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Every failing start-up dies the same, predictable death: Money starts to run out and there is no cash flow. The first things that the company stops paying for

Every failing start-up dies the same, predictable death: Money starts to run out and there is no cash flow. The first things that the company stops paying for are ... health insurance, taxes and unemployment insurance (you may not care, but this is important to you after you get laid off). Really crooked companies will also quietly steal your 401k contributions. Company perks also disappear. Any external financial accounting agency is fired and not replaced. Next, the company will stop paying vendors, and if they are a financial middle man to other companies, they will keep those monies as well. Amazingly, a start-up can stay afloat for 1 year or longer by employing these tactics. Next, the cash crunch hits harder. Paychecks are delayed, and a short time later, paychecks are issued on-time, but bounce when you try to deposit them. There are some tactics that you can use to make sure your paycheck clears before your coworkers' do, but I won't get into those details. As some money comes in the door, preferred/mission critical employees are paid while others are not. You might be asked to pay for things on your credit card that are actually company expenses, with the promise that you will be reimbursed. All the while, your CEO will promise paychecks in a day or two, over and over again. You will go along with this because it's kind of a new and exciting thing to happen to you. It's also fun to meet your coworkers for happy hour and gossip about the situation. Some people will start to quit and find new jobs. The CEO secretly breathes a sigh of relief because .. he/she won't have to be on the hook for unemployment insurance for that employee. Eventually, the company collapses under financial pressure from creditors and investors. It's ugly and everyone gets laid off without receiving their last few paychecks. So, the next day, you go online and file for unemployment benefits. A few days later you get something in the mail saying that your unemployment benefits were denied. After spending a couple of weeks proving that you were an employee by showing all of your pay stubs (which, by the way, it looks like you don't even have those!), you find out that since your company wasn't paying for unemployment insurance, the unemployment office is unable to pay you. You think this is crazy, because it's a government agency, but you are screwed. The local government starts going after your ex-company and its leadership, by threatening them with legal action and jail time. However, there is no money left in the company now, and you find out that the leadership weren't official employees of the company, only contractors. Maybe you'll get unemployment money in the future, but you'll likely find a new job before then. You and your other laid-off coworkers hire a lawyer to try to recoup your last few paychecks. By this time, the company is totally dissolved. Not that there was any money left in the first place. TL;DR: Your company is dying and you should leave now while you're only 1 paycheck behind.

kulachilli 13y ago
>The first things that the company stops paying for are ... health insurance, taxes and unemployment insurance (you may not care, but this is important to you after you get laid off). My health insurance actually stopped a few months ago. I discovered it while I was in the dentist. > Paychecks are delayed, and a short time later, paychecks are issued on-time, but bounce when you try to deposit them. This is exactly what happened. > You might be asked to pay for things on your credit card that are actually company expenses I first felt very weird when my boss was unable to provide a company credit card for me to test our own credit card processor. He asked me to use mine. What you said in the last few paragraphs is definitely a wake up call for me. I am very surprised this is actually what's happening to me at the moment. Thanks a lot for your insight!
- epoxyhockey 13y ago
  I am very surprised this is actually what's happening to me at the moment. Keep your chin up, because it's not the end of the world. No one is immune to riding out a failing start-up; I've seen really bright and highly qualified engineers, who have just relocated their families to a new city, fall victim to a failing start-up. You have very marketable skills and will be able to find a new job faster than most people in other industries. Your CEO will beg you not to leave, and will have other employees guilt-trip you, but you need to figure out how long you want to go unpaid before leaving and stick to that threshold. The funny thing is that you may find yourself in this same situation with another company in the future. It's a common game that start-up CEOs play and the faster you catch on for next time, the more control you have over the continuity of your employment and income. I.e. don't be afraid to cash your last paycheck and quit the very next day, without 2 weeks notice.

kulachilli 13y ago

>The first things that the company stops paying for are ... health insurance, taxes and unemployment insurance (you may not care, but this is important to you after you get laid off). My health insurance actually stopped a few months ago. I discovered it while I was in the dentist. > Paychecks are delayed, and a short time later, paychecks are issued on-time, but bounce when you try to deposit them. This is exactly what happened. > You might be asked to pay for things on your credit card that are actually company expenses I first felt very weird when my boss was unable to provide a company credit card for me to test our own credit card processor. He asked me to use mine. What you said in the last few paragraphs is definitely a wake up call for me. I am very surprised this is actually what's happening to me at the moment. Thanks a lot for your insight!

epoxyhockey 13y ago
I am very surprised this is actually what's happening to me at the moment. Keep your chin up, because it's not the end of the world. No one is immune to riding out a failing start-up; I've seen really bright and highly qualified engineers, who have just relocated their families to a new city, fall victim to a failing start-up. You have very marketable skills and will be able to find a new job faster than most people in other industries. Your CEO will beg you not to leave, and will have other employees guilt-trip you, but you need to figure out how long you want to go unpaid before leaving and stick to that threshold. The funny thing is that you may find yourself in this same situation with another company in the future. It's a common game that start-up CEOs play and the faster you catch on for next time, the more control you have over the continuity of your employment and income. I.e. don't be afraid to cash your last paycheck and quit the very next day, without 2 weeks notice.