Communicating Your Startup’s Collapse


You gave your own business a shot, and failed. While that’s depressing, having an imploded startup (or three) on your resume is a badge of honor in tech hubs like Silicon Valley, where failure is okay so long as you earn some valuable experience and contacts from it.

In the immediate aftermath of your company’s demise, though, it’s important to take several steps to mitigate any damage and hard feelings among your customers, partners, and employees.

Give a Head’s Up (If Possible)

Earlier this month, hot startup Zirtual disappeared literally overnight, with an email at 1:34 A.M. PST that told employees all operations had ceased. “The reason we couldn’t give more notice was that up until the 11th hour, I did everything I could to raise more money and right the ship,” CEO Maren Kate Donovan wrote in a subsequent Medium posting.

Although Donovan managed to secure enough funding to resurrect her startup from the dead, the sudden collapse irritated clients and employees who’d assumed the company was doing fine right up until that email.

At such moments, the heads of failing startups face a particularly difficult conundrum: If they tell employees and customers that doom is imminent, everybody will flee, destroying any slim chance of a last-minute recovery. But not sharing any information is guaranteed to make the founder or CEO a lot of enemies—and damage his or her reputation—once things run their course.

The best solution is possibly something of a controlled descent: Announce that you’re closing shop, take care of employees’ final payouts, and lay out a schedule for service shutdown. Sure, people will still be angry—but maybe they’ll be less angry.

Final Word

You can’t leave the stage without a final word. Take a look at the lengthy apology letter (titled “Game Over”) that game developer Wim Wouters just posted on Kickstarter, after his small studio’s passion project, Woolfe, collapsed.

“I guess our public silence the last few months already said a lot,” that letter begins. “It is not out of disrespect that our communication dropped to almost zero… it is out of shame.”

While the head of the failed firm doesn’t need to provide an intensive blow-by-blow of what went wrong (for legal reasons, that might not even be possible), at least some kind of honest, forthright explanation is better than nothing.

Aside from the public missive, calling up investors and stakeholders for a conversation about what went wrong will (possibly) keep bridges intact and soothe over hurt feelings.

Make Plans for the Future

A failure is a great time to think ahead. If you’re in such a position, consider what you want to do next, and what lessons you can draw from your current situation. Failure hurts, but it’s not forever.