. And even they're doing
Starfield, as I mentioned.

Fallout 76 seems to kinda suck, but that's one game.

