Some might think that having a low proportion of startups shutting down is a good sign. But it’s not. And over the past few years, I’ve seen lots of founders struggle to come to terms with the fact that closing shop was probably the best course of action.
The stigma around shutting down is still very negative in many cultures.
It’s often worse if investors are involved because of the guilt some founders bear: some think that by selling a stake in their company they’ve sold a part of themselves. So they continue pushing ahead despite being uninspired and worn out, until the money runs dry.
In places that are generous with grants, it’s worse.
Think of the amounts of talent, knowledge and energy locked-up in stagnant, half-heartedly led startups propped up by grants and subsidies. Staying afloat for the sake of it is not a goal, and while you owe it to your different stakeholders to give it everything you’ve got, you’re not bound eternally.
The liquidity of talent is as important for an ecosystem as the liquidity of capital.
That’s the story of all major tech ecosystems: ex-employees create clusters of knowledge, talent, capital and, ultimately, companies. The most emblematic “mafias” are those of successful companies like PayPal, Skype or Uber; but incredible lessons come from failures too and great founders build atop those.
So here’s what I ask founders facing this difficult choice.
Each conversation has its nuances. If the business isn’t profitable and you run out of money or fail to raise any, you don’t really have a choice. But you probably shouldn’t wait until then to think about having the conversation.
Are you still excited by what you’re building?
Do you still enjoy working with your cofounders?
Are you growing?
Do you have any remaining ideas for growth that you want to test?
Do you have a path to profitability?
If the answer to each is no, odds are very high you should consider shutting down. There are days when it might feel like some of the answers are no - that’s normal, building a company is never smooth sailing. But if the feeling lingers for weeks, and then months, moving on is likely the best course of action: no one can give you that time back.
It’s always a tough decision to make and the months that follow are often painful. But the dozens of founders I’ve helped navigate this situation ultimately found it to be a liberating path, and one which might, why not, lead to the creation of an exciting new company.
If you have questions about whether you should continue with your company, you can DM me on Twitter (@pastormhm). If you’d like to tell us about what you’re building now, you should apply to The Family, our next batch is in January! Looking forward to hearing from you!
To finish 2020 on a high note, one Director from The Family sends you a startup lesson each day all the way through Xmas!