- It is difficult to shut down a company because it requires an active decision.
- When a company is not growing and the founder doesn't know what to do, it can enter a zombie mode.
- To decide whether to shut down, consider if the business is growing and if there are ideas to make it grow again.
- If there are ideas, consider if the growth can be achieved profitably.
- Also consider if the new direction aligns with what you want to work on and if you want to continue working with your co-founders.
- It is okay to shut down a company, but consider the stakeholders, such as users, investors, friends and family, and employees.
- Communicate openly and honestly with stakeholders about the decision to shut down and help employees find new opportunities.
- Ultimately, you will be judged on how you treated your stakeholders and how honestly you made the decision.

YC Partner and Tutorspree cofounder Aaron Harris on when to shut down a startup.

https://twitter.com/harris

Read Aaron's post On Shutting Down here: https://blog.ycombinator.com/shutting-down/

Well, it's actually really hard to shut down because it takes an active decision.

Something we see a lot is companies that things are going okay, but nobody's really excited about it.

And the founder doesn't really know what to do, doesn't want to pull the plug, and that's when something goes to zombie mode.

A zombie startup, it doesn't look like anything's happening and people get bored and sad and it just can go and go and go forever.

So let's say you think you might be in this zone of shutting down.

The way that I would suggest you think about it is you look at whether or not the business is growing.

If the business isn't growing at all, you have to ask yourself the question of whether or not you have any ideas on how to make it grow again.

Remember that startups are in a large part defined by growth.

That is kind of what makes a startup a startup.

Right, if a startup isn't growing quickly, it might be a good business, but it's not a startup.

If you're out of ideas on how to grow the business, well, that's a pretty good sign that you should shut it down or at least move on.

Now, if you find an idea and say, hey, this is an idea that can drive growth, we think it's going to work, well, then you have to ask yourself the question of whether or not you can drive that growth profitably.

Now, the reason I say profitably in this case is because companies that are approaching this decision point usually don't have a pile of money that they can spend on growth.

So you have to be able to do this under your own power, at least for a little while.

Now let's say those 2 conditions are met.

Well, will that growth, will the thing that you're building to drive that growth actually be something that you want to work on?

Now this might seem strange, but often in going for growth and pushing a new idea, founders change the nature of their businesses.

You want to call it pivot, swivel, something, whatever, a change in direction.

You have to be sure that you want to work on the thing that you're working on.

And then finally, you have to be sure that you want to work with the people that you're working with.

And this is a really tough decision because you start out working on an idea with people that maybe they're your best friends, maybe you think you're perfect fits, but after years of working together, you might decide you don't want to anymore.

People think, oh, I have to stick with this person that I started with.

Now let's say you go through all these decisions and you realize, you know what?

We don't have ideas or we can't drive them profitably or we don't wanna work on that or I don't want to work with my co-founders.

But you do have to think about something else, which is the stakeholders in your business.

And it's not just you or your co-founders.

If you're lucky enough to have users you have to think about how to message to them that you're shutting down and don't worry They won't be that upset as long as you tell them the thing you shouldn't do is just turn the servers off 1 day around 3 p.m.

And hope they fend for themselves tell them what's going on You might have investors Don't worry about them either if they're professional investors they probably expected to lose their money.

Now if they're friends and family, you do have a more difficult conversation to have.

You should have it openly and you should have it honestly.

And you should tell them what went on and make it clear that you did everything you could to build a business to make their investment a good 1 but it just didn't work out.

And then there's the most important thing, which is your employees.

If you're lucky enough to have hired people who are still working for you, you owe it to them to tell them what's going on as soon as you can, as soon as it's reasonable, and help them figure out what comes next.

Usually in a shutdown or the end of a company, the founders are best positioned to find a new job or Start a new company or find something.

Your employees usually aren't that lucky Now if they're great engineers, maybe they won't have such a hard time But it's still hard to lose a job.

It's hard to get fired It's hard to have a company shut down So make sure you approach that with empathy and make sure you help everyone.

At the end of the day, the only thing you're gonna get judged on when you shut the company down is how you treated all of your stakeholders and how honestly you made that decision.

So make it well, but you gotta remember that you have just 1 life and you don't wanna spend it doing something because you told people you're going to do it.

You should be doing things because you think they're going to make a difference and because you


Speaker 0: All right, so let's think about this. When to shut down. Well, it's actually really hard to shut down because it takes an active decision. Something we see a lot is companies that things are going okay, but nobody's really excited about it. It's not growing, but it's not dying.

And the founder doesn't really know what to do, doesn't want to pull the plug, and that's when something goes to zombie mode. Now zombie mode is dangerous. A zombie startup, it doesn't look like anything's happening and people get bored and sad and it just can go and go and go forever. You don't want to end up there. So let's say you think you might be in this zone of shutting down.

How do you make that decision? The way that I would suggest you think about it is you look at whether or not the business is growing. If the business isn't growing at all, you have to ask yourself the question of whether or not you have any ideas on how to make it grow again. Remember that startups are in a large part defined by growth. That is kind of what makes a startup a startup.

Right, if a startup isn't growing quickly, it might be a good business, but it's not a startup. It's not something that's going whoop. If you're out of ideas on how to grow the business, well, that's a pretty good sign that you should shut it down or at least move on. Now, if you find an idea and say, hey, this is an idea that can drive growth, we think it's going to work, well, then you have to ask yourself the question of whether or not you can drive that growth profitably. Now, the reason I say profitably in this case is because companies that are approaching this decision point usually don't have a pile of money that they can spend on growth.

So you have to be able to do this under your own power, at least for a little while. Now let's say those 2 conditions are met. Well, will that growth, will the thing that you're building to drive that growth actually be something that you want to work on? Now this might seem strange, but often in going for growth and pushing a new idea, founders change the nature of their businesses. You want to call it pivot, swivel, something, whatever, a change in direction.

You have to be sure that you want to work on the thing that you're working on. And then finally, you have to be sure that you want to work with the people that you're working with. And this is a really tough decision because you start out working on an idea with people that maybe they're your best friends, maybe you think you're perfect fits, but after years of working together, you might decide you don't want to anymore. And that's okay. People get confused by this.

People think, oh, I have to stick with this person that I started with. I have to stick with the thing forever. And it's just not true. Now let's say you go through all these decisions and you realize, you know what? We don't have ideas or we can't drive them profitably or we don't wanna work on that or I don't want to work with my co-founders.

It's okay, right? It's okay to shut the company down. It's okay to quit. But you do have to think about something else, which is the stakeholders in your business. And it's not just you or your co-founders.

If you're lucky enough to have users you have to think about how to message to them that you're shutting down and don't worry They won't be that upset as long as you tell them the thing you shouldn't do is just turn the servers off 1 day around 3 p.m. And hope they fend for themselves tell them what's going on You might have investors Don't worry about them either if they're professional investors they probably expected to lose their money. Now if they're friends and family, you do have a more difficult conversation to have. You should have it openly and you should have it honestly. And you should tell them what went on and make it clear that you did everything you could to build a business to make their investment a good 1 but it just didn't work out.

And then there's the most important thing, which is your employees. If you're lucky enough to have hired people who are still working for you, you owe it to them to tell them what's going on as soon as you can, as soon as it's reasonable, and help them figure out what comes next. Usually in a shutdown or the end of a company, the founders are best positioned to find a new job or Start a new company or find something. They've been visible. They've raised money.

Whatever it is. Your employees usually aren't that lucky Now if they're great engineers, maybe they won't have such a hard time But it's still hard to lose a job. It's hard to get fired It's hard to have a company shut down So make sure you approach that with empathy and make sure you help everyone. At the end of the day, the only thing you're gonna get judged on when you shut the company down is how you treated all of your stakeholders and how honestly you made that decision. So make it well, but you gotta remember that you have just 1 life and you don't wanna spend it doing something because you told people you're going to do it.

You should be doing things because you think they're going to make a difference and because you

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When to Shut Down a Startup - Aaron Harris