Really good writeup of the current situation in startup land.
Definitely some hot takes:
Shutting down and giving up is really hard. Founders may have spent many years of their lives on a company that is not going to work. But rather than spend another 2 or 4 years waiting for the bank accounts to drain through multiple layoffs and venture debt draw downs it might be better to accept reality and throw in the towel.
For a founder (and their employees), those 2+ extra years may be amongst the potentially most productive years of their lives. The opportunity cost of not going to work on something better is too high.
Pivot isn't quite the same as shutting down and -- ostensibly -- returning the remaining capital, no? Pivot implies you keep the money and keep trying to find some path to profitability.
Founders of startups that didn’t work out have potentially learned a lot of valuable knowledge. This can be very useful for future endeavors if they do it right.
On the other hand, some failed founders get a chip on their shoulder and think that their failures were only due to external factors: Bad customers, wrong investors, a bad engineering team, etc. This mindset sets people up for repeat failure. You really have to understand why their business failed and what they’re going to do differently next time.
It also depends a lot on the economy. During the 2021 boom, I had several friends “exit” their failing startups via acquihires into bigger companies. One friend admitted that his total payout in the end would be less than if he had just kept a full time job during the duration of his startup, but now he gets to be a “successful startup founder with an exit”. In an economy like today’s, that’s not going to happen.
I think, at least that's the impression of my limited experience with start-ups around here, that chip is also blaming timing and increased interest rates for failure. But still an external factor, so the founders did nothing wrong.
If you are acquihired as a founder, does your career trajectory change. Looking only at then opportunity cost of forfeit salary might be incomplete if your lifetime earnings increase due to improved career trajectory
A startup I worked for during the .com bubble gave up and returned the remaining cash to investors, something on the order of 10 cents on the dollar. One of the VCs joked? that it was the best return of the year for them.
I will hire the founders of a failed startup any day of the week over just about any other category of candidate. They are "salted" horses of the finest calibre.
In my last shop, we had 8 (I think) former CEOs on staff. All made very significant impacts to the business.
If you are staring into the Valley of Death, remember that it is a valley, and you do come out the other side, and that makes you rare and valuable.
See I was going to do this too and found there was no rss (only email prompt came up when I clicked on subscribe). Oh well I guess I'll just have to consume it as it appears on hn :(
Yeah, this works great for public/free Substacks. Unfortunately Substack doesn't offer any way to get a private RSS feed for subscribers, except for podcasts. So you end up with the truncated public versions of articles in the public RSS feed and have to click through and sign in to read the full one.
It's a good article, and the obvious implication is that the market will continue to be flooded by layoffs. Therefore, if you're on a ship that you suspect to be sinking, it might be advantageous to start getting your resume out there - and, be careful to vet where you land thoroughly.
Seems to me that the higher interests rate have not only forced individual companies to close but also effectively ended the blockchain technology. Is there a promising blockchain startup?
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[ 0.22 ms ] story [ 69.6 ms ] threadDefinitely some hot takes:
Is this possible without a tarnished reputation?People do it all the time! But it’s usually called “a pivot”.
Just because the corp name stayed, doesn’t mean it’s the same startup :)
On the other hand, some failed founders get a chip on their shoulder and think that their failures were only due to external factors: Bad customers, wrong investors, a bad engineering team, etc. This mindset sets people up for repeat failure. You really have to understand why their business failed and what they’re going to do differently next time.
It also depends a lot on the economy. During the 2021 boom, I had several friends “exit” their failing startups via acquihires into bigger companies. One friend admitted that his total payout in the end would be less than if he had just kept a full time job during the duration of his startup, but now he gets to be a “successful startup founder with an exit”. In an economy like today’s, that’s not going to happen.
In my last shop, we had 8 (I think) former CEOs on staff. All made very significant impacts to the business.
If you are staring into the Valley of Death, remember that it is a valley, and you do come out the other side, and that makes you rare and valuable.