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On Shutting Down
- shshhdhs 8y agoOh man, for a few seconds when I saw "Shutting Down (ycombinator.com)" on my aggregator, I thought HN was shutting down! And then I was like, "Oh, April Fools.. wait, it is December". Man, that scare woke me up more than this coffee sitting next to me would.
- deleted 8y ago[deleted]
- vernie 8y agoI was scared that tech pedants would need to find a new place to bicker.
- artur_makly 8y agothis is the best shutdown i've seen to-date: http://vmashup.com/BDMLAWn6 http://vmashup.com/BDMLAWn6
- craftyguy 8y agoTo be clear, since now ycombinator is in the business of clickbaiting titles, this is a blog about shutting down a company, not a blog about ycombinator or HN shutting down. Edit: the original title was 'Shutting Down'
- apl002 8y agoYeah definitely thought ycombinator was shutting down at first
- mikeash 8y ago“On Shutting Down” isn’t a whole lot better!
- croddin 8y agoMost real shutting down announcements are titled with some spin that makes it sound like the opposite though like: "The next chapter of advancing Y-Combinator"
- dooglius 8y agoI think that "On Shutting Down" may have been a better choice of title here
- akharris 8y agoGood edit. Hadn’t thought of that. Changed.
- richardbrevig 8y ago"Shutting Down Your Startup"
- BoorishBears 8y agoIt's still honestly confusing, the first thing I did after reading the title is look at the url to see who's shutting down...
- philip1209 8y agoYC has talked about how startups die of suicide, not homicide. Shutting down is a hard decision, and there always seems to be pressure to do it. Raising money looks like success to others - so it's tough to declare later that you have made nothing of value and will close shop. Here were my shutdown articles after I closed Staffjoy: https://blog.staffjoy.com/staffjoy-is-shutting-down-39f7b5d66ef6 https://blog.staffjoy.com/staffjoy-is-shutting-down-39f7b5d6... https://blog.staffjoy.com/denouement-abe7d26f2de0 https://blog.staffjoy.com/denouement-abe7d26f2de0
- jpmoyn 8y agoThanks for open sourcing staffjoy by the way. That was awesome.
- fencepost 8y agoit's tough to declare later that you have made nothing of value and will close shop. It's not that you've made nothing of value or that there was no need, it's simply that you weren't able to build a viable business from what you were doing. It doesn't even mean that nobody could build a viable business, it may be that your definition of viable is different from someone else's (e.g. minimum required growth numbers, desire for an acquisition, etc.).
- dyarosla 8y agoI think the definition of viable isn’t really up for debate. But I do agree with your sentiment: There may have been a need and you may have created value but perhaps the need/value wasn’t viable at the target size set for the business by the founders and investors.
- wpietri 8y agoI think the definition of viable depends a lot on how you started the business. For a bootstrapper the definition is totally different than if you have taken millions (or tens or hundreds of millions) in VC money. In general, VCs not only aren't interested in small-but-steady earners, they will be happy to destroy one if they think it gets them a chance at a big payout.
- clarkevans 8y agoWhat to do when a company has found a market, reached sustainability with regard to its employees and customers, yet probably will not be providing the anticipated return for its investors? I'd like to hear about ways this has been bridged. Have there been any SV "exits" to a ESOP? Unfortunately, an ESOP requires at a minimum 30+ people to be legitimate exit option and quite a bit of administrative attention and expense. It seems an unlikely path for a technology startup.
- ithinkinstereo 8y agoThe company can continue to operate, but that'll probably depend on the equity structure. Not a lot of incentive for founders and key employees to stay-on and manage a "lifestyle" business if they only hold a minority stake in the company. In that scenario, I think the investor-owners would probably want to recoup some/all of their investment quickly in a sale to a competitor rather than slowly over-time by milking and growing cashflow.
- pc86 8y agoDo founders typically own a minority stake in VC-funded businesses? Even a lifestyle business may be able to throw off several million a year in disbursements beyond payroll. Sure if you own a fraction of a percent that's not much money but if you own 20% of a company disbursing $2MM+ every year that can fund quite a bit. I know VCs are aiming for home runs and 10x+ returns but trying to get someone to shut down a business like that seems short-sighted.
- jacquesm 8y agoIf a company is throwing off profits like that (as dividends, presumably) they are in absolutely no risk of being shut down.
- rdiddly 8y agoAbsolutely - I had to rub my eyes and make sure I just read that a sustainable, profitable business (by that metric already more successful than most startups) is being referred to as a "zombie" etc.!
- djschnei 8y agoTop 10 reasons people will start HATING your blog. They're hard to believe!
- jacquesm 8y agoTo avoid further cardiac anomalies maybe change the title a bit?
- dodopok 8y agoI thought the same thing
- garysahota93 8y agoSame. I was really worried for a second... semi- (unintentional I hope) click-bait....
- humbermetallic 8y agoThe worst thing is to keep beating up the dead horse. At least in the gaming industry, you can clearly see some companies "milking" the brand of games, Bethesda and Blizzard have been doing nothing else recently IMHO. But as long as it sells I guess the company is still satisfied with chosen politics, even though it's profit over quality.
- scirocco 8y agoIt's always profit first, in any given public company.
- eropple 8y agoBlizzard released Hearthstone in 2014, Heroes of the Storm in 2015, and Overwatch in 2016. It's very difficult to characterize that as "milking". And Bethesda has Starfield in the pipeline, though it's a next-gen title at this point.
- Jach 8y agoI also don't think Blizzard or Bethesda are particularly good examples of game studios "milking" it. Sure you can use the "new IP" filter to describe those who are "milking" and those who aren't, but to me it's ok to reuse existing IP if there's a significant new spin to it (rather than beating a dead horse). Take Doom 4 (2016) as an example from Bethesda via id, rather than being a knockoff it totally revived the series, capturing what it means to be "Doom" while also feeling fresh against all the other FPSes at the time. In contrast look at Nintendo's parade of 2.5D Mario side-scrolling platformers since New Super Mario Bros DS. They're all basically the same. Yet even then they can still sometimes produce something greater than that with Odyssey.
- eropple 8y agoTo be honest, I was trying to respond in good faith and not consider other Zenimax/BGS properties outside of Bethesda proper. And even they're doing Starfield, as I mentioned. Fallout 76 seems to kinda suck, but that's one game.
- sandov 8y agoThis is like a FREE BEER ad.
- exogeny 8y agoI don't know Aaron at all, but I'm curious about what kind of bonafides you must have to be a Partner at YC. Do they mean partner in the financial sense (ie: he bought into it) or in an operational sense? If it's the latter, at first glance there's a bit of strange optics to have someone in that role whose only notable experience to my knowledge in the startup world ended in failure.
- zapita 8y agoWhen your job is to help startups, your experience of failure is much more valuable than your experience of success, because it’s much easier to learn from your mistakes. In any case, YC partners quickly accumulate enormous experience from the failures of all the startups they’re helping. I bet Aaron has personally seen hundreds of startups fail, and has learned from every single failure in order to better help his next batch of startups. That experience probably eclipses whatever else he did before YC. To me that’s YC’s biggest competitive advantage: they aggregate the learning experience of thousands of startup failures, and use it to keep their success rate above market.
- mi100hael 8y agoPartner at a VC fund generally means you have a proven track record picking winning deals or bringing on investors and have been given a seat at the adult table by the other existing partners. Usually it involves putting up some of your own money so you have skin in the game. Doesn't necessarily require startup success of your own.
- lawnchair_larry 8y agoSam Altman is the President of Y Combinator, and that was roughly his experience as well. YC does not consider having a billion dollar exit to be a requirement for advising and picking billion dollar startups. Neither do most VCs I’d guess. In some ways it may be counterintuitive, but in others it makes sense. A successful founder only has a single anecdote. Someone running an incubator has something much closer to empirical data. You can only run 1 experiment at a time, while they can have hundreds or thousands. Also, you don’t necessarily need talent executing in a specific domain in order to recognize it in others.
- iandanforth 8y agoYC provides a toolkit for starting up and incorporation. Do they also provide a toolkit for shutting down and wrapping up legal / tax obligations?
- garysahota93 8y agoI don't know if they do, but I'd really love to see it if they do! Always good to have.
- akharris 8y agoThis is a great idea. We've thought about this a fair amount but have not yet found the right solution to implement.
- DenisM 8y agoWhen you have a good plan for getting out of something you're that much more likely to get into it. Think about it -- this the easiest way to get more people to try creating more startups.
- iandanforth 8y agoIn my imagination this would initially be like your SAFE template or perhaps a checklist. A legally vetted document that tries to take into account the interests of both founders and investors while covering the important bases. I'm glad it's being thought about one way or another!
- jacquesm 8y ago> tries to take into account the interests of both founders and investors Customers first, employees second, founders third, investors last. You may want to think over why the last two are in that order, my reasons are simple: investors know the risks going in, and they will not eat one sandwich less. Founders need to be able to get on with their lives too.
- 8y ago
- andrewstuart 8y agoWhen shutting down, founders need somehow magically to know how to do it "right" or as best possible, when they have no experience of that. I think investors should consider requiring founders prove they know how to shut down properly before giving money to grow in the first place. Here are the basics: -- what the ethical issues, how to "do the right thing" -- how to shut down when they can still do so without debt being incurred. -- what to say to which staff members and investors and when to say it -- what the legal obligations are -- how to either get acquihired, or how to find jobs for existing exployees -- what legal bombs to avoid and how -- what the biggest legals traps are in shutting down, such as leases which will remain fully payable
- sontek 8y agoA lot of founders are first time founders. They barely know how to run a company let alone shut one down. I think it is fine for investors to invest in great inexperienced people. Maybe it would make sense for the investors to mentor them during the shutdown to make sure it is done correctly, since investors have been through it many more times.
- Jach 8y agoThere's a kind of shutting down not covered here: getting acquired. Too often a phrase similar to "our incredible journey"[0] appears, in which case as an end-user you know the time for enjoying the service is at an end just as surely as if the startup went bankrupt. [0] https://ourincrediblejourney.tumblr.com/ https://ourincrediblejourney.tumblr.com/
- hodgesrm 8y agoIt's pretty easy for founders/execs at that point to make regrettable comments along the line of 'this is going to be great for our customers'. Sometimes being honest and taking care of your customer/employees/other stakeholders requires you to say "I don't know" or "this will be a change" instead of what you think they might like to hear.
- smacktoward 8y agoIt can be hard to hear what those other stakeholders are saying over all the noise the dump truck full of money makes when it starts backing up toward you.
- ChrisSD 8y agoIt's not always possible to make such statements, depending on the terms of the buyout. That goes doubly so if the founders/execs have a continuing relationship with the buyers. Even if it turns out to be a short term relationship.
- quickthrower2 8y agoMaybe you need like a warrant canary. "This service is great for customers" is removed from a url once that is no longer true.
- Dylan16807 8y ago"I don't know" shouldn't be hard to say. If the terms require you to actively lie, well, that's shameful to accept.
- 8y ago
- discreteevent 8y agoFuck it. Move on.
- DonHopkins 8y ago>Because of this difficulty, we’ve evolved a set of terms that often mean “shut down” without saying “shut down.” In no particular order these are: pivot, hard pivot, rebrand, strategic shift, change customer focus, and platform switch. How about "serialize"? As in "I'm a serial entrepreneur, so I'm serializing my current project, and spinning up a new one!"
- simonebrunozzi 8y agoIn the case of a startup shutting down, what would be the best way to try to resell the technology that the company has built (with the hope of recouping some money for the investors)?
- chiph 8y agoI once called a friend that I hadn't talked with in a while, only to find out that he was helping load their office chairs into a U-Haul for their new owner. Awkward.
- cyborgx7 8y agoBuilding a sustainable business that meets customer demand and is able to pay employees, without the need for growth, is called a zombie and needs to be shut down? You know, sometimes I forget that this stuff if just a "get rich quick" scheeme, but then an article like this comes along and reminds me.
- cool-RR 8y agoThe author writes about the founder in an idealist way, i.e. searching for the most effective and honest way to manage a shutdown. I'm interested in the moral dilemma, especially regarding employees. Aaron writes: "The biggest emotional investment that founders make – especially early on – is convincing great people to take a leap of faith and accept an offer to work their butts off on a long shot. This dynamic is why transparency around the decision to shutdown and the timeline of it is so important." Imagine you're a founder and your company is on its last legs. You can make a last-ditch effort to pivot and save the company, but that means that if you fail, which is likely, your employees will get shafted. Can you really communicate this transparently to your employees, and risk having them start searching for a way out, dooming your chances to succeed in turning around the company?