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


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
LinkedIn Profile
(President & CFO, |

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?


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