When to give up and shut down your startup?
A guide to probably the most difficult decision you may need to make as a founder
This is a mantra: “You miss 100% of the shots you don’t take.” (Wayne Gretzky)
It’s true in ice hockey and painfully true when it comes to startups: you can’t win unless you try. So, you try. You make mistakes, you fail, you fall — then you get up and move on chasing that dream, or that ambition, or that hunger. But somewhere, along the way, you start asking yourself: Have I invested too much money and time into this? Should I stop now? Should I have stopped long ago? What if I stopped too late?
But what if you stop too early? What if you try a thousand times and each time you stop a month into the process when it becomes really hard? Or worse: what if you stop just a bit earlier than you should — just before that one test which will prove your idea worth a billion dollars?
The big question is When exactly to give up and shut down your startup? Behold a guide for how to handle this:
This is an easy one. Do you have second thoughts regarding your co-founder? Or do you have conflicts, different visions, bad chemistry with him/her? Stop immediately. You can’t move on with problems like these. Sooner or later your startup will die because of the issues between the founders and it’s better to be sooner than later. Split what you have to split, share what you have to share, sell what you have to sell and move on. Find another partner, find another idea to work on; this one is dead.
Another easy one. Never give up because you have problems with the product — not even if you try building your own black hole (keep reading and you’ll understand what I mean— you’ll probably have to give up because of insufficient funds, but you’ll never give up because of a short supply of dense matter). Iterate. The product is never finished; it’s not an artwork or a masterpiece; it’s always evolving like an animal. Make sure exactly of this: that your product is evolving — evolving means adapting — adapting to the market, to the user, to the competition, to the world.
Pain point & Value proposition
Actually, you should start with this one — the Product comes later. Test the Pain point and the Value prop. 1) You don’t need the Product for this. Fake the Product — a mock-up is enough. Talk to customers; ask questions and listen. Don’t ask questions in future tense; always in past tense: What did you use for this or that? When was the last time you needed something for this or that? How much money did you pay for it? 2) Don’t test on friends or family. They will be kind to you — so kind that you’ll spend the next three years of your life working on something stupid because they wanted to be supportive with you. At this stage you don’t need support; you need the truth. At this stage it’s ok to give up on your startup idea if your assumptions are wrong; it’s ok to give up twice a day. No regrets — you haven’t invested that much time and money. Try something else and always remember: there are only two things in this world that are in excess — money and ideas.
Go to market
When it comes to marketing, everything is quantifiable; it requires the algebra skills of a fourth grader and the emotional unavailability of a hammer. You have conversion rates, bounce rates, click through rates, customer acquisition costs, budgets etc. Set up your metrics wisely and test, test, test. But make sure that you have structure in doing this: create a framework for testing, give yourself a strict deadline and a stricter budget, set milestones and thresholds. Otherwise it’s not testing; it’s just changing things blindly and shooting in the dark; wasting your little resources for no result. If you think of giving up on your startup because you couldn’t find a market for your product, then you should have stopped much earlier — it means you made a huge mistake somewhere on the way. Like that expensive wi-fi connected juice maker that was only able to squeeze a bag of already-made juice — Juicero went broke after raising $120 million, by the way.
The only way you should close the shop because of the competition is when they buy you out. Otherwise, even if you are in a red ocean, you should go on — I mean, you knew from the very beginning that you were in a red ocean, didn’t you, moron?
The search for a viable business model — that’s the very definition of a startup; take this course by Steve Blank, it’s a mind opener. Not finding the viable business model is the best reason you might ever consider giving up and shutting down your startup. Take my advice if you are a rookie: whatever company you think of starting up, do it with $10 and within six weeks. During the six weeks move fast and try to test all your assumptions — again, have structure in doing it. Create the testing framework. Iterate. Adapt. Focus and Intensity. Move to another idea if this one doesn’t work. Be a machine.
Don’t give up until you’ve tried everything. Everything. Get intros, pursue all leads, qualify all investors, follow up methodically, pitch fiercely. Use the feedback you get to improve your product, your marketing strategy or your business model. Stop when you see no result, but only after you have no one else to call. No regrets: you are either an idiot for getting to this point or way ahead of your time; either ways, no pills will help.
Really? I mean, you’ve solved them all and you still have no traction — and that’s why you think of quitting? You have a great product that comes with a beautiful value proposition and satisfies a real need, your marketing engine turns every one dollar into two, your competition lies in the dust and TechCrunch just published the news that you closed a $50 million round. All these and you got no traction? The truth is that no startup ever shut down because of luck of traction; they all died for not having a compelling product, for wasting marketing money, for having bad leadership or for a thousand other motives. Traction is not one of them. Traction is the result of all these components. Lack of traction means that something else didn’t work.
There are other reasons for which founders think of shutting down their startups: physical burn out, personal reasons, emotional fatigue, falling in love with a bigger opportunity… Running a startup is a life choice, it requires dedication and it tends to take from you more than initially expected. It can ruin relations and families, waste fortunes, break friendships, destroy dreams, ruin health. It’s not for the common folk — just for the brave ones not afraid of epic failures.
Hope this way of looking at things helps.