The death of a startup: memories from the autopsy room

A few years back this time of the year, I was helping wind up a startup. It was not a complete shut down because some assets and employees were part of an acquihire. But quite a few people had to be let go and the remainder of the company was up for a new life under different leadership.

As most of the employees were young, qualified and employable, it was not a personal drama. Everyone ended up receiving their legal severance even though at the beginning of the process there were doubts as to whether we would have enough money.

Looking at it from the outside, the wind up should have happened reasonably smoothly ... but it did not. To this day, I have a lot of open questions about what makes these processes sometimes smooth and sometimes full of tensions and bad feelings.

As part of the management team, it is clear to me that when such a delicate process does not go well, it is mainly your fault because of how you (we) treated the employees in the past, or because of the communication and management of the wind up process, when it happened.

"How you treat the employees" is a term that does not necessarily imply what the first interpretation is - that they were treated poorly or unfairly. Other factors that to me were equally important in our case were:

1. The breach between managers in their 40's and a majority of employees that were millennials. Cultural responses in front of a small crisis were very different and those differences were not bridged.
2. Communication (as always). A problem probably starting much before the company started to go downhill. You never know how much you should really share, as a manager, about the real situation of the company, both in general, and also in smaller teams that maybe have access to part of the story because of their jobs (such as an accountant that sees that cash is running out, or an engineer that sees that a product fails in its adoption).
3. The deep level of paranoia and distrust between employer and employee that has been growing for the last ten years, as corporate cynicism, the crisis and the scandals have created a huge rift that does not seem to heal. Even at small companies where relationships should be a lot tighter. I cannot complain as I have seen guys being promised that "I will promote you and make you one of our key employees" by one manager, while another manager was taking the necessary steps to fire him. Split personality at its best.

Something else that created an immediate conflict was the fact that we were VC backed. By definition, the failure and closure of a portfolio company does not mean much to a VC because statistically a lot of their investments will be completely lost. If anything, what the VC will want to save is its reputation. So the decision to turn the key off is swift, fast and has little emotion, while "on the other side", the company was someone's project for a few years. In our case we needed to push back a bit on the VCs to find ways to at least save some employees and assets instead of letting the company die discreetly.

And finally, as always, there is the human factor and the big questionmarks our complexity as human beings adds to these processes. A few years have passed and I still keep some close professional relationships with those alumni. With some others, the relationship stopped the moment we locked the door behind us, or even before, because we did not say goodbye to each other, or even had heated discussions during the wind up process. It would be too easy to attribute this to how delicate the situation was because like I said earlier, the situation was never dramatic. I tried to learn as much as I could, yet I feel I still lack a lot of pieces from the puzzle.

It is said that when you are fired, or fire someone, things go back to normality very soon afterwards because companies have no memory. This I have seen happening too many times - you say "things are never going to be the same after this guy leaves", and they are the same. The guy who fired you was later on fired by a guy whom you fired at another job. But that is not the complete truth. Each of these seemingly mundane stories has an interesting understory that you can learn from. The guy whom you had to threat with legal action because he was crossing all red lines. The little moment of human grandeur at the worst time of the crisis. The guy you helped and later on bit your hand (or vice versa). Make mistakes but learn from them. And never do anything that you know is wrong.