This story mirrors my startup experience exactly, including the moment where I had to lay off my friends, took a last long look at "our place" before turning the lights off, remembering that this was what I had sacrificed my relationship for, including the ending where I thought of nothing but the crushing mountain of personal debt. In some ways, this is the archetypical founder's nightmare, and it's happening every day in a lot of places. If you're doing a startup, this should be the one scenario that haunts you and motivates you to do better.
What it should do is motivate founders to 1) read the 'sunk cost fallacy' article on Wikipedia, and 2) set clear lines well before 'mountain of personal debt' and 'ruined relationships', where you call it over.
I walked away from a startup when it ran out of money. The founders were floating a proposal to guarantee a business loan with their houses. That, to me, was a bridge too far, an inability to recognize too much sacrifice in the making.
Yes, there's such a thing as 'too much sacrifice'. Businesses are ultimately, as said in the linked article, run by the math, not the CEO. Overcoming the math with a foolhardy level of commitment is a mistake. It's gambling, not math. You'll learn the same lessons about commitment and failure before maxing out every credit card you can get your hands on.
I agree, but I do think there is more to it than a sunk cost fallacy at work, though that part certainly plays a large role. In my case, the first year doing the startup was absolutely miserable, it was indescribably bad from an economical standpoint. Then, things picked up and for the first time we got the feeling that we could actually accomplish our ambitious plans. We identified personally with our "specialness", behind it all was the idea that somehow we had the right stuff. After a period of good profits and rapid expansion, several huge projects suddenly fell through. If we had never been borderline successful (albeit for a short while) I wouldn't have had this manic pipe dream of a possible recovery in the first place. That hubris was fatal.
Of course, there is never just one reason for anything. Of course, there was a lot riding on making the startup work, not only in terms of financial commitments (that death spiral only appeared towards the end times) but also a large part of my personal reputation. Failing with a startup in rural Germany is simply different than, say, falling through an incubator in Silicon Valley. There is a lot of stigma involved and everyone knows your name. It's also a bitter experience when your own family and friends start seeing you personally as a disappointing failure.
The deeper lesson here I think is to watch out for this type of creeping overcommitment as well as keep a watchful eye on what it actually means to fail. The level of personal commitment I mistakenly applied to my startup was simply toxic, to the point where I couldn't do my job anymore. While maybe trivial for some, it's a huge and complex lesson for people like me who are too quick to put too much behind their ideas.
I absolutely agree that there's a swirling mess of emotions and impulses around giving up and walking away and declaring it over. I was, rationally, absolutely in the clear that it was time to walk away from my own experience. But I still deal with a certain emotional residue around doubts about my decision and worries about how the others think of me.
1 - Knowing what you know now, is there anything you would have done differently?
2 - After you turn off the lights and walk out, what happens next? Have you managed to bounce back? I would imagine that the skills that enabled you to run a startup (even an unsuccessful one) would be highly in demand.
1 - Absolutely, there is a huge list of things I would have done differently - and there's a huge list of failure modes I now know how to look for. The most obvious thing: I would never again borrow money personally to invest in a failing business, that was just unspeakably arrogant and stupid. But there are also a lot of operational and technical details that I would never screw up like this again.
2 - I took a job pretty much immediately. I consolidated my debt into a more manageable package, I'm still paying it off though (it's really huge). The alternative would have been declaring personal bankruptcy, which in hindsight might have been a much better move, but at least I am taking responsibility this way.
I did bounce back in a sense that my life is in order and I'm financially sound again. I have a good job (yes, my crisis management experience paid off), I travel a lot on business, I have a nice car. But it's not the same as succeeding with your own company. On the other hand, my job has taught me several key things I should have known when I did the startup, so I'm really thankful for the opportunities I got.
I'm pretty sure I'll try this again, in a safer and saner environment. It will definitely involve less dreams and more math.
