When should a CEO tell startup employees that the company is going under?

I recently asked this of an interviewee that just went through the shut-down of a top-VC backed start-up.

It was a good reminder of two things:

  • everybody knows; and
  • hope springs eternal.

This isn’t to say everyone knows a start-up is literally going under. But they know when things are … off. They’ll know if you might be getting acquired (odd meetings, lots of folks in button-down shirts coming into the office that no one knows who they are, etc.). And they’ll know if you are going through a very high level of financial stress.

Look, being too pessimistic rarely helps in start-ups. But the troops can handle it.

If there’s a 25%+ chance you are going to pull through, maybe hold back just a bit. Sometimes we are too pessimistic as founders. I think at 25%+ odds — you may well find a way. Instead, just tell folks you need more help now, and where you need it. They’ll see and know you need more help. If it’s a good team, they’ll respond. And help.

If there’s still a 5% chance, let folks know things are tough — but you are doing everything you can to pull it out of a hat. That there’s still a shot, and you are doing everything possible to make it happen.

If it’s 0%, tell them that day. They already will sort of have known.

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Published on September 17, 2018

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