As you can probably tell from the title, I'm one of the cofounders of a VC backed startup. I've been working on this startup for about three and a half years, but we've pivoted a couple of times and have been working on this particular iteration for about two of those years.
In that time we've raised about $10m, have about $7m left in the bank, and are a team of about 15. We are making basically zero revenue (a rounding error amount), and almost for the whole of the three years that has been the case. I find my cofounder very hard to work with at this point - for a variety of reasons.
I feel very tired, and it has been a huge slog to get this latest version of the product out and I have little confidence it will meaningfully impact the metrics that matter i.e. revenue and retention.
But at the same time, I know that I want to build another startup.
Does anyone have any good mental models for how I should think about whether or not to stay at this startup any longer? I feel a sense of obligation to our team, and obviously we have a reasonable amount of cash in the bank (investors want us to return this), and I feel obviously worried about leaving without a clear plan on what to do next.
Would appreciate any thoughts!
Thanks!
But really, if you have no revenue, and no passion - be open with your cofounder. Dwindling along until you use all $10m isn't fair to anybody involved really. You must both know this; who decided, and was it on purpose? And if investors want it back, it might be a good time to decide on this.
At the same time you have space to move. Most startups in the US are default dead for much longer than you have spent in the market now, especially those that raise $10m (you hire bigger teams).
Be very realistic about the end consumer and their problems and think from that angle. Is there an alternative. Do you possess the motivation to focus on it. Are you on the tech side?
One thing that might be tricking you or your cofounder is the $7m - you might see it as a strength. Indeed it is an "asset", but as to mental models, read what Jason Cohen says and consider if it really is a benefit, or only a benefit if it is used wisely. Where does it, your product, your expertise and any industry news fit into this landscape? https://longform.asmartbear.com/swot/
And don't worry too hard. You can try again. You have given employment to a dozen people and probably helped shape them. Contrary to what you will hear, if you were not the face of fundraising, this will likely not prevent future fundraising, but you will need to tell the honest story. Waking up to this not working at this point is not the worst - you are doing well on that. What I will say is that 15 people who know how to work together, combined with good morale and clear leadership, could certainly still pivot to success.
Another irrelevant data point is how long you have failed to make revenue. We see patterns of startups building things for 4 years, then hit product-market fit 2 years after launch. You have the runway for that, and you've already put in the time. However, there are startups that start from scratch, launch a thing in 4 months then get to PMF 2 months later. You rarely see data where someone launches something 4 months and sees PMF 4 years later. Starting from scratch isn't bad.
It sounds like the problem is with your cofounder and the processes that led you to this point. So based on the given data, I'd say do something else.
I'd talk to your co-founder and start by taking some time off. I bet for the past 3 years of grinding on the startup you haven't done a good job with vacations. If you went and fully unplugged for a month (or more) you might be in a place for a better perspective.
You might feel like you can't get away - that you're too essential to some work right now - but in my experience a top role of co-founders is to keep the passion and vision strong. Where you sound like you're at mentally you may be doing more team harm than good and your co-founder may be surprisingly supportive of you taking some time to get rest.
Thinking about the long game, if you want to raise VC funds again, your reputation might be better served by winding down and returning the funds you haven't used, instead of burning through the remaining 7M.
If your team is still energized and believes, it might be better for the company for you to move on. You could explore an advisory or board only role and help identify a new leader to take the reigns.
If you didn't have the money to pay yourselves a liveable wage, would you still have the passion to keep going? If not, it seems like you are headed down a dead end road.
Instead, you could ask "What problems do you face? What solutions have you tried? How effective are those solutions?" If someone has not tried to solve their problem, they're not gonna care about your solution. If someone has tried to solve their problem and failed, then you know you have a killer painpoint.
Why don’t you pivot with another startup? We launched some months ago, see serious traction, are raising a much lower amount in Europe and are close to turning actual revenue within the coming months.
Happy to get on a thread / call with you to understand what you’re doing and if there is synergy possible. Would be a shame to let all the effort go to waste.
corrals.prim-0c@icloud.com
Dimension 1 - are you enjoying your work? Is your work meaninful? How does it affect your mental and physical health (either way)?
Dimension 2 - what are potential career opportunities if you continue with this company? Will you have a multi-digit exit? What are the chances? Again, how does it affect your mental and physical health (either way)?
Dimension 3 - can you continue and mend relationship with your cofounder? Is it a personal conflict or different world views? Can you change to accommodate their view? And, again how does it affect your mental and physical health (either way)?
Make an Euclidean sum of these vectors and see where it leaves you. Nothing is more important than health, but startups (and relationships) are often hard and grueling work, perhaps you enjoy it but need to put in the effort? Or you hate it and stay there out of guilt? Quantify and figure it out. Best of luck!
The problem is you still have no traction or considerable revenue to show after 3.5 years. That right there to me says that it's time to end this misery.
Hope it helps.
If you have no clear direction, why do you have 15 people? Cutting staff is one of the hard times of running a business. Cutting staff increases runway. That's just gravity.
Some other remarks:
+ If the investors are asking for their money back, then your investors are a poor fit to your business's needs.
+ The difficulty of working with your cofounder are in part because you are experiencing a hard time in the life-cycle of a business. They are also because your cofounder is experiencing a hard time in the life-cycle of a business. All the petty baggage that's built up over the years is bubbling to the top in both of you.
My best advice is to try to do the right by people. The only way to know what that actually is is to ask. Asking and trying to do right by others is also doing right by yourself.
Maybe it works out. Maybe it doesn't.
This is probably not your only rodeo.
Good luck.
It seems you got lucky! You raised all this money without having the courage to do something simple, like talking with the people who footed the bill and your cofounder. How's that even possible?
You don't have an obligation to your team or anybody. Imagine if, instead, you make them waste a few years with you when you no longer believe in this business. This is much worse.
In my view, you must be transparent with everybody. If you keep running it, you are no different from Adam Neumann. If I had invested in your company, and you'd keep wasting my money as you no longer believe in it, I'd sincerely believe you are a conman.
ps: I'm still curious why VCs haven't kicked you out. 3,5 years and no revenue. This looks like fanfiction to me. Don't give me those Figma examples; you aren't building Figma.
Consider that any change is an opportunity for all parties involved to be better off. This isn’t to say that your cofounder or employees need somebody else, just that it’s better to go into any discussion assuming that there’s a everybody-wins scenario rather just a win-lose scenario. Maybe the everybody-wins scenario is having the conversation with your cofounder and choosing to stay. There’s lots of good things that can happen if folks conduct themselves with the right mindset to capitalize on new opportunities as they come along.
If you don't then wind it up ASAP. If you do, but don't like the organisation you are in, then ask yourself a different question, how do you get rid of the other person.
If you are asking, 'can I just hang around and grift as much of the $7m into my own bank account', then I have nothing to offer you. You can examine your own conscience for that.