Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

On Shutting Down

blog.ycombinator.com

Post reply on HN
Print view View original

51–60 of 88 posts

Re: On Shutting Down

#51

Post by jacquesm »

pc86 wrote: post #32
ithinkinstereo wrote: post #14

Earlier quoted context omitted.

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 bu…

If a company is throwing off profits like that (as dividends, presumably) they are in absolutely no risk of being shut down.

Re: On Shutting Down

#52

Post by rdiddly »

pc86 wrote: post #32
ithinkinstereo wrote: post #14

Earlier quoted context omitted.

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 bu…

Absolutely - I had to rub my eyes and make sure I just read that a sustainable, profitable business (by that metric already more successful than most startups) is being referred to as a "zombie" etc.!

Re: On Shutting Down

#53

Post by FooHentai »

eropple wrote: post #31
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.

You can bring in some fresh cows while continuing to milk the older ones, which is what both appear to be doing (e.g. WoW, Fallout) ;)

Re: On Shutting Down

#54

Post by dragonwriter »

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 people who invest labor in startups often have the same kind of vision of how things will go as people who invest capital, and are prone to looking to invest labor in a new startup if the old one doesn't produce as hoped. The trick is transitioning (not all at the same time, usually, but before people flee and destroy continuity) to ownership, management, and staff that are interested in a small, steady-state business.

Re: On Shutting Down

#55

Post by StudentStuff »

rdiddly wrote: post #52
pc86 wrote: post #32

Earlier quoted context omitted.

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 bu…

Absolutely - I had to rub my eyes and make sure I just read that a sustainable, profitable business (by that metric already more successful than most startups) is being referred to as a "zombie" etc.!

Anything that isn't a unicorn is a zombie if its received VC funding. Its a good reason to not take on VC unless your in a market that can magically meet the extreme growth expectations that are tied to that lump of cash.

Re: On Shutting Down

#56

Post by irq11 »

jacquesm wrote: post #50
iandanforth wrote: post #40

Earlier quoted context omitted.

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!

> 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.

Unfortunately, the legal obligations are almost reversed.

Re: On Shutting Down

#57

Post by pkaye »

irq11 wrote: post #56
jacquesm wrote: post #50

Earlier quoted context omitted.

> 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.

Unfortunately, the legal obligations are almost reversed.

In that case they just need to forthcoming to the customers early on that they are last in priority.

Re: On Shutting Down

#58

Post by wpietri »

dyarosla wrote: post #46
fencepost wrote: post #28

Earlier quoted context omitted.

it's tough to declare later that you have made nothing of value and will close shop. It's not that you've made nothing of value or that there was no need, it's simply that you weren't able to build a viable business from what you were doing. It doesn't even mean that nobody could build a viable business, it may be that your definition of viable is different from someone else's (e.g. minimum required growth numbers, d…

I think the definition of viable isn’t really up for debate. But I do agree with your sentiment: There may have been a need and you may have created value but perhaps the need/value wasn’t viable at the target size set for the business by the founders and investors.

I think the definition of viable depends a lot on how you started the business. For a bootstrapper the definition is totally different than if you have taken millions (or tens or hundreds of millions) in VC money. In general, VCs not only aren't interested in small-but-steady earners, they will be happy to destroy one if they think it gets them a chance at a big payout.

Re: On Shutting Down

#59

Post by bradknowles »

irq11 wrote: post #56
jacquesm wrote: post #50

Earlier quoted context omitted.

> 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.

Unfortunately, the legal obligations are almost reversed.

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.

Post reply on HN