In recent times, due to the current macro climate, I have observed many startup founders engaging in challenging conversations with VCs regarding missed milestones, the absence of product-market fit, and persistent struggles without any tangible progress. Some founders even find themselves in tricky situations as their VCs propose shutting the company down and returning capital to investors.
Founders, if your startup is not progressing to your expectations or if you don’t have the same passion as you had before, it is totally okay to find a way out.
It is crucial to be honest with yourselves and critically assess whether it is feasible to continue pursuing the work. Closing shop and returning capital aren’t viewed as failures or incompetence. On the contrary, it showcases a high level of self-awareness and the ability to make difficult decisions.
This process of returning capital can be a humbling experience for any founder in any environment. It is important to remember that startups are inherently risky. Returning any capital back to investors is not necessarily a negative outcome. It can be a choice that allows you to reset and refocus.
I want to share a note from a founder who might resort to this in the coming months. I was impressed by how straightforward and transparent she/he was and am sharing this with permission in the hope that this normalizes these conversations in our ecosystem.
Better to return money than to waste it and return zero in the end.