When to Quit
Recently, Talos attempted to raise a Series A round. We, however, have put our funding round on hold and made the decision to close our company as it runs now. These past two years while working at a startup, I have read, heard, and seen a lot of the stereotypical company implosions, which is why I wanted to write a blog about our quiet end and how our company will go into its half-life.
This choice is different for every founder but rather than turn the end of my company into a horror story of late paychecks, broken promises, and unpaid debts, I went a different route and, in the process, hopefully preserved the dream I had invested two years and several hundred thousand dollars in pursuing for the future. This is how I chose to respect my colleagues’ time and work, as well as our investors’ trust. I hope this can be an alternate story to the doom and gloom of clichéd startups’ ends and help the majority of founders who will one day find themselves in this position.
Talos did not close our funding round before raising money because there was nowhere else to look for funds, or because we ran out of funds while looking. We chose to close because the shortlist of venture capital firms and people who could best help us achieve our goals gave us some advice, and we chose to listen.
As much as we had accomplished and as hard as we had worked, we were not yet ready to execute the plan we had proposed.
Over the past two years, our small three-person company has accomplished a lot. Among the headlines: we took over executive management responsibilities to close down operations for a consulting client that was a furniture e-commerce site and boutique in the Bay Area. We networked with vetted technology firms in both the U.S. and abroad to help perform work. We used this network to develop our first application, RDV, and will continue to use it to launch the app and help it grow. Most importantly, we built a structure to fund and support founders that was a departure from everything that we believe makes the technology industry such a homogenous place in terms of people.
Moving forward we were planning to raise a Series A round to not just help us continue building our company but to fundamentally change the way new companies are built. As a two-thirds female and two-thirds gay company, we were driven by a mission to support a diversity of ideas and people in the technology industry. And it helped that our international network of development firms could build great products at lower cost, so the economic motives were there too.
However, the simple truth was that running a company on the path to exit and building a new product were far short of the experience needed to help others build companies from scratch.
By the time we moved up the rung from “analysts” and “associates” to the partners who actually make decisions at venture capital firms, we were faced with a hard choice:
Bootstrap for several more months and show that we could do the work, in the process making promises we might not be able to keep to consulting clients, founders, and development firms we worked with, as well as burning through every last bit of capital we had (and some we didn’t). Then, we might have proven we were ready for investment.
Or, not listen to these firms and continue looking for funding elsewhere.
These were the people we had identified as the partners who could help us long-term, the people on our list that we chose because we respected the work they had done and the reputations they had built.
In the end, I chose neither path. Instead Talos has board approval to close our operations at the end of this month and give our employees severance while preserving remaining capital to continue to support the application we have built.
I made this choice because as the founder this company, it is what I have to give the world; its mission aligns with my own, and I have a duty to guard it. The best way to respect the work my colleagues and I have done is to preserve it for the future, to get ready to pursue it the proper way, with the resources and experience we need to be successful.
Instead of leaving a string of broken promises and destroying relationships in a trial by fire or working with partners of questionable character who may give us monetary support but can’t help us grow into the future, the choice to stop and hold is the one that serves our mission rather than ego, or bottom line.
The questions of when to start a company, when to apply for funding, when to hire your first employee—these all have answers well hashed on the internet. But one that is so often overlooked is when to quit. Yet, this is where three out of four funded startups end.
The truth is that not very many people write about it because, well, it sucks—a lot. As a founder, it is a failure of your ability to run a company on the trajectory it should be going; as a colleague, you must tell friends that they don’t have a job; as an investor, you’ve just kissed your return goodbye.
So with all of these downsides, when do you quit?
Short answer: when it is the right thing to do.
Luckily, part of our work over the last two years building a structure to support founders involved answering this very question. All startups solve a problem, but there are two other important details that every founder should have a grasp on: your core beliefs about the problem and the execution of your solution to it. Essentially, the “why” and “how” of your work. Your core beliefs act as anchors and guide how your company make choices about both the problem it solves and the execution of that solution.
Often times in startups, you will pivot the execution of your solution as you begin to gain experience while building your product and moving forward with your company. Changes here are expected and welcome. Then less often, you will actually change the problem you are solving; Slack is the best example of this recently. While this should be heavily scrutinized, more than a few of the startups in the 1–2x investment return range will have built something for one problem and then applied it to another. It’s not ideal, but it happens all the time.
Core beliefs, though, these heavy things have as much to do with you as a person as they do your company. When iterations in either the problem or the execution of the solution begin to tug at this anchor, you have a problem.
Any time you must change your core beliefs about a problem or its solution, you should consider whether you should be building anything at all.
For Talos, our two choices midway through our funding round were to either make a string of promises that might ruin our reputation and take on debt we might not repay or work with people who were not good partners and did not have the long-term success of our company in mind. These two choices pulled our core beliefs anchor right out of the sea bed and set us afloat.
This is why I chose to quit as founder. No path forward allowed me to adhere to my core beliefs while making progress in solving the problem our company was created to right. I do not make promises I cannot keep, I do not leave debts unpaid, and I believe that who you choose to work with matters; these are deeper and more important to who I am as a person than seeing my work as an entrepreneur move forward right now.
My advice, taken with a grain of salt as our company is closing, is that fortunes are made and lost but integrity is what defines you over a career and lifetime. Have the strength of character to hold onto your beliefs and the wisdom to know that if you are unsure of them, you should not be in a position to lead a company and others.
Failure is always hard, but it is much easier when you know you have done it to the best of your abilities while thinking of others and the bigger picture rather than your ego. Over the next couple weeks, we will be dusting off our résumés, I will be writing reference letters, and we will be launching our first application just as our company winds down operations to the minimum needed to see to it that both the app and my colleagues have the best chance of success.