On Firing A Startup

This week, I had to take the difficult but necessary decision to dismiss a StartupYard startup from our program. I did not take this decision lightly, and if anything, it was overdue. What I want to accomplish in talking about this chapter in our blog, is to educate other startups in our community about what it is we do, how our program works, and what we look for when it comes to startups that we accept and work with.

What We Do

We have never dismissed a team from StartupYard before. Perhaps we’ve been lucky. Of course, as we’ve written about on this blog, and as any accelerated company or accelerator team knows, there are always moments of conflict and stress.

In fact, conflict in the constructive sense is really what we are all about. We challenge and push our startups to achieve in areas in which they are not comfortable. Our mentors and workshop leaders challenge the founders in our program to think more globally, to think critically about their decisions, and to grow personally and professionally.

A difficult requirement that we put on our startups is one that we discuss with them from the very beginning. “We own your schedule.” For 3 months, they work on our clock, and they make themselves available to mentors, workshops, advisors, and the StartupYard team during that time. Company founders and sometimes whole teams move into our workspace at Node5 in order to be available all the time.

In order to make this work, we encourage our startups to do a few things they aren’t always comfortable with at first. To delay some meetings, and to slow down or halt progress on non-critical development in their products, in order to give more time to the big picture, and to see things from a higher perspective.

This is not to say that the startups slow down work. Quite the opposite, they typically spend nights and weekends to continue developing, even during the program’s busiest times. There are periods in which our demands on their time are very light, particularly in the middle of the program, but nevertheless, the time commitment is large.

We feel, and experience has shown, that this period allows founders to switch from “builder mode” to “leader mode,” and prepares them to grow their teams, take a step back from their immediate needs, and see their work in a broader context. We have seen this experience deeply transform startups, and we think it works.

When That Doesn’t Work

In this case, early indications of pushback quickly became apparent. This startup, unlike most startups we accept, had majority shareholders who were not the founders. That had not been made clear in our initial meetings, and it proved to be a sticking point.

In addition, it quickly became clear that the founder who had applied and been accepted to our program did not have, as he had represented, a co-founder or near equal partner with whom he could share responsibility.

We don’t take single founders for a good reason. The demands of this program, and simultaneously running a company, are too much for one person to handle. While our founder teams often have a leading partner, they share the workload, and they are each empowered to represent their companies on their own. This allows them to do much more at StartupYard, and it allows them to maintain a better institutional knowledge and memory. Two founders can balance each other. One can become lost in the wilderness.

This founder was simply not present- whether due to the demands of his job, or his partners, or to lack of interest. He appeared only sporadically, and missed a large part of the program, including mentors, workshops, and other meetings. He sometimes sent representatives from his company to some of our program events, however, the purpose of most mentorship and workshops is to engage directly with a company founder.

So, for example, a marketing workshop, or a workshop on PR or UX, or a mentoring session with one of our 60+ active mentors, is meant for a founder, even if the founder also has team members who work in these specific areas. The team members may also benefit, but the founder benefits equally in understanding what it is that members of their team can do, and what measurement of success can be applied to that work.

It was apparent by the end of the first month, that this founder was simply not prepared or not able to engage with the program to the level that we expect and demand.

Bad Faith

StartupYard is ultimately a business, even if we try hard to make sure it’s a highly altruistic one. We depend upon the good faith of our startups, partners, mentors, and investors that we all have the same priorities.

Our priority is to help startups grow, and to help them do good work that is valuable to others, and profitable to themselves, to us, and our investors. We do well when our startups grow in value. Moreover, we feel that the price we ask for the value we provide, much less the money we invest, is not onerous.

As we have written before on this blog,  we are not about giving startups cash. The money is there so that they have time to work with us, and to grow with our help. If a startup’s first concern is the eventual cash value of our stake in their company, then our priorities are not in sync.

In the end, despite a series of promises and deadlines broken, and unending complications that seemed to arise from nowhere, it became clear that this startup, its investors, and its founder had no intention of acting in good faith with the terms they had agreed to upon being accepted to the program.

In addition, the founder also failed to meet every milestone that was set for him in the program, neglecting every deadline for user projections, business and investment plans, and other reporting. We heard only excuses and explanations, but never saw any results.

When a startup enters our program, we are making a statement that we believe in its potential to be an engine for growth, and its team’s ability to execute on a dynamic, exciting vision. Our seal of approval means something, and has been a boon to the many startups that have gained investment, or been acquired following our program.

At the same time, if a startup team or its investors act in bad faith with our arrangement, we have a duty to share that experience with our investors and partners, which we have done in this case. Our ability to provide the value that we do depends on our reputation being linked with companies that act in good faith, and are aligned with our vision.

Our Mistakes

These things happen. I believe that we can learn from this experience.

First of all, I feel that we were too focused on the profit potential this company showed. We saw that they were attractive to investors, and that they had already gained some investment, and this fact blinded us to concerns that were raised even during the selection process. We didn’t examine closely enough whether this company and its founder should be in our program, or would be able to engage with it fully.

So in a sense, we lost sight of our mission in this case, and the result should have been predictable.

In retrospect, it’s obvious now that this founder was unclear about the nature of our program, and was never willing or able to commit to it in a way that we required. He had too many other responsibilities. His company already had too many moving parts to allow him to step back and change direction. Too much money had already been spent. In short, there was no helping him, because he had already been locked into most of his decisions before the program started.

Because we liked (and still like) the product and business idea, we overlooked these issues, and tried to sweep them under the rug. That put us in a poor position, because we were expecting results and engagement that, again in hindsight, were probably not reasonable to expect.

We have seen this sort of thing happen in the past, and thankfully more than one company has decided not to join because of the expectations we have. Not joining an accelerator can be an enlightened decision, if a founder feels that he can’t effectively implement the feedback he or she gets from the program.

Fail in Order to Succeed

So in sum I don’t view this is a dark chapter or a catastrophe. It is a failure, and we are experts at learning from our failures. But it is a failure that will not cost us much, and will benefit us hugely in the future, as we work towards becoming better at identifying the companies and founders that can benefit most from our support.

Lastly, with no ill-will, we wish this company and founder the absolute best, and we look forward to their future success. Growing pains and mistakes are a part of this business, and a necessary part. Our hope is that we all learned something from this.