When your Startup is Dead

Hamish Mexted Business Strategy & Planning

We came across this post by Rowan Simpson which talks about the success (or otherwise of start-ups).

Most founders think in reasonably binary terms: your venture is a success or your venture is a failure, and often you will oscillate between those two extremes several times in the course of a single afternoon, depending on how things are going.

However there is a third outcome, which in my opinion is worse than failure: your venture is living dead.

Rather than continuing to throw good money after bad, or worse (in our opinion) good time after bad it’s important to identify when to pull the pin.  Rowan identifies a few indicators that your start-up is a “living dead”:

It has some customers, and associated revenues, but few if any who really LOVE it…

It makes enough money that it seems silly to think about shutting it down, but nowhere near enough to enable investment in growth or to entice further investment, and probably not enough to properly pay the founders for their time…

It operates mostly in the dark. The founders stop looking at the numbers which only make them depressed. Faith starts to trump facts in decision making…

…it has no momentum of its own. It atrophies. It only moves forward when the founders or investors really lean hard on it.

To us, it’s important build ‘outs’ into your business plan – points at which you stop, take check, compare your position to where you aimed to be, and decide whether you continue.

It’s a brave decision but a logical choice. The important thing to realise is that from this position it’s better to have already failed than to be continuing on as you currently are. You need to forget about the sunk cost and get your head around the opportunity cost of continuing.

So call it a day. Then get on with the next thing.