Ask HN: Early signs that a company is failing?
100 comments
Pretty much.
#10 struck me. I'm doing work for one guy that seems somewhat litigious and I'm afraid it might bring the startup down. There's no such thing as a solid contract with a bad person.
I'm very familiar with #8. I worked for a company that was being super picky with its term sheets when looking for investment, but then suddenly the credit crunch happened and all our term sheets were withdrawn. Problem was, we were spending as if we'd already had an extra $15m in the bank, so we had to start cutting back.
I'd had a habit of coming in around 10 AM and staying most of the day and part of the late afternoon/evening; typical startup kind of 'go get lunch then come back and crank out some code' behaviour, while most of the rest of the dev team came in between 11 and 1. This includes one of our best developers, who, without downtime, ported an entire product from PHP to Rails on his own time over the weekend because the code was unmanageable and he wanted to be able to iterate faster.
Suddenly, after most of the most senior (and most expensive) people have left, the CEO decides that everyone needs to be in the office at 9 AM, you know, so we can communicate. Sure, okay. So people start coming in at 9 AM. They're tired, they haven't had breakfast, they only got 5 hours of sleep, but boss wants people filling seats so we fill them. I start getting phone calls at 9:03 if my bus is running late, because my buffer time was usually taken up by being in such a rush that I forgot my wallet.
So every day, everyone's tired, everyone's frustrated, and everyone's leaving after they've put their 8 hours in. My start date, when my options were priced, was the highest price the shares had ever traded at. But I was still one of the most well-paid engineers so I stayed until I got 'downsized' and took a month off.
Last I heard, the CEO was getting sued by the board for treating that company as a source of resources for his other company (like flights back to his other company's office, or my tech support to get his people up and running).
I'd had a habit of coming in around 10 AM and staying most of the day and part of the late afternoon/evening; typical startup kind of 'go get lunch then come back and crank out some code' behaviour, while most of the rest of the dev team came in between 11 and 1. This includes one of our best developers, who, without downtime, ported an entire product from PHP to Rails on his own time over the weekend because the code was unmanageable and he wanted to be able to iterate faster.
Suddenly, after most of the most senior (and most expensive) people have left, the CEO decides that everyone needs to be in the office at 9 AM, you know, so we can communicate. Sure, okay. So people start coming in at 9 AM. They're tired, they haven't had breakfast, they only got 5 hours of sleep, but boss wants people filling seats so we fill them. I start getting phone calls at 9:03 if my bus is running late, because my buffer time was usually taken up by being in such a rush that I forgot my wallet.
So every day, everyone's tired, everyone's frustrated, and everyone's leaving after they've put their 8 hours in. My start date, when my options were priced, was the highest price the shares had ever traded at. But I was still one of the most well-paid engineers so I stayed until I got 'downsized' and took a month off.
Last I heard, the CEO was getting sued by the board for treating that company as a source of resources for his other company (like flights back to his other company's office, or my tech support to get his people up and running).
All great points. In my experience I have seen revenue losses followed by products/solutions which do map to the main objective of the company but in reality is scraping the bottom of the barrel. Example having billing of $1 million MRR but then releasing products with $15-20k MRR. So essentially the management is out of ideas on how to make up the revenue losses.
I'm the CEO of a 20-person startup and we've been on the brink of failure twice. Both times, our employees were never aware of it from the symptoms other people might expect (e.g., late payroll, some senior folks leaving); in fact, during such times we paid everyone ON TIME so that we wouldn't be on the hook later if things went to hell.
I would flip the question back to you: (1) Do you trust your CEO? (2) If you DO trust the CEO, then the only time your startup is failing is when the CEO tells you they're close to failure, running out of money.
If you DON'T trust your CEO, then your startup is also failing and #2 doesn't apply.
That's how I would think about it.
I think every startup employee has the right to ask me about runway, cash on hand, etc. I would be open with that info and have shared these metrics in the past with them.
I say this because we (a) hire MBAs, (b) hire less qualified developers for roles that do not require deep technical knowledge, (c) have motivational posters, etc... And as we grow, become profitable, and scale to 50+ people, we require these things simply to survive and thrive.
How could someone mistake that for a startup on the brink of failure is beyond me, but that's what some people seem to be writing in these comments.
I would flip the question back to you: (1) Do you trust your CEO? (2) If you DO trust the CEO, then the only time your startup is failing is when the CEO tells you they're close to failure, running out of money.
If you DON'T trust your CEO, then your startup is also failing and #2 doesn't apply.
That's how I would think about it.
I think every startup employee has the right to ask me about runway, cash on hand, etc. I would be open with that info and have shared these metrics in the past with them.
I say this because we (a) hire MBAs, (b) hire less qualified developers for roles that do not require deep technical knowledge, (c) have motivational posters, etc... And as we grow, become profitable, and scale to 50+ people, we require these things simply to survive and thrive.
How could someone mistake that for a startup on the brink of failure is beyond me, but that's what some people seem to be writing in these comments.
> (b) hire less qualified developers for roles that do not require deep technical knowledge
Therefore making them perfectly qualified for the job you are giving them?
Therefore making them perfectly qualified for the job you are giving them?
Which is also one of the ways paul graham according to his faq, suggests one learn to program. Win win.
Yes. I find it amazing that people running startups apparently have a problem with this concept. How else are junior developers supposed to gain experience and be exposed to hard technical problems, get the benefit of mentorship, etc?
There is nothing wrong at all with less experienced devs working for a startup. It is one of the components for building a successful company. As your junior employees grow, they move into roles of greater responsibility.
There is nothing wrong at all with less experienced devs working for a startup. It is one of the components for building a successful company. As your junior employees grow, they move into roles of greater responsibility.
I always see startups looking for experienced people as a company started by a couple of non-programmers, desperately seeking someone to make their products for them. It sounds like they'll be worked to death and expected to work long hours while the founder makes fluffy posts on hackernews :P
Seems accurate, though I think his point is that the overall team quality is decreasing instead of increasing. On the flipside, keeping a strong team probably means the team is always much smaller than it could be at any given stage. IMO this is well worth it and I strongly prefer a tiny team. But it could potentially decrease a valuation where company size/number of employees (especially engineers) is taken into account.
It also depends a lot on the company's strategy. If you are building a complex product then a small, highly qualified team makes sense. If your product is basic and requires a lot of customer success, you might want to hire junior devs or non-devs to do basic work (thus growing your team, but saving the senior dev time for more complex tasks).
Also, growing your own senior devs is something responsible companies do.
haha, good point! But I'm not sure if that's how other people would see it, but touche. :)
This is a great answer. Trust is intangible, so maybe it's easy to overlook or forget.
Some of the other signals could just as easily reflect management's reading habits. It doesn't mean the other comments are wrong, but if you are looking for "early signals," be honest with yourself and hone your trust-dar.
Some of the other signals could just as easily reflect management's reading habits. It doesn't mean the other comments are wrong, but if you are looking for "early signals," be honest with yourself and hone your trust-dar.
> If you DON'T trust your CEO, then your startup is also failing
Yes!
Yes!
>I say this because we (a) hire MBAs, (b) hire less qualified developers for roles that do not require deep technical knowledge, (c) have motivational posters, etc...
I can't say this inspires very much confidence. Why does hiring MBAs mean you are successful? What exactly do they do to make you successful? On developers, if they have the knowledge for the job then they are qualified, not less qualified. This terminology is very worrisome. And motivational posters? That was a joke I guess?
And what does any of this have to do with being on the brink of failure or not? You can have a perfect team and still fail because of a bad product direction or market fit.
I can't say this inspires very much confidence. Why does hiring MBAs mean you are successful? What exactly do they do to make you successful? On developers, if they have the knowledge for the job then they are qualified, not less qualified. This terminology is very worrisome. And motivational posters? That was a joke I guess?
And what does any of this have to do with being on the brink of failure or not? You can have a perfect team and still fail because of a bad product direction or market fit.
GP doesn't mean that those are signs of success; they mean just that those three things aren't signs the company is failing like some of the other comments suggest.
[deleted]
> If you DO trust the CEO, then the only time your startup is failing is when the CEO tells you they're close to failure, running out of money.
The question is not really "how to know your startup is failing right now." I think it's pretty obvious when a startup is already failing.
The question is, instead, what the signs are that a startup is on the "wrong track" and will inevitably begin failing six months to a year down the line.
I've worked at several companies that were already in the "inevitably going to fail" category before I was even hired—retroactively, looking at when they took on the qualities that ended up killing them, they had those qualities for my entire tenure there (though they didn't previously had them; frequently I was hired as the replacement for the key cofounder whose departure, according to others there, signalled the beginning of the end.)
So, I don't want to know whether my startup is failing. I want to know whether a potential employer is failing, so I can avoid riding yet another startup into the ground and suffering through the inevitable cash-crunch and lay-offs. What are the warning signs, visible from the outside, that a startup is headed that way?
The question is not really "how to know your startup is failing right now." I think it's pretty obvious when a startup is already failing.
The question is, instead, what the signs are that a startup is on the "wrong track" and will inevitably begin failing six months to a year down the line.
I've worked at several companies that were already in the "inevitably going to fail" category before I was even hired—retroactively, looking at when they took on the qualities that ended up killing them, they had those qualities for my entire tenure there (though they didn't previously had them; frequently I was hired as the replacement for the key cofounder whose departure, according to others there, signalled the beginning of the end.)
So, I don't want to know whether my startup is failing. I want to know whether a potential employer is failing, so I can avoid riding yet another startup into the ground and suffering through the inevitable cash-crunch and lay-offs. What are the warning signs, visible from the outside, that a startup is headed that way?
* Gut feel. This doesn't say much, but sometimes that is a good heuristic. It isn't one thing, but you'll just get a feeling.
* Custemers are not signing up and not paying. The most obvious one. But this can be hard to find. But say if you are used to add features or fix bugs customers find, and then all of the sudden nothing. It could mean product is in good shape, or nobody is using it.
* Senior people leaving. Especially developers whose judgement you trust.
* Drastic changes to the product. "Wait, why are we pivoting?" Corrolary: quite often the pivot fails. It is always in the news if it succeeds. but that is only because it is exceptional.
* No bonuses, and salaries have not been going up. If you somehow find out that nobody's salary went up and nobody got a bonus (this is hard often, companies don't want you to discuss those things).
* Maybe a sharp increase in team-building activities. Taking everyone for lazer tag is cheaper than increasing salaries. But it presents this image of "everything is fine". I have seen that -- a few senior people left. All of the sudden a sudden surge of minigolf, bbq, ski trips and other to mask away the issues. But then again, this can be a sign that the team is doing so well and are being rewarded. I guess this is more of a gut feel and depends on the large context (so it is a secondary sign).
* Owners start avoiding meetings and questions. Because they know they might have to lie. It is up to you, but you can try to ask directly. Then you sort of force their hand. That could backfire. You are now "not a team player" and not a "culture fit" so beware.
* Custemers are not signing up and not paying. The most obvious one. But this can be hard to find. But say if you are used to add features or fix bugs customers find, and then all of the sudden nothing. It could mean product is in good shape, or nobody is using it.
* Senior people leaving. Especially developers whose judgement you trust.
* Drastic changes to the product. "Wait, why are we pivoting?" Corrolary: quite often the pivot fails. It is always in the news if it succeeds. but that is only because it is exceptional.
* No bonuses, and salaries have not been going up. If you somehow find out that nobody's salary went up and nobody got a bonus (this is hard often, companies don't want you to discuss those things).
* Maybe a sharp increase in team-building activities. Taking everyone for lazer tag is cheaper than increasing salaries. But it presents this image of "everything is fine". I have seen that -- a few senior people left. All of the sudden a sudden surge of minigolf, bbq, ski trips and other to mask away the issues. But then again, this can be a sign that the team is doing so well and are being rewarded. I guess this is more of a gut feel and depends on the large context (so it is a secondary sign).
* Owners start avoiding meetings and questions. Because they know they might have to lie. It is up to you, but you can try to ask directly. Then you sort of force their hand. That could backfire. You are now "not a team player" and not a "culture fit" so beware.
You've clearly been there.
Your last two points are huge.
> Maybe a sharp increase in team-building activities. Taking everyone for lazer tag is cheaper than increasing salaries.
That can also be a sign that the founders hate each other and are about to split the operation - one of them is treating the employees as children in the hope that they go with a favourite parent's splinter company. They are probably doing it subconsciously.
That can also be a sign that the founders hate each other and are about to split the operation - one of them is treating the employees as children in the hope that they go with a favourite parent's splinter company. They are probably doing it subconsciously.
LOL this reminds me of the place I interned at. After my internship ended they seemed to have a huge split. Except the only company event we did was go to see a movie. It was still cool.
The skilled, senior developers leave.
Money problems (Travel cancelled, Free food/drinks stopped)
Drastically shorter deadlines.
They start hiring programmers who cannot code (Literally cannot fizzbuzz)
Rapid flip-flopping on projects couples with constant firefighting.
Starting to Micromanage developer time in intervals less than 1 day - (exactly 3 hours on X, exactly 2 hours on Y, exactly 3.5 hours on Z)
Money problems (Travel cancelled, Free food/drinks stopped)
Drastically shorter deadlines.
They start hiring programmers who cannot code (Literally cannot fizzbuzz)
Rapid flip-flopping on projects couples with constant firefighting.
Starting to Micromanage developer time in intervals less than 1 day - (exactly 3 hours on X, exactly 2 hours on Y, exactly 3.5 hours on Z)
Nailed it. This is exactly what happened at the startup I was working for. I saw the writing on the wall and left, along with 2 other senior developers. Replaced by a set of fast-hire "interns"* that couldn't code. Then management started flip-flopping between a bunch of different projects with severe micromanaging: standups twice a day, constant focus on Jira metrics. Deadlines became very tight under monetization pressure from investors. Ultimately, the grand "2.0" version of the app that was going to save the company never launched, the series B was not raised, and the company fell apart.
*I say "interns" because they were actually full-time hires at 1/4 the price of developers.
*I say "interns" because they were actually full-time hires at 1/4 the price of developers.
> Replaced by a set of fast-hire "interns"*
Yes! Saw that happen. Senior people leave, management thinks, no worries, with their salary we can pay for 6 interns. We don't need those traitors / haters anyway. Next thing there are 6 interns there.
Not that interns are bad, they are great, I enjoyed mentoring and getting help from many during the years. It is when they are brought in to replace a senior devs that things might be getting a little weird.
Yes! Saw that happen. Senior people leave, management thinks, no worries, with their salary we can pay for 6 interns. We don't need those traitors / haters anyway. Next thing there are 6 interns there.
Not that interns are bad, they are great, I enjoyed mentoring and getting help from many during the years. It is when they are brought in to replace a senior devs that things might be getting a little weird.
One caveat is where I work we found the hiring pool to be an issue.
Senior Devs were usually only by title, and graduate Devs are much more plentiful, we slowly chopped out three seniors and replaced each with competent grad hires.
Turned out to be a much improved situation for everyone.
I can see how replaced ng good senior Devs with inadequate interns would be a bad sign though.
Senior Devs were usually only by title, and graduate Devs are much more plentiful, we slowly chopped out three seniors and replaced each with competent grad hires.
Turned out to be a much improved situation for everyone.
I can see how replaced ng good senior Devs with inadequate interns would be a bad sign though.
Sometimes a senior developer will leave and it's not an indicator at all. EG: the founding CTO was more of a coder than a manager and as the company grows you need a CTO who is more manager than coder - that is a tough bump. If the exit is clean/healthy with transition period and no hints of animosity then that's just normal events as a company grows and demonstrates resilience - yet still not comfortable.
Bluntly: the CTO who takes you from $0 => $5M may not be the one who takes you from $5 => $50.
Replace CTO with any other senior position.
However if multiple senior people are leaving with short notice then you should ask them where they are going.
Last three points above are 100%
Bluntly: the CTO who takes you from $0 => $5M may not be the one who takes you from $5 => $50.
Replace CTO with any other senior position.
However if multiple senior people are leaving with short notice then you should ask them where they are going.
Last three points above are 100%
To me the tightening of deadlines and rapid starting and abandoning of projects are a sign that things aren't going well.
Lots of secret meetings, CEO more stressed and distracted than usual, strangers visiting the office and looking around, hasty writing of documents.
The dead giveaway - salary paid late or not at all.
If your salary is ever paid late then check to see if you are being paid all of your statutory entitlements such as pension plan and government insurances. If the company is not paying these things, go to the CEO and tell no one else except them that you know they are not paying your legal entitlements and you want it paid now. If you have lots of leave accumulated then that is cash value to you and is at risk when the company goes bust. Resign as soon as you can because companies typically need to pay out all your entitlements and unused leave when you resign - and you definitely want to do that before everyone else rushes to do the same, and before the company goes pop leaving you with nothing. Somehow you need to navigate in a non illegal/ non extortionate way letting them know that you'll go quietly if they paid you everything you are owed - careful on this one, you are breaking the law if you say "pay my entitlements or I'll.... " You are of course entitled to explain that you have spoken to your lawyer and accountant to understand exactly what they owe you, and also explain that they have advised you to contact the tax office if you are not being paid what you are meant to be paid, presuming that is the case, which it should be. The CEO won't be enthused about anyone asking the tax office why the company is behind on its payments and this will give incentive to the CEO to pay you fully out. Make sure you and your accountant calculate exactly what you are owed and have it in writing - don't let the CEO/company calculate that because it is likely to be wrong.
The dead giveaway - salary paid late or not at all.
If your salary is ever paid late then check to see if you are being paid all of your statutory entitlements such as pension plan and government insurances. If the company is not paying these things, go to the CEO and tell no one else except them that you know they are not paying your legal entitlements and you want it paid now. If you have lots of leave accumulated then that is cash value to you and is at risk when the company goes bust. Resign as soon as you can because companies typically need to pay out all your entitlements and unused leave when you resign - and you definitely want to do that before everyone else rushes to do the same, and before the company goes pop leaving you with nothing. Somehow you need to navigate in a non illegal/ non extortionate way letting them know that you'll go quietly if they paid you everything you are owed - careful on this one, you are breaking the law if you say "pay my entitlements or I'll.... " You are of course entitled to explain that you have spoken to your lawyer and accountant to understand exactly what they owe you, and also explain that they have advised you to contact the tax office if you are not being paid what you are meant to be paid, presuming that is the case, which it should be. The CEO won't be enthused about anyone asking the tax office why the company is behind on its payments and this will give incentive to the CEO to pay you fully out. Make sure you and your accountant calculate exactly what you are owed and have it in writing - don't let the CEO/company calculate that because it is likely to be wrong.
Sometimes I think this is the "Does she/he really love me?" question. Because it says a lot about the person asking and about their world view.
I'm pretty sure that every company I've worked in had a success rate that was inverse to the belief that it was failing. That is to say assume that the company is failing, always. That makes two things true, first when you get "bad news" that something hasn't gone right it doesn't suddenly throw you for a loop, after all the company is failing. The second is that you are more carefully looking for things that are helping, and putting energy into them so that you can extend the life of the company just that much more.
You are most at risk when you think you are not failing, then you take your eye off the ball and start coasting a bit. Taking some "me" time as it were. That is when a glitch or misstep will feel like a huge betrayal from "we're doing well" to "we're dooooomed!" And everyone will stop and reassess just when you need them to be taking action and responding.
Often the root of this question is, "Should I stay or should I leave?" After all if you conclude the company is failing you can give yourself "permission" to leave. And since that is the root question, I have found a better way to ask it is, "Is working to make this company a success helping me achieve what I want to in the next 5 years?"
Whether or not the company is failing is irrelevant as input to the question, "Is this the best way to be spending my time?" That question can only be answered by thinking about what you want to do, or be doing, or not be doing, in the future and evaluating if what your are doing right now is getting you closer to or further away from that future.
I'm pretty sure that every company I've worked in had a success rate that was inverse to the belief that it was failing. That is to say assume that the company is failing, always. That makes two things true, first when you get "bad news" that something hasn't gone right it doesn't suddenly throw you for a loop, after all the company is failing. The second is that you are more carefully looking for things that are helping, and putting energy into them so that you can extend the life of the company just that much more.
You are most at risk when you think you are not failing, then you take your eye off the ball and start coasting a bit. Taking some "me" time as it were. That is when a glitch or misstep will feel like a huge betrayal from "we're doing well" to "we're dooooomed!" And everyone will stop and reassess just when you need them to be taking action and responding.
Often the root of this question is, "Should I stay or should I leave?" After all if you conclude the company is failing you can give yourself "permission" to leave. And since that is the root question, I have found a better way to ask it is, "Is working to make this company a success helping me achieve what I want to in the next 5 years?"
Whether or not the company is failing is irrelevant as input to the question, "Is this the best way to be spending my time?" That question can only be answered by thinking about what you want to do, or be doing, or not be doing, in the future and evaluating if what your are doing right now is getting you closer to or further away from that future.
Saving money in new ways, with adverse consequences on work and employees that prove it isn't a benign optimization. Variant: ending or selling off "unnecessary" luxuries.
For example, the newest computers are cheaper than old ones, free food is replaced by a vending machine, art on display disappears.
The slightest hint of late payments. For example, salary one day late "because the bank made a mistake": in reality, the company was waiting for cash but negotiations with banks or other lenders were difficult enough to miss the deadline.
The slightest hint of late payments. For example, salary one day late "because the bank made a mistake": in reality, the company was waiting for cash but negotiations with banks or other lenders were difficult enough to miss the deadline.
I'll be writing a longer response in a few minutes. I am the CEO of a 20-person startup and there were a few scenarios we've had where payroll was truly late because of bank issues.
Just want to bring this up so people aren't paranoid when such things happens. They DO happen, especially now that so many startups use "cool" and "hip" startup payroll providers that also make mistakes.
Just want to bring this up so people aren't paranoid when such things happens. They DO happen, especially now that so many startups use "cool" and "hip" startup payroll providers that also make mistakes.
I've seen both. The most truly pathetic thing I have seen was the rush to the bank to cash the payroll checks because certain employees knew that the account only had enough to pay a certain number of employees. Have also seen an innocent bank failure that screwed a payroll cycle. Luckily the bank covered overdrafts for the day it hosed everyone[1].
When the company is innocent, its best if the employer shows the employees the cause of the failure and be really, really oversharing so us very angry workers aren't inclined to riot.
1) at this late date, I get the feeling because the town was small enough to call around and make sure people banking at other banks didn't overdraft either instead of covering them money-wise after the fact.
When the company is innocent, its best if the employer shows the employees the cause of the failure and be really, really oversharing so us very angry workers aren't inclined to riot.
1) at this late date, I get the feeling because the town was small enough to call around and make sure people banking at other banks didn't overdraft either instead of covering them money-wise after the fact.
Oh boy, that sprint to the bank sounds absolutely devastating. :(
When the business office people leave work 15 minutes early, then the rumor spreads and you have a parking lot of people driving like Mad Max to the bank the company uses[1], it does get pretty bad. I was an observer since I worked for someone else.
It was in the 90's and there were "personal adjustments" that occurred later on.
1) cannot drive to your bank because then the check would bounce and really do some extra fun damage - plus this was before direct deposit was available at that company
It was in the 90's and there were "personal adjustments" that occurred later on.
1) cannot drive to your bank because then the check would bounce and really do some extra fun damage - plus this was before direct deposit was available at that company
[deleted]
I've had actual experience of this sort in an established, relatively large company with a dedicated CFO. Worse and worse every month.
A true mistake is acknowledged, not repeated, and addressed: the opposite of what a failing company in denial does.
Interesting; and that's a shame. I guess I just mean to say that a mistake like that could legitimately be a mistake. I'd be horrified if our employees thought we were going bankrupt because our payroll system had a bug in it!
Just last week my three person startup had a payroll issue, bank error affecting one employee only. On top of the previous months payment being late by 15 days! As the founder/CEO it's freaking scary to know that money is the prime source of trust for my employees and if I lose it => REKT!
If your CEO fucks around with YOUR money at ALL watch out!
And don't be shy about asking about finances. If you have stock grants or options then you are not only an employee but also an INVESTOR and may be entitled to these details - but you have to ask.
As for my employee: the second time the bank messed up I had to stop payment on the pending one (time w/bank +fee!) then went direct to Western Union to wire cash within the hour (+fee). If payroll is late I expect the CEO to spend two hours immediately fixing it and assume costs necessary to expedite.
If your CEO fucks around with YOUR money at ALL watch out!
And don't be shy about asking about finances. If you have stock grants or options then you are not only an employee but also an INVESTOR and may be entitled to these details - but you have to ask.
As for my employee: the second time the bank messed up I had to stop payment on the pending one (time w/bank +fee!) then went direct to Western Union to wire cash within the hour (+fee). If payroll is late I expect the CEO to spend two hours immediately fixing it and assume costs necessary to expedite.
Communication and trust is key. I think developers can understand mistakes happen, they deal with bugs in code every day. But how it is handled and how the patterns look over time is what matters.
Some warning signs I have seen:
* conflict between founders
* investors start "suggesting" changes to strategy or stack
* hiring someone external to take over tech team
* instituting some new "system" to improve productivity
* appearance of consultants
* conflict between founders
* investors start "suggesting" changes to strategy or stack
* hiring someone external to take over tech team
* instituting some new "system" to improve productivity
* appearance of consultants
To your last point: when Bob Slydell appears, it's never a good sign.
My guide for a company in decline--and more pointedly for when it's time to leave--is the bullshit/productivity ratio. How much time are you being asked to spend on bullshit that doesn't get product out the door vs. real work on product? If b/p is high, that's a red flag. Now look at the first time derivative of b/p. Is b/p increasing or decreasing with time? If it's increasing, that's a bigger red flag. If it's decreasing, maybe the problems are getting fixed and you should consider sticking around. Finally, if b/p' is positive look at the second derivative. Is b/p accelerating or decelerating? If the former, LEAVE NOW. If the latter, maybe b/p is approaching an asymptotic level you an live with. Or not.
Hahahaha, good one :-)
If every sale remains an exercise in business development and requires the driving force of a founder or similar key person, then the company is closer to failure than success.
While this type of biz dev feels like forward action in the trenches, in reality it means that you are only a few key deals or people from an empty accounts receivable.
Companies that bring process to the prospecting and sales cycle, and develop a path to closing business that is not highly dependent on a small pool of stakeholders have a clear path to growth.
While this type of biz dev feels like forward action in the trenches, in reality it means that you are only a few key deals or people from an empty accounts receivable.
Companies that bring process to the prospecting and sales cycle, and develop a path to closing business that is not highly dependent on a small pool of stakeholders have a clear path to growth.
Specifics to very early stage start-up following the methods currently labelled as "Lean":
In this case the exercise in BD is relabelled "Customer Development" and the founder is there directly to learn from and build relationships with the early (<100?) customers. The "Way of Lean" says to do these things that "don't scale" to help create a better refined, higher quality product that customers really do want.
By deal #101 some processes should be in place, because now the customer is clearly defined an there is good market fit.
Statistically, every early stage business is closer to failure than success...until they're not.
In this case the exercise in BD is relabelled "Customer Development" and the founder is there directly to learn from and build relationships with the early (<100?) customers. The "Way of Lean" says to do these things that "don't scale" to help create a better refined, higher quality product that customers really do want.
By deal #101 some processes should be in place, because now the customer is clearly defined an there is good market fit.
Statistically, every early stage business is closer to failure than success...until they're not.
I probably should have added the caveat of speaking about working in an environment that is not purely software.
Here a few dozen clients/deals per year (or less) can keep a company moving and even feeling like it is progressing. Meanwhile the underlying fragility in the sales process is obscured.
Here a few dozen clients/deals per year (or less) can keep a company moving and even feeling like it is progressing. Meanwhile the underlying fragility in the sales process is obscured.
This is very interesting question and answer is not so simple.
First, if a company is a startup which is not yet profitable and burning investors money you should assume that the company is failing. Yes - you might be wrong (i.e., the company is AirBnB, Dropbox, etc.) not but in 95% of cases the company will eventually fail. In this case, just ask CEO/CFO/your manager about what is runaway, cash on hand, etc.
Second, if a company is already established (out of startup mode) then you can see signs:
- senior management leave (they have access to more informations than you)
- rapid flip-flopping on features and priorities (maybe caused by above)
- TPS reports become a norm
First, if a company is a startup which is not yet profitable and burning investors money you should assume that the company is failing. Yes - you might be wrong (i.e., the company is AirBnB, Dropbox, etc.) not but in 95% of cases the company will eventually fail. In this case, just ask CEO/CFO/your manager about what is runaway, cash on hand, etc.
Second, if a company is already established (out of startup mode) then you can see signs:
- senior management leave (they have access to more informations than you)
- rapid flip-flopping on features and priorities (maybe caused by above)
- TPS reports become a norm
There are many type of businesses that need to 'burn investor money' before income. Those investors can be (partly) the founders but when R&D of a product takes millions because of external factors then you cannot prevent spending only investor money at least until you have something to sell.
> a startup which is not yet profitable and burning investors money you should assume that the company is failing
If a startup doesn't have a period where it is "not yet profitable and burning investors money", then it didn't need investors in the first place. The whole point of venture capital is to enable the existence of "convex" business models that require a period of revenue-less work before anything happens.
If a startup doesn't have a period where it is "not yet profitable and burning investors money", then it didn't need investors in the first place. The whole point of venture capital is to enable the existence of "convex" business models that require a period of revenue-less work before anything happens.
Yes.
You have to understand that startups "by default" are failing. They are searching for and developing repeatable and scalable business model.
If they found that "repeatable and scalable business model" they are not startup and they are called established business.
If they do not find "repeatable and scalable business model" they fail.
I was in 3 startups so I would say 100% fail but that is my luck.
You have to understand that startups "by default" are failing. They are searching for and developing repeatable and scalable business model.
If they found that "repeatable and scalable business model" they are not startup and they are called established business.
If they do not find "repeatable and scalable business model" they fail.
I was in 3 startups so I would say 100% fail but that is my luck.
If you have any exposure to the business side of things (which in a small[ish] company just about everyone does no matter the role unless the management is proactively hiding these things which then is a pretty clear symptom in and of itself), the impending doom is typically pretty evident.
Things like not being close to breaking even in the foreseable future, investors getting cold feet, having to pivot to appease the VCs etc etc.
On this last point - you really see the true colors of upper management when pivoting kicks in. If there are concrete actions taking place aimed at getting shit done to keep the company afloat - there might be a chance there. If, however, it's just posturing and paper-ware BS to fool the investors into thinking there's a fundamental change of direction - that would be a major sign of things being REALLY bad.
Things like not being close to breaking even in the foreseable future, investors getting cold feet, having to pivot to appease the VCs etc etc.
On this last point - you really see the true colors of upper management when pivoting kicks in. If there are concrete actions taking place aimed at getting shit done to keep the company afloat - there might be a chance there. If, however, it's just posturing and paper-ware BS to fool the investors into thinking there's a fundamental change of direction - that would be a major sign of things being REALLY bad.
To me, the number one sign is the deterioration of HR policies. Beyond late salaries, when they begin doing away with flexible work environment, like variable hours, and try imposing things and micromanaging, effectively treating knowledge workers like shop floor laborers (there isn't anything wrong being a shop floor laborer, I am just providing a reference), it is a sign of what is imminent.
I used to work at a place, a 10 year old established medium sized company, that was hit so hard by recession of 2009 that it disintegrated. The HR thing I mentioned is the period I can trace back to to say when it was the beginning of the end.
I used to work at a place, a 10 year old established medium sized company, that was hit so hard by recession of 2009 that it disintegrated. The HR thing I mentioned is the period I can trace back to to say when it was the beginning of the end.
In some sense, every company is always at risk of failure.
Fortunes can turn quickly.
Also, every success story has a few tense nail biters on the way.
If you are an employee (not a founder,) then keep a rainy day fund on hand, and leave if the work is no longer what you want to do. Also, make sure expense reports and paychecks are paid on time, even for successful companies!
When they start hiring MBAs, who then turn everything into a "profit center".
Watch out for any change of habits, especially regarding what employees spend on food at lunch time.
The rate of industry change is greater than your product development.
If you can actually pick up on this, it's a good early warning sign. If you don't already have your two weeks in by the time they take away the coffee maker, you've probably already stayed too long.
People stop telling you the "why" of things, and/or you stop believing them.
[deleted]
http://c2.com/cgi/wiki?WarningSignsOfCorporateDoom
* No more free soda or coffee.
* Toilet paper quality suddenly drops.
* Someone comes by to measure your desk and cubicle, but refuses to tell you why.
* No more free soda or coffee.
* Toilet paper quality suddenly drops.
* Someone comes by to measure your desk and cubicle, but refuses to tell you why.
* Rental plants in the office are reclaimed
Cutting costs by turning off the QA servers.
If you turn off the QA servers, then production is your QA server. This may be the surest sign in the entire comment section.
I will suggest that you fail when you give up and no company is ever completely free of the threat of failing, no matter how long they have been around. If you hit challenges that the C level staff cannot overcome, then you are likely to die. But C level staff are often able to do "the impossible."
It is going to be nigh impossible to determine that something is certain to fail. Paul Graham suggests that startups need to just "not die" to eventually make it. I will suggest that this continues to be true, even after they are worth billions of dollars.
It is going to be nigh impossible to determine that something is certain to fail. Paul Graham suggests that startups need to just "not die" to eventually make it. I will suggest that this continues to be true, even after they are worth billions of dollars.
There was a post on Reddit a few days back that I thought had some great answers:
https://m.reddit.com/r/startups/comments/4zkka8/what_are_the...
https://m.reddit.com/r/startups/comments/4zkka8/what_are_the...
Ticky-Tack book keeping around things like vacation and sick leave. Anything that implies a liability on the books.
Motivational posters
Some people (their companies aren't likely to be a pleasant place) like motivational posters from the beginning and even if the business goes well.
Therefore I'd qualify the symptom: motivational posters are a bad sign as part of an attempt to renew management style and inject new energy, which is itself an indication of helpless desperation.
I don't know if I'd agree with that - I haven't worked at a company that uses them, but I have seen them all over Facebook, and they don't look like they're failing anytime soon so far.
Those posters aren't for motivation. They're propaganda. You don't see the Soviet inspiration in bold type on a reddish background?
EDIT: Lol this clearly made some people mad.
EDIT: Lol this clearly made some people mad.
I would prefer actual Soviet propaganda posters on the wall over motivational posters. They'd be more entertaining.
The similarities are striking, and their intent is literally the same.
Oh it gets even better. You can't even find the best ones in online pictures I think. They have an auditorium with floor to ceiling banners everywhere with those slogans (and those are the bold white font on red background I was referring to). All that's missing is Stalin preaching from a podium. Zuck pontificating on the "knowledge economy" does give him a run for his money though.
And lest anyone mistake me for a hater, let me be clear that I have a tremendous amount of respect (even awe) for the information empire they've managed to build. I do question its value however. I know few (if really any) people for whom Facebook has been, on balance, a positive influence in their lives.
And lest anyone mistake me for a hater, let me be clear that I have a tremendous amount of respect (even awe) for the information empire they've managed to build. I do question its value however. I know few (if really any) people for whom Facebook has been, on balance, a positive influence in their lives.
I upvoted you, but I would say Dilbert Calendars and the like are a better indicator.
Dilbert calendars are healthily cynical, not elements of denial like non sarcastic motivational posters.
I don't think I have ever before heard the expression healthily cynical. I have heard of healthy skepticism, but not of healthy cynicism.
Military generals and ops people can have healthy cynicism about the probability of any new technology being bug-free.
Be honest about what could happen vs. being delusional about what is wanted to happen. Basically, a variant of hope for the best prepare for the worst. Sarcasm is a great way to do that.
[deleted]
[deleted]
I would find it hard to stomach working surrounded by motivational posters.
It sounds like somebody has a case of the Mondays!
There is always news. If you don't hear any for a while, it means the news is bad.
That's all I have.
That's all I have.
No growth and/or no progress on getting traction.
Without this, it's only a matter of time.
Without this, it's only a matter of time.
[deleted]
As someone who has worked at quite a few startups this is the wrong question to ask. Out right failure is pretty easy to detect, and it kind of doesn't matter. A startup failing fast is the second best outcome (after a nice exit) for everyone involved, including the investors.
Startups that fail slowly are the worst, because there is an illusion of success that can drag everyone along for years.
Always keep in mind that the odds will always be astronomically high that you are working for a startup that will fail. You're probably working for a startup that's going to fail. Most startups fail fast (but never employ many people), but the startups that hire the most people fail slowly, so the odds are very high that you are working for a startup that will fail slowly.
So what should your question be then?
It should be: Am I enjoying my job and/or does this job contribute to meeting my career goals? If the answer is no for too many months in a row and you are relatively sure the answer won't change and that you have no power over making it change then it is time to move on, with one highly unlikely exception: Your startup is succeeding and your equity stake is enough that riding the wave of a bad job for a year or two will result in a good chunk of money for you.
So what are the signs of a company that is succeeding? There really easy to spot actually, even though you've never seen them:
1. Everyone's hair is on fire. Micromanagement is not a thing at your company because everyone is desperate to meet the insane demand and growth that your product has.
2. The technical work is very enjoyable, because the growth is insane. When you achieve incredible growth it actually stops managers from making decisions that don't scale, because the technical team will have numbers on their side of the argument. Your company can no longer afford to hack things together, because it has to scale tomorrow.
3. Talented people are banging down the door to work for your company.
4. Founders aren't talking about exits in terms of goals, but in terms of certitude. They've already received offers and they now have strategies in place to get the kind of exit they want.
5. BS of all forms is not experienced, because no one has time for it, even the people who normally spew it.
6. Hockey stick growth in either user growth or profit growth is trivial for you to see in your position. The founders don't have to convince anyone that your company is doing well, it's just plainly evident.
If you are not experiencing these signs and you hate your job than it's time to move on. Founders hate to hear this, but if they haven't gotten traction in the first year-and-a-half they probably will never get it. There are notable exceptions, but it's important to remember that you are not the exception (does your founding team seem exceptional to you?).
Startups that fail slowly are the worst, because there is an illusion of success that can drag everyone along for years.
Always keep in mind that the odds will always be astronomically high that you are working for a startup that will fail. You're probably working for a startup that's going to fail. Most startups fail fast (but never employ many people), but the startups that hire the most people fail slowly, so the odds are very high that you are working for a startup that will fail slowly.
So what should your question be then?
It should be: Am I enjoying my job and/or does this job contribute to meeting my career goals? If the answer is no for too many months in a row and you are relatively sure the answer won't change and that you have no power over making it change then it is time to move on, with one highly unlikely exception: Your startup is succeeding and your equity stake is enough that riding the wave of a bad job for a year or two will result in a good chunk of money for you.
So what are the signs of a company that is succeeding? There really easy to spot actually, even though you've never seen them:
1. Everyone's hair is on fire. Micromanagement is not a thing at your company because everyone is desperate to meet the insane demand and growth that your product has.
2. The technical work is very enjoyable, because the growth is insane. When you achieve incredible growth it actually stops managers from making decisions that don't scale, because the technical team will have numbers on their side of the argument. Your company can no longer afford to hack things together, because it has to scale tomorrow.
3. Talented people are banging down the door to work for your company.
4. Founders aren't talking about exits in terms of goals, but in terms of certitude. They've already received offers and they now have strategies in place to get the kind of exit they want.
5. BS of all forms is not experienced, because no one has time for it, even the people who normally spew it.
6. Hockey stick growth in either user growth or profit growth is trivial for you to see in your position. The founders don't have to convince anyone that your company is doing well, it's just plainly evident.
If you are not experiencing these signs and you hate your job than it's time to move on. Founders hate to hear this, but if they haven't gotten traction in the first year-and-a-half they probably will never get it. There are notable exceptions, but it's important to remember that you are not the exception (does your founding team seem exceptional to you?).
If you know the numbers
http://paulgraham.com/aord.html
http://paulgraham.com/aord.html
Founders starting to tap into the employee option pool for themselves. Difficult to hire or retain talent after that.
Still believing a transformative event is coming after a couple failed prophecies.
Firing of social media folks, or at least a downturn in social media activity
Is slashing salaries by 50% also a sign?
Competitor pivoted and got funding
Lack of users and usage.
I wrote a blog post describing my personal test for this sort of thing: http://jasonlefkowitz.net/2013/05/introducing-lefkowitzs-law...
I had experience with a similar work environment, though I drew a different conclusion:
http://micheleincalifornia.blogspot.com/2016/08/business-til...
http://micheleincalifornia.blogspot.com/2016/08/business-til...
1. Senior people leaving (as has been said by pretty much everyone else in this thread).
2. Not having a clearly defined problem to solve, or a well understood target audience.
3. Not knowing who the competition are, or just dismissing them as "not being as amazing as us."
4. Little or no customer research - if you hear the phrase "customers don't know what they want" and it's not immediately followed by "so we need to do research and find out" - run.
5. Building solutions that don't really map back to problems. This can manifest in a lot of ways, but the most common ones I've seen: projects constantly changing in priority (entire projects materialise and become urgent overnight), features that are arbitrarily demanded, or in an over-emphasis on polish and minutia.
6. Departments not collaborating, things getting thrown over the fence. Workflows that move in the wrong direction.
7. Lack of autonomy - a handful of people make all of the decisions.
8. Micromanagement. People tend to micromanage when things aren't going well, which tends to make them worse. It's a downward spiral.
9. Being afraid to talk to management about problems; being chastised for suggesting ways to improve things.
10. When mistakes are made, focusing on blame rather than resolution and prevention.