In the realm of startups, failure is as common as success is rare. But the path to startup failure is seldom a graceful descent. Instead, it often resembles the thrashing of a mortally wounded dragon - a spectacle both fascinating and horrifying to behold. This phenomenon, which I've come to call "startup death-flailing," is a series of desperate, often out-of-character moves that struggling startups make before they ultimately crash and burn.
Having witnessed this dance of death numerous times throughout my career in the tech startup world, I've developed a keen eye for the telltale signs of a startup in its final throes. These signs are not always obvious to the casual observer, but to those who know what to look for, they're as clear as day. Let's dive into the world of startup death-flailing and explore the warning signs that can help you identify when a once-promising venture is circling the drain.
The Silence Before the Storm
One of the first signs that a startup is entering its death throes is an eerie silence that descends upon the company. This silence is particularly noticeable in startups that were once known for their transparency and frequent communication with stakeholders.
At first, it might seem like they're just busy working on something big. But as days turn into weeks, and weeks into months, the silence becomes deafening. No updates, no tweets, no press releases. It's as if the once-mighty dragon has retreated to its cave, licking its wounds and preparing for its final battle.
Nearly every startup that I've been at during this phase has stopped blogging, cancelled town hall meetings last-minute, and gone entirely silent on social media. You can usually spot the Twitter (now a letter...?) account of these startups as they tend to keep tweeting recycled content for long after their death like strange echos in a dark cave.
This silence is often a sign that the company is frantically trying to figure out its next move behind closed doors. They might be attempting to secure last-minute funding, negotiating a desperate acquisition, or simply trying to figure out how to break the news of their impending doom to their employees and investors.
The Frozen Hiring Pipeline
Another clear sign of a startup in trouble is a sudden freeze in hiring, particularly for critical roles. In the early stages of a startup's life, hiring is often a constant process. There's always a need for more developers, more salespeople, more marketing experts. But when a startup enters its final days, this hiring pipeline suddenly runs dry.
This hiring freeze is often a desperate attempt to conserve cash. But it's a double-edged sword. While it might temporarily stem the outflow of money, it also hampers the company's ability to grow and innovate - the very things it needs to do to survive.
The Desperate Pivot
In the world of startups, pivoting - changing direction when a current approach isn't working - is a normal and often necessary part of finding product-market fit. But there's a difference between a strategic pivot and a desperate one. These rapid, drastic changes in direction are often a sign of a startup thrashing about, trying anything and everything in a desperate bid for survival.
The Cost-Cutting Frenzy
When a startup is in its twilight, cost-cutting measures often reach absurd levels. It's not just about trimming unnecessary expenses anymore; it's about slashing costs wherever possible, often at the expense of the company's ability to function effectively.
I once witnessed a startup called go from having catered lunches and top-of-the-line equipment to asking employees to work on personal laptops and share desks. They cancelled all subscriptions, including essential tools for their developers.
While cost-cutting is sometimes necessary, when it reaches this level of desperation, it's often a sign that the end is near.
The Executive Exodus
Perhaps one of the most telling signs of a startup in its last breath is the departure of key executives. When the C-suite starts jumping ship, it's often because they can see the writing on the wall more clearly than anyone else.
Throughout my career I've seen CTOs, CFOs, and COOs all resign in quick succession, citing "personal reasons" or "new opportunities." Meanwhile, CEOs insist everything is fine, but the exodus of top talent has always told a different story.
This executive departure is often like watching the organs of a dying dragon shut down one by one. Each loss further weakens the company, making recovery increasingly unlikely.
The Desperate Search for a Savior
In their final days, many startups engage in a frantic search for a savior. This might take the form of courting potential acquirers, seeking a merger with a competitor, or making increasingly outlandish promises to potential investors.
I've seen startups suddenly start touting their brand-new "AI capabilities" or "blockchain integration" in a desperate bid to appear more attractive to investors or acquirers. Others might suddenly announce partnerships with big-name companies, even if these partnerships are tenuous at best. These almost always include awkward meetings with senior product and engineering staff demanding that we "just figure it out!".
The Lessons of the Dying Dragon
Watching a startup go through its death throes can be a painful experience, especially for those directly involved. But like all experiences in the startup world, it's also an opportunity to learn.
For founders, the lesson is clear: stay vigilant for these signs in your own company. If you start to recognize them, it's time to take decisive action. Can you cut costs without crippling your operations? Can you pivot in a way that leverages your existing strengths rather than abandoning them entirely? Can you be transparent with your team and stakeholders about the challenges you're facing?
For investors and employees, these signs can serve as early warning signals. If you start to notice multiple red flags, it might be time to start considering your options. This doesn't necessarily mean jumping ship at the first sign of trouble, but it does mean being prepared for the possibility that the company might not recover.
For the broader startup ecosystem, these signs can provide valuable insights into what doesn't work. Every failed startup is a lesson in what to avoid, what strategies don't pan out, and what mistakes can prove fatal.
The Importance of a Dignified End
While it's natural for startups to fight for survival until the bitter end, there's also value in knowing when to call it quits. A dignified shutdown can preserve relationships, protect reputations, and even pave the way for future ventures. Remember, nobody does just one startup. Nobody.
I've seen startups that, upon recognizing the signs of impending failure, chose to wind down operations in a controlled manner. They were transparent with their employees, giving them time to find new jobs. They worked with their customers to ensure a smooth transition to alternative solutions. They settled their debts as best they could and thanked their investors for their support.
These startups might have failed, but they did so with integrity. And in many cases, the founders and key employees went on to successful careers elsewhere, their reputations intact despite the failure of their venture.
Conclusion: The Circle of Startup Life
The phenomenon of startup death-flailing is a natural, if unfortunate, part of the startup lifecycle. Just as the death of a dragon in mythology often heralds great change, the failure of startups paves the way for new ideas, new companies, and new innovations.
For every startup that enters its death throes, another is just beginning its journey. The lessons learned from those that fail inform and shape the strategies of those that follow. In this way, even in their final moments, struggling startups contribute to the ever-evolving ecosystem of innovation and entrepreneurship.
As we navigate the turbulent waters of the startup world, let's remember to approach both success and failure with empathy, wisdom, and a willingness to learn. After all, today's failing startup might contain the seeds of tomorrow's unicorn. And who knows? Maybe that mortally wounded dragon isn't dying at all, but merely shedding its old skin, preparing to emerge stronger and more magnificent than ever before.
For those looking to embark on their own startup journey, it's crucial to understand the Lean Startup method and how to build a Minimum Viable Product (MVP) to increase your chances of success.
-Sethers
