HACKER Q&A
📣 throwaway0623

How and when do things turn ugly at a failing startup?


Hi folks,

I work at a Series A startup with a B2B SaaS product.

We have 8 employees and about 12 months of runway. I’m the only person doing sales & marketing full time (the founders do the pitching and I do most everything else. I’m somewhere between a overpaid BDR and underpaid director of SalesOps/MarketingOps).

Right now we have one very large customer and they love us, but in the 9 months I’ve been there we haven’t closed anything new. Although I’m concerned we aren’t doing enough to close that second customer the founders don’t seem very concerned with our speed of growth or my performance.

I’ve heard this “if we build it they will come in good time” sort attitude is fairly typical with VC-backed startups. How does it typically play out? Where is the inflection point at which things start to get nasty?

  👤 withinboredom Accepted Answer ✓
IME, things turn “ugly” at the point where this decision must be made:

1. Pay themselves less and keep employee salaries the same.

2. Keep their pay the same and ask everyone else to take a pay cut.

3. Everyone gets a pay cut.

Which one they choose says a lot about what the founders value and there will be people who resent their decision (either the founders or the employees or both) which tends to cause a lot of drama. If the founders choose option 1, you’ll only start to hear about it once the founders resent it enough to use it as an argument to do X, as a sort of guilt trip.

As soon as one of these decisions is made, you have 3 options:

1. GTFO

2. Stay until they make you go.

3. Stay and when things get dire, say you’ll stay for little to no pay if you get promised some IP or something. Get that in a contract and make sure it goes to you before any creditors or investors.

Option 3 is hard to pull off. I managed to get some awesome IP from a failing startup this way and sold a license for a few years to competitors before they also went out of business. (The business model only worked in a recession, who knew).

👤 K3k1
Hard to tell without more financial information, but generally speaking, having only one customer despite it being very happy with your product, is way too much risk to tolerate over the long run.

This customer may be extending the startup's runway considerably, but assuming they leave or downgrade their spending with you, you'll be getting into trouble fast.

Have an honest conversation with the founders about these potential facts. You'll learn with their behavior and response if you should stay or leave.

👤 aristofun
There’s no single answer, not even a thousand answers to your question.

Any dynamic system as complex as a business (let alone economy) is by its nature unpredictable.

Posteriori it’s easy to find correlations and pretend to be a smart ass about it.

But you fundamentally cannot predict anything substantial beforehand.

Taleb has explained it in his books, btw.