One of the
most difficult of topics to discuss is the demise of your startup. There is nothing to
say in advance or after it happens to make you feel any better. No words exist that will take away the sting
of the failure and you will relive aspects of the process the rest of your
life. Many serial entrepreneurs have
lived through at least one failure and
some, more than one. There are a
few that have not experienced it and if lucky never will.
The purpose
of this article is to alert you that many startups just do not make it. The reasons are wide-ranging and sometimes
just strange. Sometimes, you cannot prepare in advance. When possible, planning an orderly shutdown
is preferable over hitting the wall at 100 miles per hour! At least in an orderly shutdown, you have a
chance to manage creditors, staff, and operations to protect as many as
possible and as much of the assets as possible.
The following
is a short list of reasons for demise: 1) Product failures, 2) Commercial
failures, 3) Development failures, 4) Management failures, 5) Financial
failures, and 6) other. Experienced
executives can sometimes manage these events and turn a business around. The less seasoned professionals may face more
challenges than experience allows for effective management. Many times, it does not matter how good the
manager is, the company will be doomed.
As an
example, I ran into a friend a few weeks back. This person is a great manager. He was
developing a company for a VC group.
After much planning and having a deal done for the next financing, he
received a call saying the fund was not going to go through the deal. The news came about a week before the
business would run out of funds. There were
no other prospects for investment and the time was too short. My last discussion with the friend was along
the lines that he would be closing the company in about 5 days!
In the
biotechnology space, clinical trials are required to demonstrate effectiveness
of a product and gain FDA approval. Two
Phase III trials are generally required to demonstrate safety and effectiveness
of the product. Many early stage
biotechnologies have experienced break of the code and analysis of the Phase
III data to find their product did not work.
This typically makes all investors run for the hills! If the company is not well capitalized, it
will be gone in days. This has taken place numerous times and it is not
something you can plan for. Companies
having received in excess of $300MM have failed over night for just this type
of event.
The point of
this article is to alert you that FAILURE happens. You can learn from it, you may be able to
manage it, but more often than not, the company disappears quickly. Just be aware that the streets of “Startup Land” are not paved with “Gold”. You will put in long hard hours
and experience many great things, but sometimes the magic catches up to you and
poof, “Now you see it, Now you don’t”!
You can follow Taffy
Williams on Twitter by @twilli2861 and you can email him with questions
at twilli2861@aol.com and his company website
or photo website. You can also find him in the group Startup Group on Linkedin. Other articles can be found in the Charlotte, NC- small business section of Examiner.com. This blog
is now listed on StartUpRoar
and on Alltop®.
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