Absolutely yes to "Pass the Hacker News test". Seneca's letter Epistle XI is one of my favorites and teaches this exact lesson.
It closes with "Cherish some man of high character, and keep him ever before your eyes, living as if he were watching you, and ordering all your actions as if he beheld them." http://www.stoics.com/seneca_epistles_book_1.html#‘XI1
I've found it to be a great technique for making better decisions.
One of the powerful parts of the HN application of this age-old teaching is that it includes lots of super smart hackers, who by their very nature are skeptical and inquisitive. This crew doesn't miss details.
So in those times when your discipline is failing you. It's actually helpful to know that the HN crowd will catch you. For our industry overall, it's a very healthy self-policing mechanism.
I keep this picture of Elon Musk open permanently in one of my Spaces. When feeling unmotivated or risk-adverse, I'll imagine what he would say if I was sitting in the backseat of the Tesla.
There's also the deathbed technique. Imagine you're 91 years old, with a few members of your family around, and you're thinking back over your life. How would you wish you would have made the decision?
Admittedly, this only worked really well for me after I sat with a grandparent at their deathbed.
I agree, it reminds me about a quote I heared sometime ago (I can't remember where) about corporate (mis)management and its paper trail, and it was something like "Before you send an email, imagine it printed in the front page of the New York Times".
I was once on the other end of this -- witnessing a startup that failed "the wrong way". The unethical way.
I decided to use a startup to raise some money for a non-profit. Their business model was to help fund events / organizations with their platforms, and take a fixed 2-3% commission on the funds raised. I raised $500 using the platform. But I never received the check for the $500.
I knew the founder personally. I e-mailed him and week after week he said, "the check is coming, there has been some sort of accounting error". 2 months passed, and no check. Then 3 months.
So, I e-mailed one of his investors, a mutual friend. He said, "Oh no, I think they are in a very bad place and may not have any money. I have stopped using the service." I e-mailed the founder again. He replied that my money was gone, but that he had committed himself to pay it back.
He was looking for work, though, so he wasn't sure when. Then, the platform's domain name quietly stopped responding to web requests, and the whole platform went offline.
I'm now in this weird position where I'm debating pursuing legal action. I'm still in touch with the founder. He keeps saying that he will pay soon, but doesn't.
The money actually came from over 20 people who had donated to the cause. They are unaware the money never made it to the non-profit. The check I was trying to receive was meant to just be a direct donation to this cause. The founder's mismanagement actually led to $20-$40 being "stolen" from about 20 people. In a way, I acted as a middleman, by encouraging people to donate via this platform. And now, I feel very responsible to get this money back. Do I pursue legal action? I've debated it.
So, here's another piece of advice about how startups should die: "if it's not your money, it's not your money". In other words, if your platform deals with money (e.g. accepts donations, facilitates payments) it is NOT OK to use money you owe your customers to fund operations. That is called theft, plain and simple!
> I remember sitting down with Paul Graham as our startup was failing. I remember how unbelievable difficult it was to get myself to that meeting. The last thing in the world I wanted to do was to tell him my startup was failing. It took him 30 seconds to process the failure and then he moved on. He was so unbelievably supportive and so excited for whatever it was I was going to do next.
And this, my friends, is the fundamental difference between SV and the rest of the world. From my knowledge and experience, something like this simply does not happen outside of America. I haven't decided whether this is universally a good or a bad thing, but one thing is for sure - (us) Americans are very tolerant of failure and that is a good thing for startups.
"is the fundamental difference between SV and the rest of the world. From my knowledge and experience, something like this simply does not happen outside of America."
To state the obvious first SV != America.
And outside of SV there really isn't the sense of "failure is quite ok no biggie".
If you are located in a typical place in america and you lose people's money (I'm not talking about startup shot in the dark funny money) you will be viewed as a failure and less likely to get money again.
If you open up a restaurant or a typical small business (with either your own money or friends and family or a bank loan) and you fail you are thought of as a failure. It's really that simple. Most people won't say "ok he learned something let's take another shot".
Key difference is SV (or with any pooled investment fund) is that they understand that what they are investing in is shot in the dark. And besides it's not their money it's primarily their investors money. OPM. And even if it's their money they are betting on many horses a small amount. Not the ranch.
Had PG been working as an engineer at HP at the time and had put a large sum of his personal money into a venture that failed (money that might be needed for his children's college fund) he might have not been so "unbelievably supportive and so excited for whatever it was I was going to do next."
I wrote like 10 topic sentences for comments about shutting down a company and then just erased them, because what a horrible set of memories that topic brings out. I like reading about failure from Jason because he's had a win and is on his way to another, so he can talk about it with a pretty even mind. Personally, I've only got like 10% of a kind-of-win since shutting my first company down, and it still makes me absolutely ill.
I liked this article thank you. My theory on dying startups is that if its not working its better to go out with a bang (eg a crazy pivot or a high risk high reward gamble) rather than a bleed out.
FedEx was a good example of this, if I recall correctly the CEO took all the cash they had and went to Vegas with it. Usually wouldn't turn out well, but that time it did. If you need money, and have exhausted all your options you have to take a course of action that gives you a chance, no matter how slim, over the slow bleeding death which would be a long painful and hopeless experience.
Not compromising ethics like you mention is so important in life. Ethical decisions are harder in difficult circumstances (teetering over the cliff of failure) but those moments in life are when your ethics count for the most and mean the most, and as you mention they can also pay off in the long run (but this shouldn't really be a consideration from a purist ethical standpoint). The captain shouldn't go down with that ship.
If the business is sure to fail and you have money left but no clear idea what to do with it, wouldn't simply liquidating and giving partial returns on investment be a reasonable option?
"back in 2007, we were enabling college students to debate issues on their campus. And in the unfortunate theme of that era, we had lots of people using it but nothing resembling a business model."
Let's all be thankful things have moved on so much since that era!
They really have. When I look around the current batch of YC companies, I find that virtually every one has a built-in business model from the beginning.
I think the craze of 2007 was that you could make something that would become popular. Popular felt so much better than not popular. Max Levchin once called it blowing up a balloon. They get big fast, but they're just full of air.
Why is the founder taking on personal credit card debt to pay the bills of the company? Shouldn't the company just go bankrupt and then that's the end of it?
I am in the process of shutting down my first company and I would like to thank you for sharing your experience because every decision I make right now has huge ethical implications.
My first startup was a bit of a fad. A fast rise to millions of users, and then a slow peter out -- no matter what we tried. We also didn't know what we were doing, to be fair. Anyway, as we were on our last legs we got a couple offers for our email list of about 6 million users. My co-founder wanted to take them to get some money out of it, but it was an easy "no" for me. We were doing this on the side of day jobs, so failure probably didn't feel quite as catostrophic and we didn't feel as desperate. Still, probably a good thing he would have had no idea how to get at the database (designer).
Basically boils down to an 'honor code'. When you are going down imagine yourself as a great person and that history will remember every action you did. If you keep your respect and dignity people will respect you and you live to fight another day. If not no matter how successful you may or may not be, someone will someday say: "yeah its a great company but he fu*ked so so so over". You don't want to be that person. You want to be: "yeah he put 3 companies under but he always manages to pay his debt".
Yep, this is the lesson of not burning bridges that you worked so hard to create, even if it makes your life harder in the short run, it will work out in the long run.
Recently a guy applied to the current place I am working, and unfortunately I had to explain to my superiors about his history of poor interpersonal skills at another job that we worked together at. This guy wont be getting a job now.
Work hard to make sure that when you leave, it will pay dividends in the future.
This isn't really true. AirBnB got to greatness by using a lot of shady tactics earlier on, and HN was split half-half on whether this was a good thing or not. History essentially forgot those shady tactics, and AirBnB is a gorilla now.
I'm not a fan of nascent bragging about killing your latest startup, leaving customers out in the cold without a good reason or advanced warning. Find a buyer or pivot, otherwise it's just flushing time, money and credibility down the drain.
For a first bootstrapped startup, a FNAC that doesn't require much overhead / support and can be built slowly for awhile is a starting point. It's not a proper startup, but it's something that puts founders and customers in less jeopardy.
Right after reading the pg essays, any startup founder should read everything Jason has written. Cuts right to the points that many are too uncomfortable to talk about.
Financial transparency FTW. I've worked for two companies that were extremely transparent. It's made me feel like a) the company knows I am a big kid and can take the good & the bad news, and b) views me as a partner in the work, not a cog in the machine. And if declining finances leads some people to leave, that's infinitely easier than having to let them go.
Part of the question here is also, "What did you promise (implicitly or explicitly) when you got those email addresses?" That's really where it becomes an ethics issue. Our data gets sold every day.
Another question is, "Did everyone get paid?" He did the right thing and saw to it that everyone got made whole. If the business goes into bankruptcy and some creditors are not being made whole, it's much harder to not sell the email list if you can do so legally.
It's during tough times that you see what people's ethics really are. Great job by the OP addressing some of these.
Our entire team is made up of entrepreneurs that have at some point failed their own startup. There are hundreds of companies like us that are always looking to hire awesome entrepreneurs.
[+] [-] brd|12 years ago|reply
It closes with "Cherish some man of high character, and keep him ever before your eyes, living as if he were watching you, and ordering all your actions as if he beheld them." http://www.stoics.com/seneca_epistles_book_1.html#‘XI1
I've found it to be a great technique for making better decisions.
[+] [-] jaf12duke|12 years ago|reply
So in those times when your discipline is failing you. It's actually helpful to know that the HN crowd will catch you. For our industry overall, it's a very healthy self-policing mechanism.
[+] [-] taroth|12 years ago|reply
http://imgur.com/4tsZOIf
[+] [-] rubidium|12 years ago|reply
Admittedly, this only worked really well for me after I sat with a grandparent at their deathbed.
[+] [-] pjgomez|12 years ago|reply
[+] [-] pixelmonkey|12 years ago|reply
I decided to use a startup to raise some money for a non-profit. Their business model was to help fund events / organizations with their platforms, and take a fixed 2-3% commission on the funds raised. I raised $500 using the platform. But I never received the check for the $500.
I knew the founder personally. I e-mailed him and week after week he said, "the check is coming, there has been some sort of accounting error". 2 months passed, and no check. Then 3 months.
So, I e-mailed one of his investors, a mutual friend. He said, "Oh no, I think they are in a very bad place and may not have any money. I have stopped using the service." I e-mailed the founder again. He replied that my money was gone, but that he had committed himself to pay it back.
He was looking for work, though, so he wasn't sure when. Then, the platform's domain name quietly stopped responding to web requests, and the whole platform went offline.
I'm now in this weird position where I'm debating pursuing legal action. I'm still in touch with the founder. He keeps saying that he will pay soon, but doesn't.
The money actually came from over 20 people who had donated to the cause. They are unaware the money never made it to the non-profit. The check I was trying to receive was meant to just be a direct donation to this cause. The founder's mismanagement actually led to $20-$40 being "stolen" from about 20 people. In a way, I acted as a middleman, by encouraging people to donate via this platform. And now, I feel very responsible to get this money back. Do I pursue legal action? I've debated it.
So, here's another piece of advice about how startups should die: "if it's not your money, it's not your money". In other words, if your platform deals with money (e.g. accepts donations, facilitates payments) it is NOT OK to use money you owe your customers to fund operations. That is called theft, plain and simple!
[+] [-] fludlight|12 years ago|reply
Not theft, but fraud. Unfortunately, it happens in many startups that don't have a qualified finance/business guy in a senior role.
[+] [-] connerbryan|12 years ago|reply
[+] [-] mbesto|12 years ago|reply
And this, my friends, is the fundamental difference between SV and the rest of the world. From my knowledge and experience, something like this simply does not happen outside of America. I haven't decided whether this is universally a good or a bad thing, but one thing is for sure - (us) Americans are very tolerant of failure and that is a good thing for startups.
[+] [-] larrys|12 years ago|reply
To state the obvious first SV != America.
And outside of SV there really isn't the sense of "failure is quite ok no biggie".
If you are located in a typical place in america and you lose people's money (I'm not talking about startup shot in the dark funny money) you will be viewed as a failure and less likely to get money again.
If you open up a restaurant or a typical small business (with either your own money or friends and family or a bank loan) and you fail you are thought of as a failure. It's really that simple. Most people won't say "ok he learned something let's take another shot".
Key difference is SV (or with any pooled investment fund) is that they understand that what they are investing in is shot in the dark. And besides it's not their money it's primarily their investors money. OPM. And even if it's their money they are betting on many horses a small amount. Not the ranch.
Had PG been working as an engineer at HP at the time and had put a large sum of his personal money into a venture that failed (money that might be needed for his children's college fund) he might have not been so "unbelievably supportive and so excited for whatever it was I was going to do next."
[+] [-] tomasien|12 years ago|reply
[+] [-] jaf12duke|12 years ago|reply
Yep, know that feeling. Well.
Would love to have you over to the office to chat. Ping me offline. jason at 42floors
[+] [-] fludlight|12 years ago|reply
[+] [-] TomGullen|12 years ago|reply
FedEx was a good example of this, if I recall correctly the CEO took all the cash they had and went to Vegas with it. Usually wouldn't turn out well, but that time it did. If you need money, and have exhausted all your options you have to take a course of action that gives you a chance, no matter how slim, over the slow bleeding death which would be a long painful and hopeless experience.
Not compromising ethics like you mention is so important in life. Ethical decisions are harder in difficult circumstances (teetering over the cliff of failure) but those moments in life are when your ethics count for the most and mean the most, and as you mention they can also pay off in the long run (but this shouldn't really be a consideration from a purist ethical standpoint). The captain shouldn't go down with that ship.
[+] [-] YokoZar|12 years ago|reply
[+] [-] kemiller|12 years ago|reply
[+] [-] ballooney|12 years ago|reply
Let's all be thankful things have moved on so much since that era!
[+] [-] jaf12duke|12 years ago|reply
I think the craze of 2007 was that you could make something that would become popular. Popular felt so much better than not popular. Max Levchin once called it blowing up a balloon. They get big fast, but they're just full of air.
[+] [-] dfrey|12 years ago|reply
[+] [-] Causalien|12 years ago|reply
[+] [-] nobodysfool|12 years ago|reply
[+] [-] rralian|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] 3327|12 years ago|reply
[+] [-] hobs|12 years ago|reply
Recently a guy applied to the current place I am working, and unfortunately I had to explain to my superiors about his history of poor interpersonal skills at another job that we worked together at. This guy wont be getting a job now.
Work hard to make sure that when you leave, it will pay dividends in the future.
[+] [-] vacri|12 years ago|reply
[+] [-] ballard|12 years ago|reply
For a first bootstrapped startup, a FNAC that doesn't require much overhead / support and can be built slowly for awhile is a starting point. It's not a proper startup, but it's something that puts founders and customers in less jeopardy.
(Startups proper are go big & fast or bust.)
[+] [-] nwenzel|12 years ago|reply
[+] [-] dmyler|12 years ago|reply
[+] [-] eggbrain|12 years ago|reply
I'm trying to put myself in perspective of his struggle -- was he potentially buying another year of runway? Another month?
[+] [-] mathattack|12 years ago|reply
Another question is, "Did everyone get paid?" He did the right thing and saw to it that everyone got made whole. If the business goes into bankruptcy and some creditors are not being made whole, it's much harder to not sell the email list if you can do so legally.
It's during tough times that you see what people's ethics really are. Great job by the OP addressing some of these.
[+] [-] 001sky|12 years ago|reply
[+] [-] hapless|12 years ago|reply
http://blog.42floors.com.nyud.net/startups-die/#.UkHADudq0Qm
[+] [-] namenotrequired|12 years ago|reply