Ask HN: Advice for when a startup goes south

The following may or may not apply to your specific situation, but this is what I would be thinking in your case. You have two options: A. Accept failure, fold the company now, return remaining investor funds and get a job.

B. Do whatever it takes to get profitable in the next 60 days.

This is a possible game plan for option B.

1. If you're doing enterprise sales, your problem is likely as much about cash flow as it is revenue. Collect as much cash as you can now. Get customers paying monthly/quarterly to pay annually. Make big prospects an offer they can't refuse to prepay in advance.

2. Get revenue any way you can. Become a consulting company. Do things that don't scale. Sublet your office. Hold events at your office and sell tickets. Sell some Aeron chairs. Just get some more cash coming in.

3. Cut costs ruthlessly. With 2-3 months left, there is no way you should have 10-15 employees. Assume you have 3 months left to live. Do you really need all of them that badly? It will be tough and heartbreaking to let people go, but it's better to let half go with warning than to have everyone find out they're not getting paid a couple months down the line. Cut benefits immediately. Yes it will be tough and unfair, yes it will hurt morale, but you're at the end of the line. Do it. 3 months of runway with 15 people could become a year of runway with 3 people.

4. Mine your CRM and personal network for leads. Strip mine it for whatever value it has left. From now on, everyone on the team is spending at least 30% of their time on the phone with customers. Either you get some sales, or you get some great feedback about customer pain points and problems you can use for your next effort. Stop coding. This is one problem you won't be able to code your way out of.

5. Unless you have amazing revenue traction, forget about raising more money. The one thing VCs hate most is a rock that is rolling downhill. Fundraising will be a fatal distraction. Instead, go back to your bootstrapping roots and do whatever it takes to get profitable now. Exception: Your current investors may have some capital in reserve to support you. Ask them for it. If they don't re-up, your fundraising prospects are good as dead.

Feel free to shoot me an email with more specifics, happy to give other advice if you think it's useful: ilya [at] mixrank.com.

Thank you for the thoughtful reply. I will definitely consider taking some of the revenue generating steps you suggested.

We have internally been looking at what a shell team looks like for Plan B and when we'd need to start throwing the chairs out of the plane but also had been trying to consider the signal that sends to investors. We are launching a new sales effort in the next week and there is a chance it could prove promising, so Plan C is bet the rest of the company on it. We have been upfront with current investors and they don't want their money back, they want us to keep it rolling, but the ride is about to get bumpy.

What is the best way to handle this so that I minimize damage to my career and reputation?

I must say, after reading the introduction, that was not the question I was expecting.

My advice is simple: do the right thing for others. Treat them well. That includes making sure money owed to employees is paid. People get enough notice to fall back on their feet. You should have been transparent with them already from the beginning of the startup, so they should all know that cash is very tight. Don't just tell them 2 weeks before the day you lay them off.

If you treat others well, you'll be fine. Silcion Valley is a very small world.

On the other hand, if your only concern is your own career, maybe your current employees already know your true nature. Hard to know either way.

Thank you for the reply. My career is not my only concern, but one of the things I have to consider if we need to wind this down.

The stinging nature of your impression of me for asking it carries its own lesson.

Apply for a new job.

Dstillery - NYC, New York Dstillery is hiring Backend and Full-stack Software Engineers! We're #10 on Crain's Best Places to Work in NYC list, #47 on Forbes' America's Most Promising Companies list. We play Ultimate or Soccer on Fridays, we have a company band, we work sane hours, we don't track vacation (and not in the 'so nobody ever takes any' sense), and we Get Stuff Done. You'll learn a lot from working here, regardless of your current level of experience. You'll work directly with a world-class data science team (winners of multiple KDD Best Paper and other awards) that keeps us on the cutting edge of learning at scale, allowing us to build customer-specific models from billions of events per day. We're hooked up to all the big ad exchanges, and have direct working relationships with companies like Google, Facebook, Twitter, and more. But we're also still pretty small on the engineering team, and everyone gets their hands dirty and makes a real impact. We write mostly Java. Hadoop, Cassandra, Mongo, and Kafka are big parts of our stack, and we're always looking for new tech that helps us work at scale. Experience with these is a big plus, but if you've never used them before that's fine too, if you're eager to learn. If you write clean, working code, think through problems, and deliver on time, we want to talk to you. Contact me for more info, taejin@dstillery.com

hi -- thank you for posting this! I may take you up on the offer if our final push doesn't prove successful, sounds like a great place to work.

> What is the best way to handle this so that I minimize damage to my career and reputation?

Is this really a thing? It's expected that ~99% of startups ultimately die. I wouldn't hold it against somebody for trying and failing.

> When should employees be told of the impending crash?

As soon as possible. Some of them might be planning making babies, buying houses, cars, etc. If they have no idea how you're doing, they could make big purchases that put them in a tough spot later on if they're suddenly let go with no warning.

Thank you for the reply, it helps to put myself in their shoes.

Call it ten weeks.

What is the absolute minimum to get income in the door, and then scale down to that to extend the opportunity to find that income. Get to that number as soon as possible.

Alternatively scale your staffing costs and effort down starting in two weeks, dropping two employees a week, in an effort to extend your project's life.

Tell everyone on staff what is going on, if it is not already obvious, so they can make alternative life plans starting now, just as you are making such plans now. Admit the possibility of your project's failure.

Your employees may be your future collaborators, and your future partners. Treat your community well, so that you may continue to participate in it in coming months and years.

Thank you for the reply. We are in the midst of planning a last assault on the prize, and will be sure to give everyone fair warning of what is at stake.

The important thing is making sure your employees get looked after. Make sure they get paid before any other expenses and do whatever you can to help them transition.

One option is to look for an acquihire of the business, speak to your investors/network/competitors and see if there's any interest in picking up the business. You won't get much out of it financially, but it'll help your employees.

Thanks for writing and you make a good point. We do have some relationships which could result in acqui-hire and will consider that to be the proverbial corn field to try and crash-land the plane in.

Do you still need help with this? I'm a start-up mentor. I may be able to help. If I can't i'll be able to refer you to someone who can.

You can arrange a free call with me at:

https://clarity.fm/khurammalik

Thank you for the offer. We are about to launch a glorious final assault, and if I may I'd like to defer and take you up on it when we get a few more data points.