Ask HN: At what point did you realise that your startup/project wasn’t working?
Hope and the sunk cost of time/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.
13 comments
[ 2.9 ms ] story [ 46.8 ms ] threadThe 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.
The biggest surprise to me about having VC investors was how "hands off" they were, and how much good money was thrown at us when I would have either refused to invest more, or insisted on keeping a much, much closer eye on where it went and how things were going.
Our investors were not evil, quite the opposite. I don't know if they were lazy, trusting, optimistic -- I don't understand to this day. I think they'd have lost a lot less if they'd taken the time to investigate how things were really going rather than believing the pretty slideshows.
I've heard/read plenty of horror stories where this wasn't the case, and investors were very intrusive and micro-managed things, but that wasn't my experience.
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.
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 :-)
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 :)
If you like starting companies, there's no shame in focusing on that. Sell & repeat until success is obvious enough to warrant sticking with it!
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.
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."
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?
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 :)