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Ask HN: WWYD? Built a company valued at $1B and may walk away with nothing
122 points by susanwise on April 3, 2023 | hide | past | favorite | 91 comments
I'm looking for some "What Would You Do?" advice from the founder and investor community. Generally looking for guidance on what I should be negotiating for and what type of downside protection is fair, in any?

Financial Overview

- At our peak (Series C) we were valued at $1B post money - $187M raised by the company - $250M preference stack (liquidation prefs + debt) - I own ~27% of the business, and so does my co-founder. My co-founder is no longer part of the business day-to-day, he's on the board - We will end the year at $130M in annual revenues and burning ~$925K/month, we are a low gross profit margin business ~15-20%

Personal Overview - I live in New York City, it's been ~ 10 years that I have been on this journey, bootstrapped with no salary for about 2.5 years and pretty modest salary for most of the years, up until a couple years ago when I started getting "market rate" - I have not taken any chips off the table via any secondary sale up to this point, never really got the chance - Today, my base salary is $175K, no bonus, no stock refresh since the founder grant, fully vested stock, no severance, no indemnification. (Mainly because I just haven't asked for new comp b.c company is in a difficult spot) - In comparison, I hired a critical new C-Suite exec (COO) and gave her $285K/year, 75-150% annual target bonus, $150K sign on bonus, $200K funding closed bonus, 1-year severance, and a 4% equity stake in the business - I am starting to see some worrying signs of real burnout now (for myself)

State of the Union - We have < 6 months of runway based on our current burn, but majority of the money left is debt now - I am about to close on $30M of additional financing this month but the terms will decimate common stock holders (my 27% stake is likely going to go down to < 10%) - Still negotiating, but will likely have to give up board control so I could get fired immediately after financing is closed - We are in parallel exploring strategic M&A alternatives this year, but in the current market condition our business is likely worth less than the preference stack, in which case common stock is wiped out anyways and I get nothing. - Lastly, I'm not confident on the current strategy to grow out of the current problem over the next couple years, so there's a lot of risk in our growth for 2024 and beyond. The strategy I would want to run as CEO is likely not something my COO or board will want to get behind and frankly I don't know if I have the energy to do it myself. It would require 24-36 months to transition the business to the new world while watching old revenue decline and waiting for new higher margin revenue build up in parallel to offset the declining revenues in the core business.

My #1 priority is to get the financing closed for the business. But from there, I'm really confused and don't know what to do next. Doesn't seem to make sense for me to work my ass off just to return money to investors and have nothing for myself. But I do understand that it is my fiduciary obligation as the Founder/CEO, but maybe for the first time in 10 years I'm asking the question "What's in it for me?"

WWYD?




> My #1 priority is to get the financing closed for the business.

> The strategy I would want to run as CEO is likely not something my COO or board will want to get behind

I'd argue that your #1 priority as a CEO is building alignment between all stakeholders -yourself included- on the direction to move forward; everything else is downstream from that. If you close financing at terms you're not aligned with, with boardmembers who are signing up for a strat you are not aligned with, the business will be pushed into different directions, and shatter at these cross-forces.

I've seen this before, and the deterministic outcome from it is you parting ways with the company in 6-12 months' time, at which point it will be in a significantly worse shape / position than it is now.

Presently you have some level of movement freedom. I'd start by sketching out a strategy you think have a high expected value X probability of working, and a roadmap to getting there. I'd look for investors who are okay with signing up for that plan, at valuation that reflects the business's true value given that strategy is successful. Get people aligned with that goal, and execute on that.

The second issue, "What's in it for me?" flows downstream from above. If your own expected value for a successful outcome is no longer motivating for you, your incentives are at odds with the company. To align these, one useful question is: "Okay, you fire me today, find a competent CEO. What would that CEO ask for to drive this?". Sell your board on this question, and take that specific package -with the advantage of the company being that they don't have to go through the C-level search process. Operationally, this can include: a bonus for achieving milestones on the strategic roadmap, and market-level salary.

In short, I'd start with alignment. Everything else -including what's in it for you- flows from there.


I agree with much of this. Take the question to the investors and board, ie that your personal upside is being cratered and everyone is going to be pulling in different ditections.

If you have done and are doing a good job then everyone should want to put the right incentive plan in front of you.

Maybe you have to own the fact that valuations are down and the financing structure isn’t optimal, there is not really anyone to blame for that and a drop from the 20s to the 10s might be something you need to take on the chin. It’s still a good chunk of change.

Could you also look at pulling a some liquidity out during the next fund raise, with the above context set out. Most investors would appreciate the value of giving you some liquidity if you are still the guy to run it.


Thanks for this feedback. And maybe the pre-requisite to getting alignment, is to first get clarity on whether the new investor putting money in wants me as CEO to help get to the right outcome for everyone.


Based on your description I did a search on public companies with roughly the same characteristics on Finviz and returned these 9:

FTCI SRT RBT ZEPP VIAO FEIM EMKR FKWL AAOI

The challenge is that you’ve invested $250M to produce a business that sounds like it’s worth $100+M today (if $30M in debt is going to wipe out half your equity).

As much as the ride has been thrilling and you’ve worked your tail off, from a performance perspective, investors look at the $250M in and $100ish M in current value and say “meh, not that great an entrepreneur, turns every buck I give them into fifty cents.”

The reason your COO and Board are skeptical of your plan is that your actual business that you have has proven to be low margin, which means you produce relatively low value over your cost of goods for your customers. So a fantastical plan where in the future you’ll provide LOTS of value to your customers seems speculative at best, foolhardy at worst.

From a personal perspective, your value as an entrepreneur / founder, will never again go up at your current company, only down. There is no scenario in which five years from now people are more impressed with what you’ve built than they are today.

Your personal best outcome, IMHO, is to sell as much as you can and take the personal exit. Hand the keys over to the COO for them to do the grinding turnaround over next five years. Take six months to recharge and come back into the market with something new. You’ll be able to raise at a higher valuation for a new business, and actually get paid a higher comp.


Interestingly, the Board wants to continue the same play of slowly trying to turn the corner on a low gross margin business, versus a more drastic change to go after a new revenue/margin mix altogether. But regardless, I appreciate your candid feedback.


I don't think this is a public company ...


no, but it's good to compare with similar firms and see what numbers they are reporting!


Any investor or anyone close to the numbers of OPs company who may see this post could likely figure out who they are those if they are even close to accurate numbers shared.


The simple fact is that 10 years in you need to become profitable or there’s no business. Todays market isn’t going to look kindly on a loss making startup of that vintage. The $1B valuation is long gone and realistically the company is probably worth less than the cash raised to date. As you’re finding there are folks that will provide ongoing funding, but they’re going to charge a price consistent with the risk they’re taking at this point.

Not trying to sound cold but that’s the reality of the market now. Probably no consolation, but there are a lot of startups in this position now. If you have IP that’s valuable you could explore an M&A exit. That typically won’t end in a giant cheque but will make folks whole and provide a graceful exit.


Thank you, was looking for exactly this direct feedback. And agreed, the value of the business is likely less than the money raised.


> We will end the year at $130M in annual revenues and burning ~$925K/month, we are a low gross profit margin business ~15-20%

The critical question is "what is your path to profitability?" You have seemingly a positive gross margin but negative net margin? What does the gap consist of?

> The strategy I would want to run as CEO is likely not something my COO or board will want to get behind and frankly I don't know if I have the energy to do it myself. It would require 24-36 months to transition the business to the new world while watching old revenue decline and waiting for new higher margin revenue build up in parallel to offset the declining revenues in the core business.

Are you familiar with the Nokia "burning platform" memo?

You have roughly four choices:

1) make the old pre-pivot business work (have positive net margin)

2) make the new post-pivot business work

3) raise more money through investor storytime, which is going to require a good answer to #1 or #2 and as you say carries risk of being diluted out

4) give up

5) a miracle occurs

I can feel that you're very tempted to do #4, which makes #3 harder as a very high level of self-belief is necessary. It seems there are problems with #2, and #1 hasn't made it after all this time.

Perhaps this is the time to get a bit confrontational with people to insist they get behind either #1 or #2 100%.

> maybe for the first time in 10 years I'm asking the question "What's in it for me?"

Bit late for that, sadly. "Selfless CEO" is just self-exploitation.


#3 and #4 are not mutually exclusive, There IS new money coming in (thankfully), but I can also "give up" after the money is in and the company is on more stable financial footing to execute Plan #1. But truthfully, I'm likely not the right CEO for Plan #1.


Thanks for sharing the Nokia "burning platform" memo, just read it.


Using a throw away account.

I can feel with you.

Your story sound similar to mine, only that I could cash out some of my shares when a PE company took over, so I don't lose everything. I had to roll over some of my shares though, and these are close to worthless now. It's still painful getting more and more diluted in extreme down rounds, as business is running out of cash and debt is too high.

From my experience, it's inevitable that you will get diluted, you can't change that. It also does not matter what you have done for the business before, the investor persons won't care. What matters is the now and the future.

So focus on the future. You should align your salary and package with that of the COO. Your new shares could also have similar conditions as the new investor will etc. Discuss it with your current investors and the new ones. They don't want to write off their investment too, and certainly want to keep you on board?

I don't understand your fear that they will fire you? You will still keep your shares, and are free to do something new (and will probably earn much more).

You can only change the future. You seem to be a technical person (nothing wrong about that, I'm too :-)), a business person would have negotiated this a long time ago already, and multiple times.


If you have <6mo of runway at current cash levels, your first order of business would be to cut costs to get to breakeven in the next 60-90 days. That means a target of cutting out annual costs of around $11-12M broken down to around $4M+ cost reduction within the next 60-90 days.

This could mean

  - headcount reduction,
  - facility lease terminations, 
  - redundant vendor contract terminations (eg: if you have 3 suppliers reduce to 2 asking them to bid for services or use any volume discounts to work in company's favor through the consolidation), 
  - shutdown any loss-making service lines (use these to guide the previous points)
  - outsourcing/offshoring to leverage lower product/service-line costs, 
  - price increases,
  - firing loss-making customers,
  - techstack optimization
You can run targeted commission-based sales over the next 60-90 days that brings deals that are PAT-accretive. I am assuming sales closed this quarter starts contributing positively within the subsequent one or two quarters.

My personal advice is to focus on getting to breakeven ASAP as that gives you additional degrees of freedom for you to execute your strategy.

Good luck.


New money in does not want to execute this plan, and last money in wins. Given the debt vs. cash scenario, I don't have enough cash to execute he 60-90 day burn wind down plan. But from a logical perspective I completely agree with you and really should have pushed for this approach a year ago. We cut down our burn by nearly 50% last year, but turns out really should have cut it by 80-90% to not have to be in this spot.


That is difficult.

It constrains you to raising additional money at unfavorable terms whereas executing the cost reduction plan under complete control of current management would give you additional time to postpone the raise at possibly better terms (since your company isn't bleeding as much) and a possibly better fundraising enviroment given where the larger economy is at.

But that is difficult to execute if everyone that matters doesn't want to go down that path.

Good luck in any case.


WWID?

I know nothing of this life path, but I think I would up my own salary to what I am worth, if I feel it is too low. What is your role? CEO?

Say you doubled your salary to $350k, then over 2 years that is $350k, or 10 days burn. Doubt anyone will notice.

Probably need to downsize a bit to get costs under control too?

Yes this sounds like an asshole move but I think it is an asshole "relative" to the very humble choices you have made so far, so a reversion to the mean, and I think the right thing to do.

Take care of yourself and your health especially.


> The strategy I would want to run as CEO is likely not something my COO or board will want to get behind and frankly I don't know if I have the energy to do it myself.

Why would you want to keep a COO that isn't aligned with you?

> Still negotiating, but will likely have to give up board control

Then don't take it. You have control. Tell the investors / board this isn't a viable option. We all want to survive.

As others have said - cut cost or look for different types of financing where you'll do fine. If the investors really disagree they can get nothing out of it too so everyone needs to compromise.

> But I do understand that it is my fiduciary obligation as the Founder/CEO

As 1 of the largest shareholders it's your "fiduciary obligation" to make yourself happy. Why do you discount the shareholder side of you?


A few people have said the same thing, why not bring costs down.

130M in ARR and you can't save 1M a month in burn? what is holding you back from letting go ~60 people and/or trimming other costs?

Raising on those terms, that dilution and no board seat, I would not do it.


If I have the math right, their revenue of $130m is made up of $110m in COGS. If they’re losing $1m/month that means they’re spending roughly $30m/year on running the business. My educated guess is most of that $30m is marketing spend required to secure the $130m revenue and cuttable costs (salaries, office space) are much less than $10m/year.

Sounds like ARR is the wrong term since it’s probably not a business operating on recurring revenue — probably an example of the bananas valuations of the last few years, based on revenue not viability.


Generally right here, just has a physical operating component to the business which makes COGS high. Think of it like e-commerce business where you are buying goods and shipping to customers. We can cut deeper, but new investors don't want to do that at he cost of revenue. In other words, I cannot materially cut costs without sacrificing revenue bc I have a fundamental GP problem that will take time to improve over several quarters.


The safest way would probably to find a way saving ~10% in cost through all means necessary while keeping revenues stable. If that's somehow possible, you stop burning cash and are not reliant on external investors anymore.

Maybe ask your employees? I'm sure they also don't want someone to come in and take control. And quite often, employees can think of creative ways to save money that the CEO doesn't know of.

As you describe your situation, your COO would be the perfect candidate to find that money.


You need to buy time. Right now your biggest priority is to stop losing money. Can you cut expenses or staff? Can you raise prices without losing all your customers? Can you get more customers? You need to act as if financing will not be available to you, because in honesty it might not be.

If you don't figure this out within the next few weeks, you will find yourself without any options and will need to either close the company or take whatever lowball offer you can get.


How much of your margins are COGS? How competitive is this industry? Do you sell big-ticket items to a small group of customers or the opposite? Is there room to raise prices a bit? If you told your customers that you're losing a million dollars every month and you might shut down soon, would they easily find alternatives or would they be in a bind themselves?

Why are you really raising money -- to make capital investments that will actually make the company profitable (operating basis)? If the first $187 million didn't do the trick, how & why will this extra $30 million do it? Or are you raising money just to keep the hamster wheel going a little longer?

Are your revenues growing? Or flatlined? 925k/month loss is an awfully specific number, is that better or worse than a year ago, or 6 months ago?


Big ticket, small group of customer ~100 customers. Some customers would be in a very tough spot.

The funding is to keep the hamster wheel going and the new amount will allow us to get to profitability.

Burn was and is much much higher than where we will end the year. (I'm learning) there's a lot of work that goes into getting cost out of the business while preserving as much revenue as possible. We just unfortunately haven't been able to cut cost our fast enough without having to be dependent on this next round of funding.


> We will end the year at $130M in annual revenues and burning ~$925K/month

Sorry, I am confused. Is there a definition of "burning" that's different from "expense"? Cause based on those numbers, you guys are making a sound profit...


I assume the burning amount is their net cash flow loss. That's still not that bad though. A margin of -8.5% isn't that big a loss, especially if they're able to raise financing that will last a couple years while they work to achieve profitability.


> A margin of -8.5% isn't that big a loss, especially if they're able to raise financing that will last a couple years while they work to achieve profitability.

But they have trouble doing that, given the remark “I am about to close on $30M of additional financing this month but the terms will decimate common stock holders”.

My guess would be that part of the reason is “~ 10 years that I have been on this journey”.

For many markets, that’s a long time for a company to become profitable.


It would seem the valuation is readjusting to the fact that they had to stop growing (and indeed lose revenue in tandem with cutting spending) to become profitable. Since they already have a 250 million dollar preference stack on the books, with another 30 million there won't be as much left for common stock holders at the new adjusted valuation.


I assumed it meant they're losing $925k/month.


Ah right, of course...


maybe they mean they are spending 10.8m + 925K a month, though seems a weird way to say it. Still who am I to complain, communicative ability decreases with stress.


Burning means they're losing money, about $11M annually in this case.


THat's 1M a MONTH, so $12M a year in annual losses.


What exactly is the problem? If you walk away after raising the additional funding (and luckily the current market logic still says companies with no profit can still be worth billions), you'll end up with a still-substantial part of the company, which will be run by people who will have vested interest in making some sort of exit. Sounds like a win-win?


I've been in a very similar position.

Spent 5 years founding a startup that the vast majority of people here probably know. We raised healthy eight figures and failed to pivot to profitability before markets & investor sentiment turned on us. At the end of the road, we faced a critical decision: 1) Do a deep cut in team & revenue to get to profitability. Restart healthy growth with no clear path to exceeding our liquid pref stack 2) Fire sale.

We chose to do a fire sale that wiped out common shareholders. In hindsight, a fire sale was the right choice. It allowed me time to recover, and then get back into a new business that has thrived. More importantly, it gave me the necessary space to emotionally recover from a long journey, take a step back to learn from my mistakes, and healthily reset.

My advice to you:

- Take a deep breath. It might seem like the darkness will last forever, but the sun will rise again. However this fucked up situation turns out, you're going to be OK. Eventually, you're going to laugh at the pain you're experiencing now.

- Accept that everything in the past is a sunk cost, and your equity is worth 0. Yes, it sucks that you spent 10 years on a fat zero. But, you need to remain objective, and the facts are clear. The fair value of common shares today is 0, and any value creation is a function of future work, not past work.

- Appreciate the opportunity cost of your time. I don't know you personally, but if you're the type who will just start a new business after a long break, I'm willing to bet the expected value of your time is at least $1m/yr.

- Try to negotiate compensation with your board that clearly exceeds your opportunity cost. And, be generous in evaluating your opportunity cost - chances are you're underestimating your future self at this time.

- If you're unable to negotiate this package, quit.

- Get a founder coach if you don't have one yet. Someone who's been in the trenches and can relate with your situation. I can connect you with mine who is amazing, just reply here.

Best of luck friend, wish I could spend more time on this response.


Thank you, I'm ready for whatever happens how! can I contact you, if you are open to it?


Or yes, an intro to your founder coach would be great.


Sure thing, shoot me an email at fairity@fastmail.com.


You have to talk to your current investors about this. They do not want to lose all their money and you are in charge. So they want you to be incentivised to take the best option for them. Getting your incentives aligned with theirs is in their best interest.


What do you think aligns those incentives in this example?


It's unclear to me why you're taking more funding on such bad terms.

You have 130M ARR and are only ~10% short of break-even at ~1M burn/mo, just tighten up the business and clean house a bit?


It because that's the burn number we will be at by the end of year, lots of cost cutting work to reach that number. And new investor is willing to write the check to execute on this plan but will get their fair share of skin for the risk.


Dilute your cofounder to basically nothing and get yourself some preferreds as part of the debt raise.

It sucks but they’re no longer contributing and are a massive drag on the cap table.

I’d also get some generous equity for the COO if you’re going to hand it off to them. Tie it to the performance incentives you know the company needs to hit to be a success.


The company definitely ain't valued 1B any more, that's your problem. You have taken more money in than the company is worth.


yes, that's correct. Which is why I'm asking for advice/guidance here....


Just be brutally honest with yourself and do the right thing, what ever that intrinsically means for you.

Even if you don't believe in god, you have an unconscious that keeps a track of these things so act in a way where you might get/deserve chance to rebuild yourself after all of it.

P.S. I've been in a similar situation (smaller level) and the way I handled myself resulted in a downward spiral for years, never truly trusting myself to fully commit to anything while also not fully giving up. Basically running around in circles, each time losing a little bit of heart/spirit.


thank you for sharing this. tough to read but totally resonates. and hope you have found your footing now!


Reading posts like these I think my family is right and I am wrong. Every time my family business faces financial turbulence, I question why does the business not take equity funding. And every time I get an emphatic No as an answer. The reason being that this not only loses control of the business and hence freedom, but it also increases stress. It is better to grow slow and steady. There will be bumps in the road, but at least it will not add unnecessary stress to the already stressful task of running a business.


Is it possible to cut costs in an extream way to make sure you're burning 0 per month? it is okay to let growth slow down or perhaps you may even lose some percent of your current revenue. It seems to be better than the alternative options. Perhaps get rid of the COO and other high fixed costs and hire later when you're in a better financial position


There is absolutely a way to do this but the new money coming in wants to keep as much revenue as possible to "preserve" valuation. We have already significantly cut revenue (~30%) last year in order to scale back costs. And the other concern is the more revenue you cut the more of a hole you have to climb out of to eclipse your preference stack. And cutting revenue while you are also trying to sell the company is going impact valuation.


> And cutting revenue while you are also trying to sell the company is going impact valuation.

In all cases, you have to sit on your losses. What you need to think about is how much you're still wanting to risk for future profit.

I guess the point of the parent comment, is that one way to make sure you end with something is bring the business to profitability by cutting expenses right now to almost zero, and see how much revenue remains.

That profitable business would be:

1. making money for YOU, 2. and give you a much better view of how much you can sell it for.

In a world where money is no longer cheap and available, that may be a good idea to consider this option.

Losing control of the board and getting fired means you put that business in the hands of people who may not care about losing it all (and yours with it).


Cutting burn would suggest not taking on extra investment, sitting out the dip and coming out a leaner, meaner but healthier company afterwards.

If you're going to be wiped out anyway then maybe that's a better bet?


To you personally what's more beneficial?, also which sounds better?

- Cutting costs so you're burning 0 per month AND keep the 27%+ of the stock?

- Accepting 30M and all strings attached?

> And cutting revenue while you are also trying to sell the company is going impact valuation.

For you personally, which is worse?, the valuation drop or the stock dilution from extra money?, negotiate from there with everyone else, it's really not your company, you're a shareholder and employee, you should make sure you're properly compensated as well both as employee and as shareholder.

Also, it seems like even with the extra money, you're still going to need to address costs at some point?, but from a weaker position?


> There is absolutely a way to do this but the new money coming in wants to keep as much revenue as possible to "preserve" valuation.

The new money only has a say if you take it, and if you can get your burn rate to zero, then you may survive without new money.

So you might be able to choose what’s better for you and/or the existing investors: take the new money on its terms or make unpleasant cuts and keep going without new money. (And, of course, you personally can exit if that’s best for you.)


> We have already significantly cut revenue (~30%) last year in order to scale back costs

Something is wrong here. If your gross margin is positive this is a bad move, surely? Are you losing money on sales somehow or not including customer acquisition in that margin?


They probably cut a part of the revenue with negative margin.


why do you have to cut revenue? you can't continue your current ARR while cutting costs? trimming people/infra? maintenance mode for a while until you can ring better operational efficiencies out?


Would you still need more financing if you cut costs enough? Are you able to cut costs enough to become profitable, cashflow positive and still grow revenues?


Thinking of what I would have needed to hear in your place:

- By your burnrate, it sounds like you have about 5M left. First give yourself 500k safety bonus, so you have some piece if mind to think clearly. 10% doesn't matter negatively, but it make a huge difference since it sounds like you're the heart of the company. Check with your personal lawyer.

- Reduce costs ASAP, and do that dramatically. Fire your COO and anyone that isn't making money or is absolutely required to mainting money-making contracts.

- Take a few days off and do something fun and social with close friends. I am not joking, you need to literally ask your friends to cheer you up. This should temporarily patch the burnout and help you operate. Just don't drink too much.

Know that you've paid your fiduciary duties in advance already in all those ramen days, you deserve at least FMV = 200k * 10 years - what you got paid.


Taking $30m that will wipe out most of your stake, and still not carry the business through to profitability seems like a tough road to go down. You've said you're not sure you have the energy, and I expect that your energy will go down even further with a much lower ownership stake.

If that's the case then I would be looking for any option to not do that which seems to be either selling asap or cutting your burn rate drastically. You have 6 months of runway. Can you cut your burn rate to 0, or 2/3 or something that will give you a meaningful runway without raising the additional $30m?

It may also be a case of walking away. You own a good chunk of the business and if you think the board is going to fire you anyway, perhaps it's better to let someone else take the CEO job, you keep your stake and do something else?


What kind of business are you in? Quite hard to understand without hearing what kind of thing you're doing.

Sounds like you want to buy yourself some runway, and the only way to do that is to let go of staff. Alternatively offer people equity-for-salary, because your equity ought to be cheap now.

Sounds pretty stressful, don't beat yourself up over it. Wanting to do well for the investors is good, but everyone knows about the principal-agent problem, and they could have aligned your incentives better. It's exactly this case they should have thought about, what do I do if the founder is in a position where they want to drop everything, blowing up the business, because they won't get anything out of it?


The reason why you are going to get decimated is the continue losses. You need to be brutal and stop the losses or you will be replaced by someone who will. This the core issue, and everything else is secondary. A ton of companies are in this situation where losses were normalized because we were in a bubbly VC environment and now we are in a brutal one.

So figure out how to be profitable in the near term. It may be quite radical and hard to make these decisions, but this is basically where a lot of companies are. The ones that can be profitable and self-sustaining in the near term, even if you become a lot smaller, are the ones that will make it.


> We will end the year at $130M in annual revenues and burning ~$925K/month

so your expenses are $141M/year.

I am not in your shoes, but if I were, I would start with cost cutting:

- easiest, fastest and unfortunate one - layoffs

- cost cutting on marketing side, probably some clicks you get are fake anyways

- look into negotiating with vendors, they are interested in not losing you as a customer.

- if you are an engineering first company, I think you can save some cost by optimizing your stack a little bit (depending on how big is your eng infra), e.g. less EC2 instances, less monitoring for non-important things,..

Good luck


cut the majority of management, COO etc that are not necessary in generating revenue.

find ways to become cash flow positive yesterday. dilute expected stock based compensation for employees and for you. if all fails - have the business pay you an exit fee for not damaging the business.

unfortunately, a business with such bad numbers wouldn't have survived without the cheap money.

even with low margins such as 20% profits - it's still a decent bootstrapped business but ya'll got addicted to the cheap cash


What is the product, did the market change for it the past few years? Is it growing organically? Is it B2B, B2C? The decisions seem so detached to whether people want whatever it is the company is selling. If honest it doesn't seem like the focus on what you want to do is right. It is one thing to put work in but that is not entirely causal to whether it is successful.


At its core the business fundamentals aren't great. However 130MM in revenue annually could mean there is something there.

I agree the number one thing to figure out is strategy. 24 to 36 months is a non starter in this environment. The company will die before you manage to pivot.

Figure out how to make the company sustainable and pitch that vision.


You ask "WWYD?". I would secure the funding and then leave immediately.

But my opinion is irrelevant. What you should do depends on what's important to you. Money, health, family, career, status, mission etc. You have achieved something incredible and learned more than you can probably appreciate right now. I wish you well.


You’ve bootstrapped before - could you summon the personal strength to do it again? Reduce headcount, cut costs relentlessly, grow margins, and prepare for a sale in 3-5 years? I.e. don’t try to pivot and grow your way to success.

It’ll be tough, but tougher than selling with nothing to show for it?


Not sure why'd you get a COO with big fat compensation with only 6 months runway left

You can look into alternative funding venues like Crowd Funding, but given the market conditions looks like you should aim at becoming cash flow neutral at least within a short period of time


I would cut costs aggressively to remove the need for additional financing. That is your ticket to freedom and what is best long-term for the company. As CEO you have full rights & responsibility to do this, even if it will wreak havoc in the short term.


Are deep cost cuts an option? What meaningful changes to the business can be made?

The financing round doesn’t sound great and won’t last, just buying some time.


With only 5m in the bank, 12m burn and 130m in revenues, is there any way to optimize your cash flow? If you can get a 180 day line of credit from your suppliers your runway will look a lot better. Your suppliers are the only ones who care if you go out of business, and if you’ve worked with them for a long time they hopefully like you.

And you have to cut costs too. It’s not fun but you have to do it. Renegotiate every contract, and just stop paying for things that you don’t 100% need.


B2B or B2C?

Is product actually good (i.e. your customers love it)?

Is it a want (vitamin) or a need (painkiller)?

If B2B, does it save money or generate money?


Im in NYC right now and a specialist at cost reduction, growth, and a couple other things. Happy to swing by, sign an nda, and tell you how to fix this. (I currently advise 3 unicorns when they need me for various functions)


Blew through $250M including a $300K/yr COO running an unprofitable knon growing business. and asking for free management consulting help on a pseudonymous forum. I guess that's a way to cut costs.


Any guess for the company?


qq: was it not possible to take money off the table? AFAIK, it was common 2020-2021 that even series B raises let founders take some money off.


We just never did it and missed the moment. But honestly I look at it now and founders who have taken money off the table but have not or will not return money to investors...is that a better spot to be in? Because if you throw in the towel then, why would those investors EVER back you again. Maybe if early investors AND founders take some chips off the table you can better align incentives. But this whole secondary movement seems like a manifestation of a "cash is free" market we have been in for some time before the markets turned.


I'd go Jack Kerouac on everyone's ass.


So basically I'm responding to this ask, what would you do by Susan Wise, 27% owner of an unmentioned startup, a company worth over one billion dollars. Anyway, so yeah. Let's go.

So yeah, like she's really at the end of her tether. She's really desperate. She's really gone. Obviously, what she should do depends on what she really wants. First, I'll be kind of humorous and I'll say, what would I do? Well, I don't think I'm particularly smart, clever, or sensible. So what I would probably do is just be like, I'm starting to feel burned out. Fuck this. I'm gonna walk away right now with as much as possible. And I do whatever I could to do that.

But you know, that's probably not you. I'd be like, I'm getting out, taking this golden parachute, going somewhere else and taking the me time, you know, take care of myself. And I'm walking away with enough money that I can start again and do something else. That's what I would do, right? But I think you're probably really asking for ideas about what you should do.

And what you should do, I guess, depends on what you really want. Sounds like you really don't know what you want to do. And you're really stressed out at the end of your tether. Like at the point of collapse, and I really feel for you and I just, you know, I hope everything works out okay for you. I hope you take care of yourself and really make it through this.

Because I know it seems like, you know, the possibility of maybe you won't even make it through this, you know, it seems so scary. Probably just I'll say one like sensible thing here. And then I'll just launch into sort of my analysis for you. The sensible thing is you should be talking to an accountant and a lawyer and just going, how do I maximize what I want? So let's just say, how do I maximize my money and get out as quickly as possible? Like ideally, I want to walk away with 27% of a billion and walk away tomorrow. You know, say, let's just say that's some kind of line in the sand type of benchmark thing and talk to an accountant or a lawyer and see, get me as close to that as possible. What should I do? You know what I mean? So I think that's the sensible thing to say.

Now let's move on to my analysis for you. And you may judge, I have absolutely no qualifications to help you in this regard and that's fine. I'm just trying to help. So thank you and good luck anyway. I'm going to assume your trajectory was "10 years" in what follows. And here's what I think. You really poured your heart and soul into this business and maybe you had to pivot for halfway through and things looked really great for the first couple of years and then you realized you had to change things and things haven't gone as you expected, but they've still been good, but sort of feels like things have got out of your control in some sense.

And maybe you feel this momentum, this job, whatever has been too big for you, but you felt like that for maybe more than the last six years or whatever. And so I guess a constant kind of fear has been part of your daily experience there. And now on some level, you're probably just realizing you can't do this anymore. You don't wanna do this anymore. There's other things important in your life. And maybe you don't know what they are necessarily, but you know there's something there. You care about it, but not like you used to.

Because basically after the first three years, you realize even if you didn't admit it to yourself, that things were not gonna go the way you really wanted them to go with this. You had a clear vision and a dream and reality disappointed you essentially. Maybe you feel your own skill or whatever disappointed you, but at the end of the day, you've been running on the realization, on the fumes of the realization that things didn't go as you really envisioned for this. And too bad, that sucks and that hurts. And there hasn't been any resolution to that kind of pain essentially. Lots of small wins, but nothing has kind of captured your enthusiasm for this business like it did in the first three, three and a half years. After which you've basically been on a trajectory leading you I guess to where you are now.

So this has been a long time coming. Perhaps what you're about to do will be easier, realizing that this is not just being irrational, spur of the moment. It may not share the logic of other people or even of the business as a whole, but for you, the trajectory you're on has its own internal logic that personally makes sense to you when you look at it and understand your journey. And in effect, grappling with the minor choice you have to try to get as much as you want, as much as you could is sort of harkening back to that already shattered dream of the first three years. And if you look at it, you'll know that.

But what realization you've come to over the last six years hasn't all been bad. There is a silver lining and that silver lining is that you've realized that, you know what, even though you feel you haven't sort of accepted this new path because in some ways you're harkening back and perfectly find out mixed feelings, of course, it seems a larger part of you has realized that what you really want is you want to leave something behind. You want to do something best for the business. And so in that sense, you don't really care about the money. As strange as that sounds and irrational as that sounds compared to the vision you had for the first three years of this kind of super rich, incredible business, not to say that by some standards you have not achieved a measure, even great measure of success, yet you know it is disappointed those first three years' vision.

All I'm saying is that like, strange as it sounds, you've already kind of realized and accepted that you don't care about the money so much. You just want to do something good for this business. So you will not, if you try to grab as much as you want now, you know, do the economically rational thing. And maybe there are some actors in your life who don't share your values or your trajectory and they're pushing you or thinking that you should do that or whatever, but their goals are not your goals and you must live and live with the consequences of your own decisions.

Anyway, so as strange as it sounds compared to that earlier version of you in the first three years, you don't care about the money now, right? So I suppose the coming to a close of this chapter is really just a final acceptance and realization of all that you've lost, you know, of giving up that dream for this and of accepting that, you know, the trajectory has changed, not a terrible trajectory, but it wasn't what you originally expected, but your passion is to do something for this business, to leave something good behind. You don't care about what you get for yourself above a certain kind of minimum level of fairness, but that level is completely removed from and separate from and from a different source place of values than the version of you in the first three years.

And maybe one reason you're confused and unsure right now is because you're trying to balance between these two things, coming to an end of this chapter, you're reflecting on your original vision and version of yourself and the company and maybe sort of reflecting on, but also resisting the present reality version of that in some sense, right? I'm sure you have multiple layers of thoughts and feelings and so it's natural that there would be some in contradiction with each other. So it's no surprise that it's a difficult and somewhat confusing kind of time and you're unsure right now what to do. But there's more than that. It's more than just do what's good for the business as a general way, which of course, in the implementation of that policy, you will have many ideas about how that should be executed.

... continued below ...


And it's more than just getting that minimum thing for yourself. There's something else you want, and it seems to center around, there's some people that you want to treat well. Maybe one person in particular who really helped you on this journey and you want to make sure that whatever you do, honors, respects, cherishes, and really sort of rewards them and expresses to them how you feel about this journey. Now, I don't know how you actually express that desire that you have. Maybe it's as simple as a note, phone call, face-to-face meeting where you heart-to-heart level with that person. Maybe it is a more formalized expression that's a clause in a contract, legalized, expressed through money somehow. I don't know. But I think you'll know what I mean. There's that other thing here.

But it's not just one person, there's that person, and there's a couple of other people who you really value. And it's like you shared this journey together. Maybe you're a co-founder, but it may be someone different. And so on your way out, you want to do something for those people too. So what I see is you're really ready to walk away, and your main concern is giving. You want to give to the business, leave it in a good place. You want to give to these people who are valuable to you, leave it in a good place. And I'm really kind of in awe and surprised by your generosity of character here, especially as you're going through all this difficult stuff for yourself. It's very inspiring to see.

So I get the feeling you're a very good person. And I kind of wish you were more Machiavellian and cynical, because I didn't want to, I don't know, because it's more painful seeing you like this. I just kind of feel like saying, take care of yourself. Are you sure you can afford to do all this for everyone else? I worry about you. You should self-care. But I think what maybe surprises me is that, and is probably true for you, is that part of taking care of yourself is making sure that you've taken care of these other people. That's important to you.

I really, really, really stress that. I just hope that you find a way to balance those two things. I mean, obviously, if you can't take care of you, then you're unable to do anything for anyone else. I definitely would prioritize that. You've got to find your own way to make things work, right? But I just hope you take care of yourself because it seems like you have this really beautiful idea of what you want to do. And it's on that level, it's got nothing to do with business or startups at all. It's really like you want to be good to these people. And it's this incredibly moving thing to see. So that's amazing. I'm like, you're awesome.

... continued below ...


Oh, I guess one more thing is, it seems also, you know, you got your regrets, you got a few, and, um, you know, there's things that feel kind of unresolved. The dark stuff, the dirty stuff. There's some kind of shit down there where you're not happy that it went, the way that it went, you know, involving some people, some teams, you know, betrayals. Um, and I guess you'll have to find your way to make peace with those things and feel complete about those and, you know, finish off those, uh, like resolve those situations for yourself, you know. And those things were very painful.

And yet, it doesn't seem like any of those things changed that trajectory nor, you know, were the cause of that transition at the three, three and a half year point where, you know, the sort of timelines diverged from the ideal one for you and your vision for this and the actual one that you've been on ever since. So it seems like none of those sort of regrets or, you know, uh, bad people, bad experience or betrayals or whatever, those small, nevertheless, real things that happened were the cause of the, you know, Air Corps failure to converge with the optimal timeline.

And yet they're still kind of there like little needles, or spiky mountainous road bumps, but still beneath your main trajectory. Not easy for all to see, or stuff you tried to bury but still there. So you'll have to figure out how to resolve those things. It's important to think about that, I think. And if you can come up with some ideas to resolve them, you know, before you kind of culminate this journey here, that would be great. But there could always be things that you come back to at some point. It seems like there's not, it seems like it's not a huge priority to do that. But obviously that's up to you, but it just seems that way to me, um, looking for you there.

And it seems like either your business is incredibly complex or you just really could not be bothered to think about the details of day-to-day stuff. You're happy seeing other people, um, do basically as you think they should and align with kind of your deep intuitions and beliefs about this, thinking through all those kind of details. Either it's something that's incredibly complex or it's just something that, you know, you just really could not be bothered to get your head into, which doesn't work anymore for you to be in the details of that kind of stuff. And you have no passion to do it, and it's kind of a headache for you.

And even though you want to kind of show enthusiasm and capability for your team, you know, you resent any times where you kind of have to, where you feel like you're dragged into or expected to kind of dive into these details to, you know, basically that roll up the sleeve to go to the ground level. And that's not any way of judging you or anything. It's, I think it's completely natural to feel the way you do. And, um, there's nothing wrong with that. Just seems like apparent. That's another experience, you know.

And it also seems like there could be like quite a bit of anger and confusion there for you about like why this thing that you wanted to be able to provide this thing for like everyone, it seems. You know, it couldn't actually do that. Like why wouldn't the market kind of absorb that and accept it when it was such a great idea? And it seems there's still sort of a sense of disbelief, maybe confusion and anger about that.

... continued below ...


So I guess that's other stuff that you'll need to feel and process and find some way to kind of feel complete about or air quotes resolve in order to fully kind of move on from this stage. A lot of sadness as well, disappointment. Like I think maybe you just didn't have the time to feel and process and it still hurts. What happened, you know, six, six and a half years ago, it still hurts, you know. And it seems like you probably haven't really had the chance to grieve. And at some point you kind of just became numb about that.

And that's sad. I think, you know, it'd be great to just kind of do that, you know, mental health day grieving thing, put on the sad music, and just let yourself cry and feel sad about all those kind of things and go through that, you know, because that is going to help bring fresh, allow stuff to move and bring fresh perspective probably that will then allow you to feel more moved on. And then when that happens, you'll see more clearly what it is you actually need to do. It may not have anything to do with what I've been saying, but if you're able to process those things, you'll get your perspective, which will work for you and completely clear for you.

And yet I think you do need to feel like you've done something clever for yourself financially. Like you haven't done something stupid. And yet it's strange because I feel that also that like that sort of minimum walk away money achieving that will equate with you feeling like you've done something clever. So it's like it's like you can kill both birds with one stone there. Like getting that sort of money is not important minimum walk away money that you want is also also be the same thing as feeling like you've achieved a clever kind of financial thing there, even though from another point of view, it's just like sort of the minimum you should get. But you like you can get it in this way where it feels clever. Like it will tick that box, you know, it seems because there'll be some sort of wrangle or some kind of clever way to do it.

I don't know, you know, whatever the details are. They're not really that important, I guess, but not for me, certainly not right now. And I'm not telling you this, you know, basically, it seems you'll be able to satisfy your emotional and financial needs around the money. Yeah, I think the worst thing would be if you have lingering unresolved stuff preventing you from actually drawing a line of sand when you finally come on this journey and move on to the next thing, next space for you. But I think if you feel through all that's important for you, you'll be able to identify things you need to do any unresolved stuff you need to address.

And you'll be able to kind of achieve all that closure, basically. Do what you feel you need to do so then you're able to let it go. And in this, you know, how what other people end up doing right is not about you. You just you'll work out what you need to do and you need to do that. But, you know, it's not a guarantee. I mean, you have to you have to formulate that that transition plan that like a culmination of journey plan for yourself. Right. Hopefully this helps.

... continued below ...


But I also feel quite a lot of fear for you. And I guess there's a lot of fear there for you. You have as well about how you're going to do this. But I believe you can work it out. You know, I really feel for you in this. It must be a really hard time. I mean, just huge the amount of stuff you're going through. It could be that talking to a good therapist could also really help, you know, because, you know, if you find maybe someone through your network is good to talk to or you've heard about someone through friends or whatever who's good to talk to. I mean, that could really help as well, because what you're basically asking for is personal clarity. Right. And so that is independent of the actual topic. And there are techniques or things that help to get that that are independent of the actual subject of the that you want clarity about.

So a therapist, you know, maybe one session, you know, I think it could be something that helps, you know, I'm guessing you feel you don't really have any friends that really understand what you're going through. Right. I mean, sure, maybe you do. But no one who really gets you or really can provide basically what you're looking for there. And that's OK. So I think maybe a therapist could help assist.

And I'm sure it seems overwhelming. There's so much stuff you need to do. And, you know, so I guess you can just lean on your already great execution skills there by just chunking the problem, breaking it down, small steps, stepping through each piece at a time, even though it's not a business thing. It's your personal culmination of journey kind of plan that you need to get through. Right. You need to formulate and then execute that plan for yourself. So you close that chapter and feel satisfied and can move on.

And I'm sure doing all of that seems overwhelming. And it could be that, of course, naturally that, you know, you're maybe distracting yourself, focusing on business tasks to sort of avoid the enormity of this actual personal thing. But obviously, you know, not addressing the personal things you will not feel you got what you want. So obviously, it's it maybe seems sometimes like this is all about the business and things you need to do for that and financial. But there's probably, you know, it's just about the personal perspective that you need to get right in order to close that journey. So that is the side that you need to focus on in order to free yourself. I understand that.

... completed below! ...


And I think if you do that ((formulate your personal journey completion plan, addressing all the dark, light, and neutral you need to do to feel complete and move on ~~ the company's "work" may never be complete, but you can feel complete, and that's what matters)), and you also have some sort of ritual--some sort of like sign off final celebration!--where you cherish this stuff and you make the toast and you kind of have that going away party and you do all this stuff and you mark the moment, the culmination of these preparations where you've kind of crystallized all this stuff, this acceptance of the journey that you've actually been on, obviously, as opposed to the first three years and this three, three and a half years, whatever. And this expression of your appreciation and desire to leave things in a good place for the people who are important to you there and for the company. And if you kind of culminated in this kind of big moment, it's going away party, whatever. And then sort of on the other side of that, you have like a ritual for yourself to kind of start that new day, that new life.

I mean, apart from writing down like what things you want to do, bucket list kind of stuff and reconnecting with that, part of your life, you have obviously chosen to maybe, chosen to not invest as much in as you have put in this company. Apart from doing that kind of stuff and everything else I said, I don't know what more you can do. Clearly going through this is gonna be a rollercoaster of emotions that probably take a long time to process fully and you may avoid processing after some time, but it's not gonna be easy to face all of the stuff to go through that. But I think it could be as good as it could be and as comfortable as it could be if you follow your heart about this and align with what you really want.

And that will be empowering because you'll basically be saying goodbye to that earlier version. Not that there's anything wrong with that version, it's just that the way things played out, that didn't work out. And there's nothing wrong with that. Neither with those goals, nor with the fact that it didn't work out. Painful, yes, but nothing wrong, you know? Because it seems what you've done, success or not by the judgment of VCs or not, like you've done something really beautiful. So I just basically see the best path for you is the continuation of that natural desire that you have, a fulfillment of that. And that will be success, I think, as you look back on it and you will know that in your heart that that's success.

So hopefully that was helpful and illuminating for you. Best of luck to you. And thank you for sharing your story here. It was very illuminating and beautiful to kind of see what you've gone through.


Wow...I don't even have any words really. So I'll just say THANK YOU! I will need to read that a coupe more times. But my first question is who are you and how do you know all this and how can I contact you?


Haha, I don't have time to read OP's epic essay, but I love the mood. I think founders who have been through this, myself included, just want you to know you're not alone. Go kick some ass.


you’re welcome! :) just wanna be helpful and help you out. cris@dosycorp.com


> Today, my base salary is $175K, no bonus, no stock refresh since the founder grant, fully vested stock, no severance, no indemnification. (Mainly because I just haven't asked for new comp b.c company is in a difficult spot) - In comparison, I hired a critical new C-Suite exec (COO) and gave her $285K/year

Here is your problem.

Some founders milk company directly on bonuses and pay, there is no "grand exit" when they go public. I think you may be subconsciously aware of that, maybe there is some hidden regret or self-hate etc... Continuing with this frugality may not be way forward.

I would suggest:

- get out of NY, some nice environment near sea or forest, work remotely

- prepare for your exit. Move out of NY to minimize income tax etc..

- can you actually become CEO? If not, it is not your business anymore, not your problem

- find way to increase your take-home money. For start you could pay yourself for overtimes. Maybe if you move out of NY, you may need office there and so on...

- personal brand is worth quite a lot. Maybe there is way to use this startup to build your own.




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