When Startup Explodes, What An Entrepreneur Should Do

Lots of articles are written about how to launch a new startup, and there are plenty of consultants, advisors, incubators, and accelerators who will help you to do so – after all, the birth of something new is always a time of excitement!

Unfortunately, very little is written about what needs to be done when the entrepreneur can see that his startup is imploding in front of his eyes.

The fact is that over 80% of startups will fail, but no one prepares founders for this soul-crushing moment. 

While there are many reasons why startups fail, the final common event is usually that they run out of cash, and can no longer survive. While there are many reasons which can trigger this, often the precipitating event sets off a doom loop, where the domino effect kicks in, and a vicious cycle results in everything falling apart.

Thus, if a co-founder decides to leave, this damages the morale of the rest of the employees and can set off an exodus, as a result of which the team disintegrates in a few weeks. When this happens, investors also lose confidence, as a result of which it gets harder to raise money. The ability to maintain and upgrade the product also suffers, as a result of which customers are unhappy, and it becomes harder to sell to them. This can be very frustrating for an entrepreneur, especially when success seemed to be so tantalisingly close!

The truth is that no matter how hard you work and how competent you are, you may still fail, because of reasons which are completely beyond your control.

This is why it’s important to take a proactive approach, and if you do need to shut down, to ensure this is done in a systematic fashion so that no one is hurt in the process.

This can be emotionally gut-wrenching because you feel you have let everyone down. It’s hard to let go of hard-working employees who joined you because they trusted your leadership; it’s tough to tell faithful customers that it’s not going to be possible for you to support your product anymore; it’s heart-breaking to have to tell investors who took a leap of faith in you, that you are not going to be able to provide them with the return on investment you promised them; and you may feel that you have let your family down because you have nothing to show for the years of hard work and sleepless nights you invested in your startup.

However, sometimes it’s wiser to quit, rather than to continue digging the hole and ending up with a deeper hole from which it’s much harder to climb out. The sooner you bite the bullet, the easier it will be for you to move on!

[This post by Dr. Aniruddha Malpani first appeared on LinkedIn and has been reproduced with permission.]