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On Shutting Down

blog.ycombinator.com

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31–40 of 88 posts

Re: On Shutting Down

#31

Post by eropple »

humbermetallic wrote: post #15

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.

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.

Re: On Shutting Down

#32

Post by pc86 »

ithinkinstereo wrote: post #14
clarkevans wrote: post #9

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 expe…

The company can continue to operate, but that'll probably depend on the equity structure. Not a lot of incentive for founders and key employees to stay-on and manage a "lifestyle" business if they only hold a minority stake in the company. In that scenario, I think the investor-owners would probably want to recoup some/all of their investment quickly in a sale to a competitor rather than slowly over-time by milking a…

Do founders typically own a minority stake in VC-funded businesses? Even a lifestyle business may be able to throw off several million a year in disbursements beyond payroll. Sure if you own a fraction of a percent that's not much money but if you own 20% of a company disbursing $2MM+ every year that can fund quite a bit.

I know VCs are aiming for home runs and 10x+ returns but trying to get someone to shut down a business like that seems short-sighted.

Re: On Shutting Down

#35

Post by akharris »

iandanforth wrote: post #29

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

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

Re: On Shutting Down

#36

Post by claudiulodro »

clarkevans wrote: post #9

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 expe…

If you/investors are not satisfied with the current growth of the company but the company is profitable and not in danger of shutting down, it seems like it would be a wise move to invest the profits towards R&D to create some sort of product that may have better growth. You'd have the benefit of "infinite runway" for your next product and the investors have a chance at getting their money back.

Re: On Shutting Down

#37

Post by TeMPOraL »

dbcurtis wrote: post #19
clarkevans wrote: post #9

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 expe…

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…

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

Re: On Shutting Down

#38

Post by DenisM »

akharris wrote: post #35
iandanforth wrote: post #29

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

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

When you have a good plan for getting out of something you're that much more likely to get into it. Think about it -- this the easiest way to get more people to try creating more startups.

Re: On Shutting Down

#39

Post by 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

Re: On Shutting Down

#40

Post by iandanforth »

akharris wrote: post #35
iandanforth wrote: post #29

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

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

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!

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