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On Shutting Down

blog.ycombinator.com

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81–88 of 88 posts

Re: On Shutting Down

#81

Post by pandapower2 »

claudiulodro wrote: post #36
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.

Random idea.

If you have profits sufficient to fund R&D you could also potentially approach your investors about buying them out with those profits. Something like "It has become apparent that this company is never going to provide the growth you are after. Instead, every quarter the company with pay you $X in exchange for N of your shares. After two years the company will have bought back the last of your shares and you will have twice your investment. We enjoy running the company and intend to do that for the foreseeable future despite the limited growth."

Re: On Shutting Down

#82

Post by 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.

Re: On Shutting Down

#83

Post by umichguy »

gitgud wrote: post #62
Jach wrote: post #41

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/

That's a great website, I check it every now and then for a laugh. It's funny how similar every company portrays the acquisition experience. It's almost always; a positive, reflective experience which dismisses any consequences to end users...

There's probably a template which rearranges the words a bit and fills in your company specific info. It's going to be aahmazing!

Re: On Shutting Down

#84

Post by 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?

Re: On Shutting Down

#85

Post by lotsofpulp »

Zombiethrowaway wrote: post #77
lotsofpulp wrote: post #68

Earlier quoted context omitted.

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.

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.

“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.

Re: On Shutting Down

#86

Post by dbcurtis »

cyborgx7 wrote: post #80
dbcurtis wrote: post #19

Earlier quoted context omitted.

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…

Only in the insane world of "startup" culture, a sustainable business that meets enough customer demand to pay their employees and make some profit, is a bad thing.

If you take money from VC’s and compensate employees with stock options then you need to show VC returns. If the company can’t provide VC returns, don’t take VC money, find another source of funding.

Re: On Shutting Down

#87

Post by sontek »

andrewstuart wrote: post #39

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 b…

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.

Re: On Shutting Down

#88

Post by existencebox »

boznz wrote: post #69
philip1209 wrote: post #8

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.…

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…

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.

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