Many Startups Collapse a Few Times Before Succeeding

"My startup is about to collapse - is this really the end or do startups actually go through this process more than once? How should I be thinking about a collapse, especially when I don't want to close this thing down?"

Every startup dies a few deaths before it lives forever.

But that's not what they tell us in the entrepreneur / startup creators brochure. Instead, we make up this fairy tale that our startup must be a great idea that instantly takes off, leaving customers and investors standing in line to hand us their cash. We keep making great decisions while we struggle to stay on top of our meteoric rise. Our days are jam-packed between photo shoots for magazine covers, headlining major conferences, and giving powerful speeches at company retreats.

Sound familiar?

No, of course it doesn't. Because that's not how any of this shit goes. The real version of a startup involves failing incessantly, sometimes to the brink of shutting down, until we rise back up and finally make this thing work. People don't tell us that we will likely go in and out of business many times on the road to success, but in fact, that's often the case.

Go broke. Rinse. Repeat.

In my first startup, I went completely bankrupt - twice - before turning the corner. What does that look like? It looks like me calling my landlord to say I can't pay the rent, laying off all my staff, pretending to clients that we were still viable, and avoiding my friends and family altogether. In a word — not awesome.

But each time I revised my plan, ran lean, and then slowly worked back up to a point where I could re-build the business using what I had learned last time, which often amounted to "Don't hire anyone until you're 100% sure you can afford them for the long term!"

At the time I thought I was the only person that had ever "gone broke and returned". But I'd come to learn later that many, many startups do this, we just don't realize we're the only ones.

Shut Down = Temporary Pause

Unlike a big, established business, startups are far more malleable when it comes to the status of our "operational condition". We often have the ability to chop things down considerably and run "lean" for a period of time while we figure stuff out. COVID forced the entire world to do this in 2020 and we often saw how many different ways entrepreneurs were able to deal with this condition.

Often we are swinging from funding event to funding event, and as nice as it would be us to top up the bank account long before that next cash infusion comes in - that rarely happens. What's more typical is that we wait too long to raise capital, run out of capital, and then run like mad to make up for that fact. In the interim — we basically shut down.

These "shutdowns" are typical, and the amount in some cases to a "temporary pause" until we get our shit together. What keeps the startup moving from one shutdown to another is typically a wildly resilient entrepreneur who just won't give up. I've been through shutdowns that worked well (my first story) and I've been through shutdowns that never made it past shutdown (how much time do you have?) and I can tell you, they feel nearly identical while you're in them.

Entrepreneurs and Startup Creators "Manage" Shutdowns

As Startup Creators, we need to be in a position to manage our shutdowns. Sometimes we're building plans to scale, and other times we're building plans to make it through a shutdown. This is all part of the job we signed up for. When it comes to managing a shutdown the most important thing is to think through how to rapidly de-scale a business so that it can be around long enough (in some form) to ever get past the shutdown.

Startup Creators are like vampires — we can get killed many times before our time is up. Also, many of us as just as pasty.

What's important is that we recognize shutdowns as part of the startup lifecycle and not a one-off event that "only happened to us." It's normal friends — treat the event like yet another insane thing we have to do to make our dreams come true.


StartupGuy

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