What is the best way to take most out of a failed startup?


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In the case that startup I'm working on for several years is going to fail, what is the best way to get most experience out of it? I see the following options:

  1. Try to continue in the same specific area and utilize the learned "domain expertise" to start the next startup (This would be sort of very radical pivot). That assumes It would be legally possible and I would be clear from any non-compete, non-disclosure and similar agreements.
  2. Try different area. For example I may have failed because my understanding of how the industry works is completely wrong. I would be still benefiting from the experience, but I would have fresh look on the problems, I may be able to choose the new product/industry more wisely and so on.

I'm a technical cofounder(developer) so my knowledge is relatively well transferable into other areas.

Failure

asked Aug 26 '13 at 06:47
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Jhexp
105 points

2 Answers


2

This is very objective. First of all, ask yourself about your future in the actual startup (and it is a question if "several years" old company is still a startup, but that's other topic...).

If you think it will fail, you have two possibilities: a) you like (working in) that startup, it worths the effort and thus you will make all you can to prevent the failure.

b) you feel that the ship is sinking and it can't be saved / it doesn't worth the effort to try to save it.

In case a), just stop thinking about the "if questions" and focus on the rescue of the startup.

In case b) - leave. Staying in some dying company without future is just a loss of time.

Now for your future - I must say that there is not a general solution. It's about your feelings. Listen to your gut, you already know the answer. You can start by answering these questions :

  • Do you like your actual job?
  • Do you like the sector you are working in?
  • Did you learn enough to avoid the same errors in case you start again?
  • What was the case of the failure? Maybe the "radical pivot" can help, maybe the product/services is not needed/wanted anymore?
  • Are you ready for a big change or you prefer the security of the known industry?
  • ...

Frankly, the only right person to answer your question is YOU. You know the situation and you know your feelings/fears/needs... So put all of it on balance and you will see.

And if you still can't decide: toss a coin and then just do it by doing your best. (this is not a joke: the "no decision" is the worse...)

answered Aug 26 '13 at 16:28
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Data Smarter
1,274 points
  • Very good answer, thank you. It is very subjective. I think we are still a startup, because we still haven't found the working model that we were after and we recently decided to change the business a bit which resulted in even worse situation than before. To be honest it feels like "being resilient" is suddenly changing into "being stupid and not properly recognizing when to stop". For me the main reason why we are going to fail is that the relationship with the other cofounder doesn't work. – Jhexp 7 years ago
  • Indeed, relations inside a startup are very important. Especially if it's a "two person startup". If you feel that it will not be better, just turn the page and start something else (or similar with someone else)... – Data Smarter 7 years ago

1

There's a very good answer already on the personal issues to consider. Let me answer the business issues.

Generally speaking, it is best to start your second business within the shell of the first business. When people ask questions like 'how long have you been in business' you can say '7 years' as opposed to 'six months'. The longevity helps, in certain circumstances, and it saves you on the legal and accounting fees of setting up again.

There is a condition to this: it is only true if you have run your business carefully and professionally throughout (and kept your legal and and accounting issues in order). If you have ex-employees, you need to have paperwork showing they have left on good terms. You need to settle all of your outstanding debts. You need to be sure that nobody has a potential claim against you for things you did poorly in the past.

There's nothing worse than taking the business to a new area, then having a previous partner from the first business - who you didn't get proper severance with - come back and sue you a couple of years later because they are annoyed with you.

So if you're not sure about the accounting and legal history of the first company (and as the tech founder, this will require a careful review of the business affairs of the company, which you didn't look after), you'll have to shut it down and start over.

P.S. I hope you've been paid some sort of salary in the past years!

answered Aug 26 '13 at 23:45
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Kamal Hassan
1,285 points
  • Problem is that I'm not sure I want to continue with the other cofounder, it would have to be completely new legal entity and new product, maybe using the same software depending on the agreement when dissolving the current company. And yes, I have been paid some little salary. – Jhexp 7 years ago

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