Struggling 8yr Old Startup on the Edge.

I started and bootstrapped my second tech startup 8 years ago. We saw constant growth and reached just under 2M in sales until 2012 when we were hit by some challenges out of our control, including a bogus patent troll suit (which was eventually dismissed). Being bootstrapped, we just didn't have too much of a safety net in place to deal with these issues. While I have been able to hold things together from then to now, it has been more 'survival mode' than anything else. I have tried a LOT of things, but it's all been on the cheap. Advisors have told me to cut back which I have. Since then it has been a constant struggle and sales have been heading downward. I am pretty much alone as I have no investors. While I still think our company has a lot of potential, I have not yet been able to make a rebound happen. Our direct competitors are funded companies, and it's tough to go up against them without any funding and in a defensive position. The investor types I talk to have always communicated that we make too much for an angel and not enough for a VC. I have cut back pretty much all I can (we have always been pretty lean anyway). I have what I think are some great and innovative ideas, but I don't feel I have the time and funding to make them happen. On my own, I am feeling less and less we will be able to bounce back. I have no idea what I will do if I have to shut things down. I have literally poured my life into my business to keep it going, so stakes are incredibly high for me and my family. I want to be pro-active and make sure I have things in order so that if it gets to the point where it needs to be shut down, I am not scrambling to find a plan B. Additionally, I am not even sure how to shut down a business of this magnitude with many nuts and bolts. Does it have to go bankrupt? Do you just shut down the website? Has anyone else gone through something similar?


First, this is a tough spot you’re in. By making it this long you’ve already accomplished something most people never do.

My own company was bootstrapped and we’re in our 16th year now. We’re still employee-owned and have no outside investors. Looking back, there have been trade-offs to doing things the way we have but a major benefit is the very high degree of flexibility in how we do things.

As I’ve been thinking about your problem, the biggest question for me is what changed between 2012 when you were doing well and now? It sounds like you’ve dealt with the patent troll, so what else changed? Do you have new expenses you didn’t have before? Did your product become stale while you were distracted? Did a market shift disrupt your business model? Are you different yourself?

To reboot the business and keep it running, you may have to rethink your whole product and cut out parts that feel critical to you today. You said you have some well-funded competitors so you need to focus all of your energy on whatever your company can do that is better than everybody else, and make it the best it can be. Focus on whatever generates the most cash for you (vs revenue). If there is part of your business that’s bringing in revenue but not cash flow, kill it or raise prices. Cash flow is everything when you’re bootstrapped.

If you are only having a short-term cash crunch but are otherwise cash flow positive, then a business loan or debt of some sort could be an option. Giving up equity isn’t the only way to bring more working capital into a business. It’s much easier to get someone to give you money when you don’t need it, though.

In general you don’t have to go the bankruptcy route unless you owe people money you will not be able to pay back. If you just can’t afford to keep your own lights on but don’t owe anyone else money, there’s nothing to do but just shut the lights off.

With more details, I might have more specific ideas.

Answered 10 years ago

Not knowing *many* of the factors that has lead you to this point, I can only offer some generalities.

General Tip #1: $0 Budget
Start your operating budget at $0 and only add what you *absolutely* need

General Tip #2: MVP
Create your minimal viable product; ship something, even if it isn't perfect, and start building your customer base. It is much better to ship something and improve over never shipping and drowning.

General Tip #3: Stop Comparing
You say that your competition is well funded and you have to be on the defense. Stop comparing and start solving problems for people. You may be similar, they may have more money, but you are uniquely created with a certain set of biases, preferences, communication styles, and insights that they do not have. Capitalize on this and solve a problem for your ideal customer. They don't care who has a bigger marketing budget.

General Tip #4: Pick a Target
You talk about focusing on growth AND on having a plan to shut the business down. Pick one. You will never be able to focus on just one when you are thinking about two of them. Just like you cannot hit two targets with one arrow.

I'm happy to help further, if you're interested.

Answered 10 years ago

I'm sorry to hear that. I completely understand what it's like to pour your heart and soul into a business for many years, because I've done it several times. Some were successful in some were not.

Here's what I recommend:
1) You may have already done this, but if not deeply analyze if there is some sort of pivot you can do to increase sales without having to take investor money. This recent Entrepreneur magazine article talked about how I did this with a site that was on the rocks:

2) See if you can bring on a cofounder type partner,who has specialized knowledge in the crucial areas that you lack that are holding sales from growing. In exchange for a significant amount of equity, they can pour a bunch of new energy and enthusiasm into the company, which might be the thing you need right now after 8 years.

3) if that doesn't work: every business has competitors.The assets your company has are usually significantly more valuable to a competitor,then if you were to attempt to sell them to a new entrant to the market. For example, you probably have a significantly sized customer email list, that a competitor would be interested in purchasing. You may control certain parts of the market that a competitor does not, which would make it desirable to them. If you haven't done so already, I would recommend contacting the other CEOs in your industry and finding out what their situations and needs are.

4) if that doesn't work, then you would look at what pieces of the company you could sell to others that might still have value, before shutting it down.

I hope this helps.

Answered 10 years ago


Firstly, bravo for having the courage to post such an honest question. Only a true entrepreneur would be able to dig deep to find the courage to be so honest, particularly when the perception (and expectations) of entrepreneurs is to always "Put on a positive face and say everything is going great!"

1) You had $2M in annual revenue at some point, so you did *something* right and found a measure of p/m fit. This means there is a great chance you can recover this. But it might mean ripping your product and whole business functions apart and rebuilding just the best bits and the parts most relevant for today. Prepare for potential layoffs and new hires, as the business may look very different.

2) While the patent-troll issue sucks, I'm assuming there have been no permanent damages to the product or market-shifts that have affected you. So it could even just be a cashflow-gap that needs to be plugged with a bit of debt-financing

3) I've yet to discover a company making sales that isn't attractive to at least 1 investor. Every investor has different portfolio goals, personal goals and personal interests, flaws, strengths and traits. While the terms may not be super favourable because of your exposed position, there will be investment options if you can repackage and re-position the company correctly

4) Emotionally, I strongly recommend you find a few really close entrepreneur connections you can rely on for emotional support. Founders have *very* few people we can be emotionally open with, and it's important you find some people now so that they can be a part of creating the solid, rock hard foundation that you will need for the journey in front of you.

5) Winding down companies is easy (technically). The emotional problems are the hardest. Be sure to have a personal plan B in place (house payments, family maintenance). To start you off, know that entrepreneurs who have taken a journey such as yourself will *always* be in high demand for bigger startups willing to pay fat salaries. Just be sure you have the personal cash to survive for a few months while you find that job (and get your personal expenses in order NOW in case that happens.)

6) I'd love to do a call with you to see if I can offer any perspective about the current business. Message me and I'd be happy to help out ("on the cheap")

Answered 10 years ago

If you look at history, the great problems of the world took decades to solve. Unlike a lot of fast-growth stories, often you have to be in it for the long haul.

So the key question is: do you want to give it your all to make this happen?

If so, then you know what to do: pivot, pivot, pivot, until you find the market fit, keep talking to everyone who might buy. Continually test whether there is a need for your product. Treat your pipeline as sacred. Get a cofounder. And listen to your gut.

Answered 10 years ago

Based on your position it doesn't sound like you are confident in your companies ability to utilize it's competitive advantage to take market share from the funded companies you seem to be up against. If I were in your shoes I would be proactively considering all of my options and digging deep as to what they really require. If you want to continue you need at least enough funding to be able to properly market and sell your established product to take market share. You could "shut down" as you mention, but with the IP you have probably already developed, why not contact some of your more admired competitors and ask if they are interested in buyout including taking you on in a role that they feel could add equitable value to their positions?

I would be happy to do a free call to understand your specific product/service and position better to dice it up a bit more. Winding down the company would be a nightmare, I'd avoid that if at all possible.

Answered 10 years ago

Your company has reached Aha moment, and there is no turning back now. You must fight it out and fight hard. There are so many companies that undergo this moment and only a few among hundreds and thousand get over it. So here are certain tips that would help you bring your company back from the edge.
1. Start with your vision: Your vision sets the direction for where your business is headed. It also determines whether your business will thrive or fail. Take time early on to polish your vision, analyse your strengths and weaknesses, define the marketplace. These key pieces of your vision will provide a true north for the rest of your strategy.
2. Go goal-first: If you are not a natural goal-setter, you can become one. Define a few short-term goals that align with your strategy, and then create the steps needed to achieve them. Goals give your daily work purpose. There is so much to get done in start-ups that you will forget why you are working on specific tasks. Having a goal-first approach helps align your small, daily actions with the reason why you built your start-up in the first place.
3. Solve one problem: Start-ups often feel like they are flying blind; there is much to get done in extraordinarily little time. But trying to multi-task by solving all problems at once is guaranteed to lead you off course. Instead, identify the one problem you want to solve for customers and align all of your actions towards achieving that goal. You will quickly find that when you focus all your efforts on solving one problem, additional problems will present themselves.
4. Be responsive: At Aha! we are interruption-driven and respond to requests with urgency. We do this because answering people while requests are still fresh aligns with our most deeply held values. Our customers know they can count on us to offer crucial guidance.
5. Spend wisely: Many start-ups waste too much money on the wrong things. If you are running out of cash — or have yet to receive any — you must make some tough decisions. These choices might be painful now but will likely be best in the long run. Be stingy with your budget early on. Spend money only when you absolutely must, and prioritize what will create the most value for the business.
6. Treasure your time: Time is your most precious resource. And there are many ways you can spend your time as a founder. By far the best way you can spend it when your business is in trouble is refining your strategy and goals. Time and experience have taught that this approach wins in the long run. Clear your schedule so you can focus your time, attention, and energy on what matters most. Once you develop a clear vision for your business, you will see the opportunities and challenges ahead. This will help you breathe easier. You might even beat those stiff odds and become a start-up success story.
Besides if you do have any questions give me a call:

Answered 3 years ago

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