more-arw search

Q&A Forum

What are some key signs that you should walk away from a startup?

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

I am going to make the assumption that the company is not doing well.

Ask yourself three primary questions --

-Do you agree with the direction of the company? At times the founder will push in a direction that is just not marketable, because they are emotional.

-Do you feel the risk and reward is distributed fairly, relative to ownership? At times one individual seems to be the beneficiary of the cash flow.

-Are your opinions, recommendations respected, i.e. If you were to say good bye, would anyone care?

There are multiple examples of individuals that stay with a start-up with the hopes of turning it around, when the business is not viable.

May I suggest you set a deadline. If the direction is not where you believe it should be in six months, walk away.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

May I add, do you see "light at the end of the tunnel" such as:

- an exit strategy where you'll be compensated
- or a retirement fund of some kind
- a management change from seat of the pants and fire-fighting to pro-active and stable.

At some point in your life, that brass ring pipe dream needs to mix with reality...

And then it doesn't :)

Derek Quackenbush
Title: CFO
Company: Rising Data Solutions
(CFO, Rising Data Solutions) |

I could be wrong, but it seems to me one of the primary drivers for non-founders to join start-ups is the opportunity to, hopefully, have a great pay day resulting from stock options. If this is the case, then that should factor into the decision. How many shares are on the fully-diluted cap table? What's the liquidation preference of the preferred stock ahead of me (assuming the EE has options for common stock)? What are the exit multiples for a company like mine (revenue/EBITDA) and given the resulting valuation, and the answers to the questions above, is/will my stock be worth anything at the end of the day? And what is management's plan to exit?

If a primary driver is also the excitement of building something from scratch, then perhaps the financial questions above are not paramount. If this is the case, then I would ask myself--am I progressing along a career path (am I learning?), is my work stimulating, am I recognized for my accomplishments, is there some reasonable form of work/life balance, and, of course, is it meeting my financial needs?

Just my thoughts. Good luck!

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

Start ups can mean different things to different people and represent different stages on a life cycle, but here are my ten signs to look for as a hint that its time to walk away!

10 Have there been departures among the founder management team, or are there currently disputes and potential defections?

9 Do the current founders have a track record of success for a similar business?

8 Has the Company struggled unsuccesfully to raise investment?

7 Has the Company experienced a continuing failure to meet its corporate objectives on a timely basis, or at all?

6 Do you believe the current business plan is acheivable?

5 Do you see increasing competitive presence in your space?

4 Is the Company missing out on sales opportunities?

3 Is management being open about business prospects and honest and ethical in incurring debt from its vendors, including employees and consultants?

2 Has scarce cash been used wisely?

1 Are you the last one still there?

1880 views
Topics

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.