
Ask HN: At what point did you realise that your startup/project wasn’t working? - ephelant
Hope and the sunk cost of time&#x2F;effort can cloud your judgement when deciding whether your startup is working or not. I’m curious to hear people’s experiences of when they had the moment of realisation that they should move on.
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__d
For me, that's actually a surprisingly difficult question to answer. In
retrospect, it's possible to pick some key moments that I wasn't aware of at
the time.

The company ran for 10 years. The first 3 years we lived on ramen wages,
revenue, and $450k of angel/seed money. We refined and extended the code, had
some early-adopter customers, chased investment, and tried to pick a niche.
Following promised money from some VCs, we threw a year's work into the (then
very immature) mobile space with basically no traction, before reverting to
the fintech world (which was where we had customers and product) with a $5M
series A.

The milestones on the series A tranches were to hire a management team, and
get a launch customer for the fleshed-out product we'd pitched. The VCs put in
one of their in-house interim CEOs to run things until we'd found the right
team. It then took 18 high-spending months to find the wrong guy.

The worst personal decision I made was to think the VCs were right, and that I
(a geek founder) should hand over control to a "professional", so I could get
back to coding. I believe that ultimately, that decision started the chain of
events that doomed the company. If only I'd realised that then.

The clearest realisation for me came during a small meeting with a handful of
the execs. We had nearly 50 staff, an office on Union Square in NYC, some big
name customers, and had burned through more than $50M in VC money but they
were about to turn off the tap. I confronted the CFO asking what our monthly
income was -- the real cash, not the prepaid licensing that was already spent,
not the headline number that was then eaten up by us buying back services from
the customers, etc, etc. It came to enough to pay about 8-10 people, depending
on how much they were willing to cut their salaries.

I proposed a list of the required roles: a CxO, a few devs, infrastructure,
and support. I offered to resign, and suggested the best set of devs to carry
on the product. We could sublet most of the office, and rebuild on revenues.
Everyone in the room acted horrified, and came up with the most fantastic
excuses as to why that (a) wasn't necessary, and (b) wouldn't work. I got out
a month later, and they rode the company to bankruptcy a year later.

During the 6 years in between, there were many times I doubted we would make
it, and some when I thought we were doing ok. Hope and trust are both
necessary to continue, and the reason for failing.

~~~
ephelant
Thank you so much for that detailed reply, especially on so personal a topic.

It's obvious from the question that it is a reflection on my current
predicament. I'm at a place where the company is doing okay, but not great.
Part of me wants to move on, but the other part - fuelled by legendary startup
stories where things took off or turned around at the last minute - wants to
keep going till it's officially dead. Before posting my question, I was
debating whether asking the question itself served as a signal for my
company's demise, but I am glad that didn't stop me. I feel like the point
where I am too afraid to even consider the possibility - perhaps because then
I truly know the answer - would be worse than just seeking more
knowledge/wisdom.

It's very useful to have a community where I can learn from very experienced
people such as yourself and use that information to augment my knowledge.

Thanks again for your thoughts.

~~~
__d
That mythos of the startup was part of why I stayed so long, and worked so
hard. Long after I'd been diluted to nothing, I still felt the desire to make
it work, and the pressure of being one of the founders and having to seem
upbeat and to find a positive way forward from every setback.

I also think it's healthy to question the situation, privately, or between
trusted colleagues. The failure to analyse, and plan, and act, meant that we
continued down a path that clearly wasn't working long after we should have
tweaked or pivoted.

I think there's a delicate balance though between open discussion, and
maintaining morale. My observation is that it's a personality thing: some
people are fine with regular doubting and discussion, and are in fact re-
energised by questioning the precepts and either confirming the current path
or tweaking it to address an issue. Others find it terribly demotivating to
think about this too often.

I had always thought that there'd be clear point of success or failure, but my
experience was that it was a very long period where it was neither yet, and
impossible to tell which it would be :-)

~~~
ephelant
Yes, I agree that it's quite a balancing act. I find myself teetering between
those two states, more often leaning on the pessimistic side of things which I
may be incorrectly categorising as being realistic. I think I might just have
to improve my communication with the team to show and explain both sides of my
thinking, the good and the bad.

You're last sentence really resonates as I think uncertainty is sometimes the
most difficult thing to manage. There's always the possibility that death or
success is just around the corner but I guess that is just part of the
lifestyle I chose.

Thank you very much for sharing your time and your story. You have given me a
lot to ponder on :)

------
CodeWriter23
My good friend has a great story about how he and an account exec went to go
pitch a client. They met with client for about a half hour and the three reps
from the client side said they were going to go bring in a larger group to
continue the meeting. About 30 seconds after everyone walked out the account
exec said “Let’s get out of here there’s no money here“. I don’t think you’re
there yet.

Assuming you are CEO/founder, the pain you’re experiencing is a gift to help
you change. You also have to consider how future investors view the guy who
walked away when his company is doing “okay”, not seeing it through to a
liquidity event, instead choosing to take investor payday off the table either
through shut down or the company failing after his departure. Do you trust
your replacement to not fuck it up?

~~~
ephelant
Thank you for sharing that story. That’s definitely a very useful skill to
have as it saves time and hope for better prospects.

I’ve had similar experiences where people seem very interested and set up
endless meetings, but nothing concrete ever happens. I’ve started to sometimes
get a sense of when a meeting is going nowhere, but personally it’s been
difficult to know when I might be being realistic, vs being
pessimistic/defeatist. As you put it, I might not be there yet, but will keep
working on it.

Yes, I am a founder, and your point about the perception of future
investors/stakeholders is very valuable and worth remembering.

Thank you very much for sharing your perspective :)

------
muzani
When people focus on things other than the startup. Consulting projects, "side
projects", full time jobs. When everyone is fully on board, they find a way.

~~~
ephelant
Thank you. The message in the first two sentences are useful to keep in mind
as they give very measurable signals.

I'm curious about the objective truth in the last sentence. In the case where
a team is dedicated but lacks the skillset/timing to hit achieve their goals,
that statement implies that the team isn't on-board enough, which may not be
true.

My concern is that while that statement can sometimes act as a motivator, it
may also push a team forward even in circumstances where there may be
considerable rational evidence (from the perspective of an informed observer)
to wrap things up instead.

I'd very much appreciate your thoughts on this.

~~~
muzani
I had failure with business for about 2 years before the first exit. There was
a chain of events from my first business failure to my actual first business
win... I learned actual gritty sales skill on the first failure, and met with
my partner who admired my persistence and research.

We had a lot of bad ideas, but we pivoted the core gradually towards something
that worked. My first idea and the final product had nothing at all in common,
except for being in the food industry.

That same idea was acquired by a team with far more resources, better skills,
more experience, better market and timing... but it didn't work because the
new team wasn't focused enough. The only major difference was the amount of
energy put into it.

The foundation of it is really just building something that someone wants. As
long as you stick to that foundation, you will continue to build upon
something of value. As long as you build something of value, you have an
asset, that can be sold to the right buyer.

Quoting Paul Graham: "If you can just avoid dying, you get rich. That sounds
like a joke, but it's actually a pretty good description of what happens in a
typical startup. It certainly describes what happened in Viaweb. We avoided
dying till we got rich."

~~~
ephelant
Thank you for your response. I very much appreciate the insight.

