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It sucks. Not even sure they should've called it so fast, why not keep going and try to figure it out till the money runs out. Investors would be OK with that.

It sucks. Not even sure they should've called it so fast, why not keep going and try to figure it out till the money runs out. Investors would be OK with that. I wonder when Justin lost his conviction? I don't believe you can lose conviction in 2 month.

tempsy 7y ago
working at a zombie company that has no traction is not fun for anyone part of the “challenge” of being a famous founder is you can raise pre product. $75M seems insane for a company like that. Burn couldn’t have been that high, mostly rent and salaries, no heavy computation, etc.
- baddox 7y ago
  Wouldn't rent and salaries (at least in the SF Bay Area) almost always be vastly more expensive than computation?
  - tempsy 7y ago
    Depends on the company. If it’s a marketplace like Uber then you’re burning a lot of operations. If it’s ML or heavy compute then AWS bills.
    - toomuchtodo 7y ago
      Honestly surprised a bunch of VCs haven't gotten together yet and built out their own compute for portfolio companies considering how much VC money gets shoveled into the AWS fire.
      - acdha 7y ago
        Think about the hundreds of engineers they’d need to hire, purchases for hardware and software, security approvals, etc. that would all need to be spent up front with no guarantee that it’d actually be cheaper. Beating the major cloud providers requires some combination of large scale and/or cutting corners and most companies are not at the point where the infrastructure costs beat the staff time needed.
        toomuchtodo 7y ago
        I used to do ops, costing for infra, build out datacenters, I’m aware!
      - baddox 7y ago
        This sort of thing actually does happen, right? Isn’t that basically what WeWork was, but for all the VC money companies are spending on office space?
        deleted 7y ago
        [deleted]
- coderintherye 7y ago
  They noted in the article they didn't spend all $75M and that they are returning some to investors. That was probably part of the decision to shut down quickly to get some money back to them.
- lmeyerov 7y ago
  100 people x 150k yr = $15M. Add insurance, office, heaaavy marketing, sales commission, non-frugal everything.. I'm guessing $20-30M over their 2+yrs. Maybe even more on people bc hiring lawyers. Weirdly, the investors are happier with that than 5 smaller series A's of money-making / real-IP companies with existing growth engines. Easier to bet on nothing vs improving. I do find the flameout odd, and not isolated to Atrium. Why flameout vs spinoff a small business for folks who wanted to continue? Same difference to the investors, but meaningful to the lives of the believers. Worst case, just OSS for them.. Thinking more: A good comparison is Carta, also in legal, whose funding was more correlated to revenue and growth.
  - manigandham 7y ago
    The end of the first paragraph says: "The separate Atrium law firm will continue to operate." The legal talent already did spin-off with the last pivot.
    - tempsy 7y ago
      They laid off a bunch of lawyers so no idea who is still working there
    - lmeyerov 7y ago
      That sounds like... not most of the software people building IP.
prawn 7y ago
Would you retain better rapport with the investors if you returned money and started something fresh rather than persisted when you were lacking conviction?
- ttul 7y ago
  I don't think a guy like Justin lacks conviction. Justin.tv required huge conviction. If you don't recall, it was founded in 2007 -- just prior to the financial crisis -- with the unique idea of allowing people to live stream on the internet. Today, live streaming is just a feature of Instagram, Facebook, and other major services. But in 2007, it was revolutionary. Twitch was the breakthrough, but it took four years of grinding to get there [1]. In the case of Atrium, I'm sure that the investors would have had plenty of board-level conversations about the potential trajectory of the company. The decision to shut down and return funds was likely endorsed by the investors, if not proposed by them, who would doubtless remain extremely keen to invest in whatever Justin comes up with next. [1] https://techcrunch.com/2014/08/05/justin-tv-shuts-down-to-let-the-company-focus-on-twitch/ https://techcrunch.com/2014/08/05/justin-tv-shuts-down-to-le...
  - prawn 7y ago
    I meant conviction with regard to Atrium. Was responding to the idea that he could've stuck it out and burnt through the money persisting as opposed to something new.
    - ttul 7y ago
      Well, I guess only Justin knows and maybe their board. Chances are they figured there was no viable path to wild returns.
ttul 7y ago
If you're already rich (as Justin is) and realize how big an upside can be, why not flush the toilet and start over? For a guy like Justin, time is the most precious commodity because money is meaningless.
- eganist 7y ago
  This is great advice for an established founder, which might be why it's simultaneously one of the most damning reasons to avoid working for one.
  - harryh 7y ago
    Working at a zombie company with very little chance of success isn't a great gig either. Shutting it down cleanly, paying decent severance, and letting the staff move on is a good move for them too.
    - eganist 7y ago
      Absolutely, but at the same time, the founder and team with nothing to lose is more likely to pull a rabbit out of that blood-equity-soaked hat. I'd rather pitch into the latter, which I suppose is sunk cost fallacy manifest.
      - tptacek 7y ago
        I don't understand what this even means. For everyone involved in a startup, time is the most precious resource they're investing. If the startup is doomed, pretending it isn't and keeping employees on the hook is the worst thing a founder can do. And what is "blood equity"?
        speedplane 7y ago
        >> founder and team with nothing to lose is more likely to pull a rabbit out of that blood-equity-soaked hat. > what is "blood equity"? Even failing startups, with little cash and poor market penetration are often worth something to somebody. It could be a small client list, the team, patents, or just an attractive domain name. Most founders leading failing startups will try to sell to suitors for pennies on the dollar invested. Sometimes they get a small cash bump (or in WeWork's case, a small $1B), but it also means they can say they were acquired rather than simply failed. And they're right, building a company and selling it for $1.00 is far more difficult than not selling it at all. Investors don't always like this because they recognize the loss at acquisition, which hurts their published returns. But more often, they don't care. They know the odds before-hand and prepare for events like this. The people who lose the hardest are the employees with just stock-options or small equity stakes. Everyone's stock will be worthless, but the founder can potentially walk-away with a decent "consulting" contract. The best a standard employee can hope for is being hired by the acquiring company and that their culture doesn't suck. From the employees perspective, the bright side is that they are often the first people to figure out that a company is doomed (before investors, customers, or the press). They have the advantage of time when it comes to planning their next move.
blizkreeg 7y ago
Sort of related, genuine q for the founders who've raised money and lost it (had to shutdown): how did you feel about losing investor money? Did it make you gun shy about raising again from investors? Did you retain good relationships with them? Does credibility take a hit?

tempsy 7y ago

working at a zombie company that has no traction is not fun for anyone part of the “challenge” of being a famous founder is you can raise pre product. $75M seems insane for a company like that. Burn couldn’t have been that high, mostly rent and salaries, no heavy computation, etc.

baddox 7y ago
Wouldn't rent and salaries (at least in the SF Bay Area) almost always be vastly more expensive than computation?
- tempsy 7y ago
  Depends on the company. If it’s a marketplace like Uber then you’re burning a lot of operations. If it’s ML or heavy compute then AWS bills.
  - toomuchtodo 7y ago
    Honestly surprised a bunch of VCs haven't gotten together yet and built out their own compute for portfolio companies considering how much VC money gets shoveled into the AWS fire.
    - acdha 7y ago
      Think about the hundreds of engineers they’d need to hire, purchases for hardware and software, security approvals, etc. that would all need to be spent up front with no guarantee that it’d actually be cheaper. Beating the major cloud providers requires some combination of large scale and/or cutting corners and most companies are not at the point where the infrastructure costs beat the staff time needed.
      - toomuchtodo 7y ago
        I used to do ops, costing for infra, build out datacenters, I’m aware!
    - baddox 7y ago
      This sort of thing actually does happen, right? Isn’t that basically what WeWork was, but for all the VC money companies are spending on office space?
      - deleted 7y ago
        [deleted]
coderintherye 7y ago
They noted in the article they didn't spend all $75M and that they are returning some to investors. That was probably part of the decision to shut down quickly to get some money back to them.
lmeyerov 7y ago
100 people x 150k yr = $15M. Add insurance, office, heaaavy marketing, sales commission, non-frugal everything.. I'm guessing $20-30M over their 2+yrs. Maybe even more on people bc hiring lawyers. Weirdly, the investors are happier with that than 5 smaller series A's of money-making / real-IP companies with existing growth engines. Easier to bet on nothing vs improving. I do find the flameout odd, and not isolated to Atrium. Why flameout vs spinoff a small business for folks who wanted to continue? Same difference to the investors, but meaningful to the lives of the believers. Worst case, just OSS for them.. Thinking more: A good comparison is Carta, also in legal, whose funding was more correlated to revenue and growth.
- manigandham 7y ago
  The end of the first paragraph says: "The separate Atrium law firm will continue to operate." The legal talent already did spin-off with the last pivot.
  - tempsy 7y ago
    They laid off a bunch of lawyers so no idea who is still working there
  - lmeyerov 7y ago
    That sounds like... not most of the software people building IP.

prawn 7y ago

Would you retain better rapport with the investors if you returned money and started something fresh rather than persisted when you were lacking conviction?

ttul 7y ago
I don't think a guy like Justin lacks conviction. Justin.tv required huge conviction. If you don't recall, it was founded in 2007 -- just prior to the financial crisis -- with the unique idea of allowing people to live stream on the internet. Today, live streaming is just a feature of Instagram, Facebook, and other major services. But in 2007, it was revolutionary. Twitch was the breakthrough, but it took four years of grinding to get there [1]. In the case of Atrium, I'm sure that the investors would have had plenty of board-level conversations about the potential trajectory of the company. The decision to shut down and return funds was likely endorsed by the investors, if not proposed by them, who would doubtless remain extremely keen to invest in whatever Justin comes up with next. [1] https://techcrunch.com/2014/08/05/justin-tv-shuts-down-to-let-the-company-focus-on-twitch/ https://techcrunch.com/2014/08/05/justin-tv-shuts-down-to-le...
- prawn 7y ago
  I meant conviction with regard to Atrium. Was responding to the idea that he could've stuck it out and burnt through the money persisting as opposed to something new.
  - ttul 7y ago
    Well, I guess only Justin knows and maybe their board. Chances are they figured there was no viable path to wild returns.

ttul 7y ago

If you're already rich (as Justin is) and realize how big an upside can be, why not flush the toilet and start over? For a guy like Justin, time is the most precious commodity because money is meaningless.

eganist 7y ago
This is great advice for an established founder, which might be why it's simultaneously one of the most damning reasons to avoid working for one.
- harryh 7y ago
  Working at a zombie company with very little chance of success isn't a great gig either. Shutting it down cleanly, paying decent severance, and letting the staff move on is a good move for them too.
  - eganist 7y ago
    Absolutely, but at the same time, the founder and team with nothing to lose is more likely to pull a rabbit out of that blood-equity-soaked hat. I'd rather pitch into the latter, which I suppose is sunk cost fallacy manifest.
    - tptacek 7y ago
      I don't understand what this even means. For everyone involved in a startup, time is the most precious resource they're investing. If the startup is doomed, pretending it isn't and keeping employees on the hook is the worst thing a founder can do. And what is "blood equity"?
      - speedplane 7y ago
        >> founder and team with nothing to lose is more likely to pull a rabbit out of that blood-equity-soaked hat. > what is "blood equity"? Even failing startups, with little cash and poor market penetration are often worth something to somebody. It could be a small client list, the team, patents, or just an attractive domain name. Most founders leading failing startups will try to sell to suitors for pennies on the dollar invested. Sometimes they get a small cash bump (or in WeWork's case, a small $1B), but it also means they can say they were acquired rather than simply failed. And they're right, building a company and selling it for $1.00 is far more difficult than not selling it at all. Investors don't always like this because they recognize the loss at acquisition, which hurts their published returns. But more often, they don't care. They know the odds before-hand and prepare for events like this. The people who lose the hardest are the employees with just stock-options or small equity stakes. Everyone's stock will be worthless, but the founder can potentially walk-away with a decent "consulting" contract. The best a standard employee can hope for is being hired by the acquiring company and that their culture doesn't suck. From the employees perspective, the bright side is that they are often the first people to figure out that a company is doomed (before investors, customers, or the press). They have the advantage of time when it comes to planning their next move.

blizkreeg 7y ago

Sort of related, genuine q for the founders who've raised money and lost it (had to shutdown): how did you feel about losing investor money? Did it make you gun shy about raising again from investors? Did you retain good relationships with them? Does credibility take a hit?