
When to Shut Down a Startup [video] - vinnyglennon
https://blog.ycombinator.com/when-to-shut-down-a-startup/
======
vfc1
Unpopular opinion, I just don't understand this whole reasoning and this whole
startup mythology thing.

So what he said is that if its a viable, sustainable business that the founder
wants to do, that adds value to society, but there is no exponential growth on
the horizon, then it should be shut down.

Because (and he said it explicitly), the only thing that makes a startup truly
a startup is the exponential growth and nothing more.

This is just crazy, exponential growth is extremely rare in business and only
happens in situations like the way Facebook grew, by upon sign up getting the
whole list of email contacts of the new user, and sending invitations to join
Facebook to all of them.

Most of the times in business, linear growth is what happens. what's wrong
with a 20 employee company that adds a ton of value to society, operates for
30 years and gives the founder and family a comfortable life, isn't that more
than enough and worthwhile pursuing?

Exponential growth is impossible to predict and only comes by accident, it's
like chasing the rainbow.

Just focus on building a real business that you really want to dedicate your
life to, preferably borrowing as little money as possible if it all, how about
that?

~~~
brianwawok
Build a sustainable slow growing business. Just don’t take VC money to do so.

~~~
exergy
Succinct and ever so apt.

------
apo
In a nutshell, the situation is that the startup is:

> ... not growing but it's not dying. ... and the founder doesn't really know
> what to do.

Makes me think of Paul Graham's concept of "default alive/dead":

> When I talk to a startup that's been operating for more than 8 or 9 months,
> the first thing I want to know is almost always the same. Assuming their
> expenses remain constant and their revenue growth is what it has been over
> the last several months, do they make it to profitability on the money they
> have left? Or to put it more dramatically, by default do they live or die?

[http://paulgraham.com/aord.html](http://paulgraham.com/aord.html)

I think this is a much more valuable place to start the conversation. The
available options (which may or may not include shutdown) depend strongly on
the answer to the question "are you default alive or default dead?"

~~~
situational87
This is the old way of thinking, profitability doesn't seem to matter much
anymore. The last two startups I worked for were (luckily) profitable and
growing, but when the Series A investors found out about this they got very
angry and started demanding we increase spending on things we didn't need:
more engineers, more AWS, more initiatives for crazy tangents, hire a growth
hacker, hire a growth marketer, then some more engineers who have nothing to
work on.

The demand for perpetual (even artificial, fraudulent) growth is prioritized
over all else. The VCs can't get out of their investment unless things have
grown. That's all that matters to them.

Neither of those startups is around anymore, they were both driven out of
business by this demand for more growth. The Series A investors couldn't care
less, they exited long before the end and left someone else holding the bag.

~~~
jjeaff
There is another reason they want spending to increase. They need you to run
out of money before you hit profitability or else you won't need to do another
round of financing so that the VCs can take a larger piece of the pie.

~~~
tru3_power
This is messed up man. I bet a lot of a good startups are killed for no good
reason (and only for greed)

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strenholme
My startup shutdown horror story: A start up I briefly worked for during the
dot-com bubble one day just ran out of money. I could see the writing on the
wall, went to another dot-com (which also failed), but kept in touch with the
people there. As they described it, the boss came in one day and told everyone
“OK, the company has run out of money and is now closed. You will not get paid
for the work you did in the last week, all medical and other benefits are now
null and void, and good luck finding a new job.”

~~~
jacquesm
That's mismanagement to wait until the day you are out of money to inform your
employees.

~~~
EliRivers
It's disrupting employment norms :)

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tschellenbach
If you have a team you're happy with and your cap table is not messed up,
there is always a solution. See Slack, Youtube, Flickr and many others.

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going_to_800
If that zombie startup gives you freedom and a good salary, why shut it down?
This is not for bootstrappers or those who pursue life-style businesses, it's
for VC backed startups.

~~~
cheschire
I suspect the people that feel the way you do probably wouldn't gravitate
towards the risk/reward system of the startup lifestyle in the first place.

~~~
jacquesm
Life can change. That 'hot start-up' that morphed into something that employs
you and a bunch of others might be less than what you and your investors hoped
for but still substantially more than nothing.

~~~
bredren
It can change, though if it is obviously a country club your investors may not
reinvest in your next thing.

~~~
jacquesm
Sucks to be them if it takes off then. After all, your chances of success on
the second time around are substantially larger than the first. But then
again, you'll also be a much harder case to take advantage off so that would
rule out quite a few investors up front. And accelerators too, for that
matter.

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jakozaur
Unfortunately a lot of startups doesn’t shut down cleanly. Shutting down your
own startup can feel for many founders like killing your own baby.

However, the alternative such as a messy shutdown by leaving unpaid bills and
unrealized contracts is even worse. Bankrupcy laws doesn’t work so smoothly
around the world, even after bankcrupcy you can still be liable for taxes as
well as unpaid bills/wages get bad reputation which can hurt you in the
future.

------
Jasper_
That "zombie startup" that Aaron is describing sounds like a nice, sustainable
company that isn't chasing growth but can live for a while, profitably, with
the customers you have. Why shut that down? That sounds great!

~~~
nostrademons
What game do you want to play with your life? Do you want to play the
lifestyle business game? The startup game? The consulting game? The climb-the-
corporate-ladder game? The just-collect-a-paycheck-and-get-your-fulfillment-
elsewhere game?

You should decide this _before_ you enter the startup scene, and ideally as
you're beginning your career. Because if you think you're playing one sort of
game but are playing it according to the rules of another sort of game, you're
basically guaranteed to lose.

The assumption when you play the startup game is that you're playing for a
big, low-probability payoff. There are a couple variations for just _how_ big
a payoff (are you looking to play the outsource-R&D-and-get-acquired game?
show-I'm-a-good-programmer-and-get-aqhired game? build-a-billion-dollar-
company game?), but in general, when people talk about startups, they mean
hyper-growth. If you don't find hyper growth, you've lost at the startup game,
and should call it and invest your time into either playing again or playing a
different game.

If you want a lifestyle business, you should play that game from the outset,
because it means playing several choices differently. Notably, you should seek
a small niche with real customers _first_ , you can afford to pick an area off
the cutting edge, you should seek profitability over growth, and you shouldn't
take (equity) investment.

~~~
doctorpangloss
> What game do you want to play with your life? ... just-collect-a-paycheck-
> and-get-your-fulfillment-elsewhere game

This sort of rhetoric shows how much of entrepreneurship isn't really about
like, making money. It's meaningless emotional warble-garble, a kind of
psychological warfare that people do to themselves to stay happy in a system
of really emotionally punishing rules of one-upmanship.

Like one funded founder I know, I asked him straight, "Are you motivated by
acting out college-age vengeances against your peers?" and he said yes! It's
not really about, "I don't want that Google engineer lifestyle," because that
person does, he just wasn't qualified (in some narrow sense) to do that. He
just failed at it.

A lot of people don't grow out of that.

And it's not just limited to people who didn't pass the Google interview.
There are plenty of Google engineers who said to, e.g., studying medicine in
college, "I don't want that doctor lifestyle," when really they did not
perform competitively in their first-year life sciences class! Medicine
dropouts everywhere!

The startup handbook materials seem so incomplete. They don't honestly engage
with the emotions of their audience, which is overwhelmingly disaffected
college-educated 20-40 year old men of means.

In fact, the reason your rhetoric is so appealing is because it doesn't put
these emotional things out into the open. It amplifies the weird psychological
warfare, it doesn't question it.

The right question isn't, what kind of game you want to play? It starts with
what a therapist would ask, "Why are you here today?" to lead to "Why do you
think you're unhappy?", questions that make the audience of your line of
thinking deeply uncomfortable and something to be avoided.

~~~
hisnameisjimmy
Figuring out what you want to be when you grow up, what makes you happy, etc
etc is a mind-bogglingly complex problem. Often, we just have to make
decisions with the best information we have with whatever emotional
motivations we have.

A lot of our decision making, historically, was just decided for us. Parents
had children and married them based on economic benefits. Your work was just
what your Dad did or through other close relationships. Now you have seemingly
infinite choices. People are often making the _wrong_ decision for the _wrong_
reasons all the time. Sometimes it works out, sometimes it doesn't.

I think anything that helps you frame your actions and understand yourself and
your motivations is fine. I know plenty of people who happily would identify
with the 'collect a paycheck and get fulfillment elsewhere'. I also think it's
perfectly valid to want to start a company to get vengeance on those who
appeared to underestimate you.

The reality is there are many paths and it's very hard to judge what a valid
or _right_ path is.

------
peignoir
I disagree I would not shut it down I would either sell it or keep it to
maintain jobs. As for the investors if a long term plan i would convert to
debt and try to get them to flat especially if friends and family. But yep,
there are cases when you need to shut down and zombie mode sux if you can’t
escape

