By Mike Collins
Compared to starting up, calling it quits is ten times harder in my book. But it’s something every entrepreneur needs to at least think about. Preferably not at 2:00 in the morning after multiple sleepless nights.
Giving up is generally not part of the entrepreneurial DNA, but it can be necessary, responsible, and smart. So how do you know when to keep pushing and when to call it a day? Some advice from folks who’ve been there and those who’ve watched.
When to Shut Down a Startup
In this video and blog, entrepreneur Aaron Harris puts four questions to founders to help them make the persist/quit decision. (Harris was a Partner at Y Combinator for 7+ years and is now Co-Founder of Magid & Co.) He reminds guilt-ridden entrepreneurs who decide on quitting, “You don’t want to spend [your life] doing something because you told people you were going to do it. You should be doing things because you think they’re going to make a difference and because you enjoy doing them.” Harris also counsels not to forget others involved: stakeholders, investors, and employees — advising to be upfront with all.
How to Recover Gracefully After Shutting Down Your Startup
HBS Working Knowledge
This article focuses the persist/quit decision on three questions:
- Is the company likely to meet its original goals?
- Are there any options left?
- Do the founders want to keep trying?
Facing those questions can be hampered by the fact that failure can be slow and that entrepreneurs don’t like to quit or let others down. But once the decision is made, the article advises own up, clean up, and face up. The latter involves not just self-assessing, but asking others — such as investors — what went wrong.
The Founder Behind Silicon Valley’s Most Important Failure, General Magic
General Magic is a case study that resoundingly demonstrates genius is not enough. The company boasted a phenomenal team, revolutionary vision, and multiple rabbits up its sleeve — plus freely roaming its offices. But an ahead-of-its time handheld communicator, an auto search bot, and voice recognition still didn’t save this ’90s-early ’00s company from the “pull-the-plug” decision. The tough questions for General Magic: Is there product-market fit? Is the team aligned? Does the team have the will to persist? With multiple no’s, the company called it quits.
Alumni Ventures (AV) provides smart, simple venture portfolios to accredited individuals. PitchBook listed AV as the third most active VC firm in the world in 2021.
Mike Collins is the Founder and CEO of Alumni Ventures. He has been involved in almost every facet of venturing, from angel investing to venture capital, new business and product launches, and innovation consulting. He began his career at VC firm TA Associates. He holds a BE from Dartmouth and an MBA from Harvard Business School.