Startups Fail All The Time, But Many Could Fail Better By Thinking Beyond the VCs and Founders
According to the laws of aerodynamics a bumblebee shouldn’t be able to fly, but no one told it, so it does. This oft-repeated fact is, well, absolutely incorrect, but serves as a nice metaphor for ambitious startups. Probabilities suggest they should fail, but, hey, why not succeed? And experiencing an outlier company — as a founder, as a team member, as an investor — is an absolutely incomparable professional thrill. People love to tell these stories and share lessons learned. But what happens when startups fall short of these milestones. What happen when they fail?
Well, they shut down and that’s a natural part of the ecosystem we have in tech. Hopefully it was a ‘smart failure’ [good idea, interesting product, ambitious team], which isn’t less painful in the moment but does allow its participants to accrue some knowledge and relationships to increase the probability next time around. For a venture capitalist failure is part of our job in ways both abstract and material. You know that a portfolio will include a number of wonderful people who didn’t get to work on their company for as long as they hoped. And you try to change the odds for the companies you back — we describe Homebrew sometimes as a force multiplier which tries to increase the probability and velocity of your success — even if the combined best efforts don’t guarantee outcomes. So we put some work into those as well, helping the teams move forward.
Part of that is mechanical, and a few years back we published “ Winding Down Your Company” as part of Homebrew’s resource library. But lately I’ve heard stories from friends of wind downs which fell short of some other considerations, so wanted to make a case for a few constituencies beyond founders and creditors/investors who are typically prioritized in these discussions. This isn’t a purity test — I’ve been a party to processes which fell short of these goals.
When a startup fails you should also care about:
A. Team. Duh. But beyond whatever can be done with cash on hand to provide a severance, or other softer benefits, a healthy wind down will accomplish two other goals: it’ll keep the employee interested in working at startups going forward, and second, it’ll preserve the…