Zombie Startups & the New Year
It’s that time of the year again. Time to get deals closed before the year closes out in a few days. It’s also time to evaluate what’s next for your startup.
I ran into a friend over the weekend. He was talking about a deal he was working on and the goal to get it closed by the end of the year. As we discussed the deal, it became more obvious that it was a good exit for the founders, but in the form of closure vs. cash. They had started the company 7-8 years ago. Though they had some initial traction with their idea, they never saw the customer adoption the way they had hoped.
They had raised some money for growth. After a while, they saw the original concept wasn’t growing as fast as they wanted, so they made a significant pivot. Staying in the same customer segment, but launching a new product.
Regretfully, that never really took off either – so they sat in between the land of the living and the dead, a Zombie. They had invested a significant number of years of their lives on the company. The outside investors either wanted to get something back out of the deal or many had long since written off the investment.
There solution was to get it sold. It provided a place for the technology to land. But it won’t provide cash in any meaningful way.
What should you do if you have a Zombie startup?
- Gauge is you have the passion to make another run at it. If it’s been seven or eight years, you’re likely tired. Tired of the company, maybe tired of your co-founders or the market.
- Do you have a pivot idea (really)? You need to ask the question if it’s really a good pivot or is it a life ring? If it’s really just a life ring you need to ask yourself some tough questions.
- Do you think it has a faster path to growth than your current alternatives?
If not, you may want to rethink your options. It might be a good time to wind things down and let your investors know that you will be confirming what they already know. This one didn’t work and it’s time to close it down.
Then grab a New Year’s drink. Celebrate with your family and friends. And use what you’ve learned over the last eight years to launch your next company.
Have a Great New Year!