1. Senior people leaving (as has been said by pretty much everyone else in this thread).
2. Not having a clearly defined problem to solve, or a well understood target audience.
3. Not knowing who the competition are, or just dismissing them as "not being as amazing as us."
4. Little or no customer research - if you hear the phrase "customers don't know what they want" and it's not immediately followed by "so we need to do research and find out" - run.
5. Building solutions that don't really map back to problems. This can manifest in a lot of ways, but the most common ones I've seen: projects constantly changing in priority (entire projects materialise and become urgent overnight), features that are arbitrarily demanded, or in an over-emphasis on polish and minutia.
6. Departments not collaborating, things getting thrown over the fence. Workflows that move in the wrong direction.
7. Lack of autonomy - a handful of people make all of the decisions.
8. Micromanagement. People tend to micromanage when things aren't going well, which tends to make them worse. It's a downward spiral.
9. Being afraid to talk to management about problems; being chastised for suggesting ways to improve things.
10. When mistakes are made, focusing on blame rather than resolution and prevention.
I'd had a habit of coming in around 10 AM and staying most of the day and part of the late afternoon/evening; typical startup kind of 'go get lunch then come back and crank out some code' behaviour, while most of the rest of the dev team came in between 11 and 1. This includes one of our best developers, who, without downtime, ported an entire product from PHP to Rails on his own time over the weekend because the code was unmanageable and he wanted to be able to iterate faster.
Suddenly, after most of the most senior (and most expensive) people have left, the CEO decides that everyone needs to be in the office at 9 AM, you know, so we can communicate. Sure, okay. So people start coming in at 9 AM. They're tired, they haven't had breakfast, they only got 5 hours of sleep, but boss wants people filling seats so we fill them. I start getting phone calls at 9:03 if my bus is running late, because my buffer time was usually taken up by being in such a rush that I forgot my wallet.
So every day, everyone's tired, everyone's frustrated, and everyone's leaving after they've put their 8 hours in. My start date, when my options were priced, was the highest price the shares had ever traded at. But I was still one of the most well-paid engineers so I stayed until I got 'downsized' and took a month off.
Last I heard, the CEO was getting sued by the board for treating that company as a source of resources for his other company (like flights back to his other company's office, or my tech support to get his people up and running).
I would flip the question back to you: (1) Do you trust your CEO? (2) If you DO trust the CEO, then the only time your startup is failing is when the CEO tells you they're close to failure, running out of money.
If you DON'T trust your CEO, then your startup is also failing and #2 doesn't apply.
That's how I would think about it.
I think every startup employee has the right to ask me about runway, cash on hand, etc. I would be open with that info and have shared these metrics in the past with them.
I say this because we (a) hire MBAs, (b) hire less qualified developers for roles that do not require deep technical knowledge, (c) have motivational posters, etc... And as we grow, become profitable, and scale to 50+ people, we require these things simply to survive and thrive.
How could someone mistake that for a startup on the brink of failure is beyond me, but that's what some people seem to be writing in these comments.
Therefore making them perfectly qualified for the job you are giving them?
There is nothing wrong at all with less experienced devs working for a startup. It is one of the components for building a successful company. As your junior employees grow, they move into roles of greater responsibility.
Some of the other signals could just as easily reflect management's reading habits. It doesn't mean the other comments are wrong, but if you are looking for "early signals," be honest with yourself and hone your trust-dar.
Yes!
I can't say this inspires very much confidence. Why does hiring MBAs mean you are successful? What exactly do they do to make you successful? On developers, if they have the knowledge for the job then they are qualified, not less qualified. This terminology is very worrisome. And motivational posters? That was a joke I guess?
And what does any of this have to do with being on the brink of failure or not? You can have a perfect team and still fail because of a bad product direction or market fit.
The question is not really "how to know your startup is failing right now." I think it's pretty obvious when a startup is already failing.
The question is, instead, what the signs are that a startup is on the "wrong track" and will inevitably begin failing six months to a year down the line.
I've worked at several companies that were already in the "inevitably going to fail" category before I was even hired—retroactively, looking at when they took on the qualities that ended up killing them, they had those qualities for my entire tenure there (though they didn't previously had them; frequently I was hired as the replacement for the key cofounder whose departure, according to others there, signalled the beginning of the end.)
So, I don't want to know whether my startup is failing. I want to know whether a potential employer is failing, so I can avoid riding yet another startup into the ground and suffering through the inevitable cash-crunch and lay-offs. What are the warning signs, visible from the outside, that a startup is headed that way?
* Custemers are not signing up and not paying. The most obvious one. But this can be hard to find. But say if you are used to add features or fix bugs customers find, and then all of the sudden nothing. It could mean product is in good shape, or nobody is using it.
* Senior people leaving. Especially developers whose judgement you trust.
* Drastic changes to the product. "Wait, why are we pivoting?" Corrolary: quite often the pivot fails. It is always in the news if it succeeds. but that is only because it is exceptional.
* No bonuses, and salaries have not been going up. If you somehow find out that nobody's salary went up and nobody got a bonus (this is hard often, companies don't want you to discuss those things).
* Maybe a sharp increase in team-building activities. Taking everyone for lazer tag is cheaper than increasing salaries. But it presents this image of "everything is fine". I have seen that -- a few senior people left. All of the sudden a sudden surge of minigolf, bbq, ski trips and other to mask away the issues. But then again, this can be a sign that the team is doing so well and are being rewarded. I guess this is more of a gut feel and depends on the large context (so it is a secondary sign).
* Owners start avoiding meetings and questions. Because they know they might have to lie. It is up to you, but you can try to ask directly. Then you sort of force their hand. That could backfire. You are now "not a team player" and not a "culture fit" so beware.
That can also be a sign that the founders hate each other and are about to split the operation - one of them is treating the employees as children in the hope that they go with a favourite parent's splinter company. They are probably doing it subconsciously.
Money problems (Travel cancelled, Free food/drinks stopped)
Drastically shorter deadlines.
They start hiring programmers who cannot code (Literally cannot fizzbuzz)
Rapid flip-flopping on projects couples with constant firefighting.
Starting to Micromanage developer time in intervals less than 1 day - (exactly 3 hours on X, exactly 2 hours on Y, exactly 3.5 hours on Z)
*I say "interns" because they were actually full-time hires at 1/4 the price of developers.
Yes! Saw that happen. Senior people leave, management thinks, no worries, with their salary we can pay for 6 interns. We don't need those traitors / haters anyway. Next thing there are 6 interns there.
Not that interns are bad, they are great, I enjoyed mentoring and getting help from many during the years. It is when they are brought in to replace a senior devs that things might be getting a little weird.
Senior Devs were usually only by title, and graduate Devs are much more plentiful, we slowly chopped out three seniors and replaced each with competent grad hires.
Turned out to be a much improved situation for everyone.
I can see how replaced ng good senior Devs with inadequate interns would be a bad sign though.
Bluntly: the CTO who takes you from $0 => $5M may not be the one who takes you from $5 => $50.
Replace CTO with any other senior position.
However if multiple senior people are leaving with short notice then you should ask them where they are going.
Last three points above are 100%
The dead giveaway - salary paid late or not at all.
If your salary is ever paid late then check to see if you are being paid all of your statutory entitlements such as pension plan and government insurances. If the company is not paying these things, go to the CEO and tell no one else except them that you know they are not paying your legal entitlements and you want it paid now. If you have lots of leave accumulated then that is cash value to you and is at risk when the company goes bust. Resign as soon as you can because companies typically need to pay out all your entitlements and unused leave when you resign - and you definitely want to do that before everyone else rushes to do the same, and before the company goes pop leaving you with nothing. Somehow you need to navigate in a non illegal/ non extortionate way letting them know that you'll go quietly if they paid you everything you are owed - careful on this one, you are breaking the law if you say "pay my entitlements or I'll.... " You are of course entitled to explain that you have spoken to your lawyer and accountant to understand exactly what they owe you, and also explain that they have advised you to contact the tax office if you are not being paid what you are meant to be paid, presuming that is the case, which it should be. The CEO won't be enthused about anyone asking the tax office why the company is behind on its payments and this will give incentive to the CEO to pay you fully out. Make sure you and your accountant calculate exactly what you are owed and have it in writing - don't let the CEO/company calculate that because it is likely to be wrong.
I'm pretty sure that every company I've worked in had a success rate that was inverse to the belief that it was failing. That is to say assume that the company is failing, always. That makes two things true, first when you get "bad news" that something hasn't gone right it doesn't suddenly throw you for a loop, after all the company is failing. The second is that you are more carefully looking for things that are helping, and putting energy into them so that you can extend the life of the company just that much more.
You are most at risk when you think you are not failing, then you take your eye off the ball and start coasting a bit. Taking some "me" time as it were. That is when a glitch or misstep will feel like a huge betrayal from "we're doing well" to "we're dooooomed!" And everyone will stop and reassess just when you need them to be taking action and responding.
Often the root of this question is, "Should I stay or should I leave?" After all if you conclude the company is failing you can give yourself "permission" to leave. And since that is the root question, I have found a better way to ask it is, "Is working to make this company a success helping me achieve what I want to in the next 5 years?"
Whether or not the company is failing is irrelevant as input to the question, "Is this the best way to be spending my time?" That question can only be answered by thinking about what you want to do, or be doing, or not be doing, in the future and evaluating if what your are doing right now is getting you closer to or further away from that future.
The slightest hint of late payments. For example, salary one day late "because the bank made a mistake": in reality, the company was waiting for cash but negotiations with banks or other lenders were difficult enough to miss the deadline.
Just want to bring this up so people aren't paranoid when such things happens. They DO happen, especially now that so many startups use "cool" and "hip" startup payroll providers that also make mistakes.
When the company is innocent, its best if the employer shows the employees the cause of the failure and be really, really oversharing so us very angry workers aren't inclined to riot.
1) at this late date, I get the feeling because the town was small enough to call around and make sure people banking at other banks didn't overdraft either instead of covering them money-wise after the fact.
It was in the 90's and there were "personal adjustments" that occurred later on.
1) cannot drive to your bank because then the check would bounce and really do some extra fun damage - plus this was before direct deposit was available at that company
If your CEO fucks around with YOUR money at ALL watch out!
And don't be shy about asking about finances. If you have stock grants or options then you are not only an employee but also an INVESTOR and may be entitled to these details - but you have to ask.
As for my employee: the second time the bank messed up I had to stop payment on the pending one (time w/bank +fee!) then went direct to Western Union to wire cash within the hour (+fee). If payroll is late I expect the CEO to spend two hours immediately fixing it and assume costs necessary to expedite.
* conflict between founders
* investors start "suggesting" changes to strategy or stack
* hiring someone external to take over tech team
* instituting some new "system" to improve productivity
* appearance of consultants
While this type of biz dev feels like forward action in the trenches, in reality it means that you are only a few key deals or people from an empty accounts receivable.
Companies that bring process to the prospecting and sales cycle, and develop a path to closing business that is not highly dependent on a small pool of stakeholders have a clear path to growth.
In this case the exercise in BD is relabelled "Customer Development" and the founder is there directly to learn from and build relationships with the early (<100?) customers. The "Way of Lean" says to do these things that "don't scale" to help create a better refined, higher quality product that customers really do want.
By deal #101 some processes should be in place, because now the customer is clearly defined an there is good market fit.
Statistically, every early stage business is closer to failure than success...until they're not.
Here a few dozen clients/deals per year (or less) can keep a company moving and even feeling like it is progressing. Meanwhile the underlying fragility in the sales process is obscured.
First, if a company is a startup which is not yet profitable and burning investors money you should assume that the company is failing. Yes - you might be wrong (i.e., the company is AirBnB, Dropbox, etc.) not but in 95% of cases the company will eventually fail. In this case, just ask CEO/CFO/your manager about what is runaway, cash on hand, etc.
Second, if a company is already established (out of startup mode) then you can see signs:
- senior management leave (they have access to more informations than you)
- rapid flip-flopping on features and priorities (maybe caused by above)
- TPS reports become a norm
If a startup doesn't have a period where it is "not yet profitable and burning investors money", then it didn't need investors in the first place. The whole point of venture capital is to enable the existence of "convex" business models that require a period of revenue-less work before anything happens.
You have to understand that startups "by default" are failing. They are searching for and developing repeatable and scalable business model.
If they found that "repeatable and scalable business model" they are not startup and they are called established business.
If they do not find "repeatable and scalable business model" they fail.
I was in 3 startups so I would say 100% fail but that is my luck.
Things like not being close to breaking even in the foreseable future, investors getting cold feet, having to pivot to appease the VCs etc etc.
On this last point - you really see the true colors of upper management when pivoting kicks in. If there are concrete actions taking place aimed at getting shit done to keep the company afloat - there might be a chance there. If, however, it's just posturing and paper-ware BS to fool the investors into thinking there's a fundamental change of direction - that would be a major sign of things being REALLY bad.
I used to work at a place, a 10 year old established medium sized company, that was hit so hard by recession of 2009 that it disintegrated. The HR thing I mentioned is the period I can trace back to to say when it was the beginning of the end.
* No more free soda or coffee.
* Toilet paper quality suddenly drops.
* Someone comes by to measure your desk and cubicle, but refuses to tell you why.
It is going to be nigh impossible to determine that something is certain to fail. Paul Graham suggests that startups need to just "not die" to eventually make it. I will suggest that this continues to be true, even after they are worth billions of dollars.
https://m.reddit.com/r/startups/comments/4zkka8/what_are_the...
EDIT: Lol this clearly made some people mad.
And lest anyone mistake me for a hater, let me be clear that I have a tremendous amount of respect (even awe) for the information empire they've managed to build. I do question its value however. I know few (if really any) people for whom Facebook has been, on balance, a positive influence in their lives.
That's all I have.
Without this, it's only a matter of time.
Startups that fail slowly are the worst, because there is an illusion of success that can drag everyone along for years.
Always keep in mind that the odds will always be astronomically high that you are working for a startup that will fail. You're probably working for a startup that's going to fail. Most startups fail fast (but never employ many people), but the startups that hire the most people fail slowly, so the odds are very high that you are working for a startup that will fail slowly.
So what should your question be then?
It should be: Am I enjoying my job and/or does this job contribute to meeting my career goals? If the answer is no for too many months in a row and you are relatively sure the answer won't change and that you have no power over making it change then it is time to move on, with one highly unlikely exception: Your startup is succeeding and your equity stake is enough that riding the wave of a bad job for a year or two will result in a good chunk of money for you.
So what are the signs of a company that is succeeding? There really easy to spot actually, even though you've never seen them:
1. Everyone's hair is on fire. Micromanagement is not a thing at your company because everyone is desperate to meet the insane demand and growth that your product has.
2. The technical work is very enjoyable, because the growth is insane. When you achieve incredible growth it actually stops managers from making decisions that don't scale, because the technical team will have numbers on their side of the argument. Your company can no longer afford to hack things together, because it has to scale tomorrow.
3. Talented people are banging down the door to work for your company.
4. Founders aren't talking about exits in terms of goals, but in terms of certitude. They've already received offers and they now have strategies in place to get the kind of exit they want.
5. BS of all forms is not experienced, because no one has time for it, even the people who normally spew it.
6. Hockey stick growth in either user growth or profit growth is trivial for you to see in your position. The founders don't have to convince anyone that your company is doing well, it's just plainly evident.
If you are not experiencing these signs and you hate your job than it's time to move on. Founders hate to hear this, but if they haven't gotten traction in the first year-and-a-half they probably will never get it. There are notable exceptions, but it's important to remember that you are not the exception (does your founding team seem exceptional to you?).
http://micheleincalifornia.blogspot.com/2016/08/business-til...