Startup War Story: When The Team Falls Apart (Profitably)

In November they fired a key employee, then the CEO demanded a loyalty oath of all remaining members that they would stay for 6 months or get out. They had 48 hours to accept the loyalty oath or leave. All accepted.

It seems it was then that they began the total rewrite of the front and back end of the system.

On this last Monday, after 5 months of an unpaid overtime, they finished that complete rewrite death march. On Tuesday they had a token pizza party.

There is no other reward for completion of this death march or the roughly six months of loyalty.

On Wednesday they are back to the grind. A co-founder, having fulfilled his vow to stay through the six month rewrite, resigns. The rest of the employees are told by the CEO they must take another loyalty oath and this time be willing to work without pay because there is no income. This time they get 24 hours not 48 to answer. The entire team chooses to reject the new loyalty oath and thus "resigns", but it is also possible they were basically forced out for refusing the oath.

Even without the oath, mass resignations are quite common at the end of a death march. So far this story is straight predictable right out of Edward Yourdon. Yourdon is also correct that death marches are the rule not the exception with start ups. Given how many products and start ups are destroyed because of management driving death marches, they may in fact even be responsible for the largest waste of capital in the industry today. Business as usual though.

Now we get to the strange parts of the story.

During all this going on, the same CEO only the week before was emailing journalists and telling them that the company was doing well and picking up several hundred new customers per week.

The CEO then writes a letter to investors blaming the co-founder for not being loyal, doesn't mention the new loyalty oath, and goes on to say the company is in excellent shape with new customers coming in every day.

This is all quite strange with a number of unaddressed questions. Among them:

With all these new customers why was the team told to accept no pay or get out?

The team spent the last six months sacrificing their lives and successfully rebuilt the entire product. They succeeded. The CEO during that time period has successfully extracted only 50% of the loyalty oaths he demanded. This seems his major accomplishment. He completely failed to secure financing needed to keep the company afloat. What exactly has he been doing during this time while others sacrificed? It is clear what the developers have been doing, but him not so much.

The part that Neary left out in his letter? According to sources after Pugh departed he gave employees an ultimatum: 24 hours to decide if they were in or out for the long haul, even if that meant no more salary without a new fundraise, which seemed unlikely. Given that binary choice, they elected to abandon ship.

Sadly ironic name, hopefully he can pull it together.

However, when the money runs out, all sorts of bad things happen. Asking people to continue without pay, advancing expenses to the company, etc. are not things you'd do starting from the start, but it's at least understandable why people do this after investing a lot into a project, and why people feel some kind of personal betrayal when they are willing to go on and do that kind of thing but other people aren't.

The lesson is to not get to that point :)

http://venturebeat.com/2012/03/23/exclusive-new-york-startup...

Later we called our raft "two pints of lager and a packet of crisps please". Such is English humour.

On the other hand, he also said the company has a rebuilt product and is signing up hundreds of new companies every week. Is it entirely a lost cause?