1. Run out of money The number one reason a company fails is it runs out of money. Many of the "acqua-hires" by Facebook and Google are teams who ran out of cash looking for a home. They did not sell their company as a talent buy. They literally just get hired in with standard employment packages. One common variant of this are the various seed companies that raise a $1 million seed round and hire up a 6-7 person team prior to getting to product market fit. The company burns through the cash in a year, and then tries to shop itself to Google, FB, etc. If the sale falls through, the company shuts down and the employees get hired individually by various companies. This scenario is most common on teams with a large number of business founders - e.g. if you have 3 business founders and 3 engineers, the engineers may leave early on with trouble and the residual value of the team is low or none which means the company does not get an exit at all and the founders disperse to look for jobs.
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4 Ways Startups Fail
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1. Run out of money The number one reason a company fails is it runs out of money. Many of the "acqua-hires" by Facebook and Google are teams who ran out of cash looking for a home. They did not sell their company as a talent buy. They literally just get hired in with standard employment packages. One common variant of this are the various seed companies that raise a $1 million seed round and hire up a 6-7 person team prior to getting to product market fit. The company burns through the cash in a year, and then tries to shop itself to Google, FB, etc. If the sale falls through, the company shuts down and the employees get hired individually by various companies. This scenario is most common on teams with a large number of business founders - e.g. if you have 3 business founders and 3 engineers, the engineers may leave early on with trouble and the residual value of the team is low or none which means the company does not get an exit at all and the founders disperse to look for jobs.