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What to do when things aren't working at your startup

I've been there.  You come in day after day, work long and hard hours pushing that rock up a hill, only to see it roll back down again overnight.  Traffic isn't moving.  Sales aren't closing.  Investors aren't biting.

The writing is on the wall.  This ship is going down, sinking ever so slowly--one day's payroll at a time.  There's still some cash in the bank, but not really enough to do much of anything.  What do you do?  Here are five tips.

1) Be honest.  You're not going to fool anyone, so don't go pitching to VCs trying to paint a rosey picture.  It's disingenuous.  Do you really think you're going to find the world's dumbest money at this point?  If you make the story that you have a good team and you want to raise for a dramatic pivot, that's fine, but the fact that you didn't spend money on advertising yet is not the reason why things look like they're going south.  You're going to need a strong network of people who believe in you to get another opportunity down the line--so don't make your last round of pitches a bridge burning exercise where you try to sell snake oil.  Just be upfront about your situation and what you're still attempting to do.

Be honest with your employees, too.  They can sense when things are going badly, and the last thing you need is people jumping ship at a critical moment.  That will start the human resources equivilant of a bank run.  One leaves, they all leave.  If you're transparent, formulate a plan, and you tell them the timeline of when things will either happen or they won't, they're more likely to sign up for the final push.  

Be honest with your investors.  Overcommunicate.  Let it be no surprise the day you write to them to say that you're now a tax writeoff.  

2) Try something crazy.  At this point, what do you have to lose?  Perhaps slow and steady sales aren't getting you anywhere.  What if you just gave the product away and got to scale quickly?  Maybe there's something else you could be monetizing.  What if you made your otherwise hard to get proprietary data searchable by everyone?  What could you do, productwise, that would make front page headlines and get customers, acquirers and partners interested in you?  Cross the streams, baby.  

3) Don't be afraid to raise the white flag early and in public.  A lot of times, when companies announce that they'll be shutting down, acquirers they didn't know would be interested start coming out of the woodwork.  Why not circle the vultures that much earlier, when you're not desperate, or *as* desperate.  Issue a press release that you're exploring options with acquirers to see who might be interested.

4) Keep competitors and partners close.  From the beginning of your company, you should understand the road maps of others in the space.  How?  By talking to them, often.  Understand who you would be a fit for and what you could do to be more or less attractive as an acquisition target.  Meet multiple people in each organization as well, so when rumors of your ultimate demise start circulating, more than one person at a company guides you in for a soft landing.  

5) Talk to a lawyer.  You have real legal responsibilities around notifications of employees as the money gets low--and there will be some wrap up legal work to be done.  Make sure you leave enough cash in the bank to actually close up shop and know what your requirements are to employees and investors.  

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