No Stupid Questions

From an employees perspective:

1. They will prohibit vacation or send everyone away.

2. Your salary will come late.

3. Various people you haven't seen will visit the office.

4. There's a running gag of packing up to move offices and being told you have all been fired the next day, Arrested Development style.

From a higher-level perspective:

1. Some investors will write off losses to save on their taxes.

2. Others will try to sell any tech or other properties the startup has managed to create to recoup losses.

3. Creditors and bond holders will be paid first before stock holders. Most vc funding comes in exchange for stock.

I was at one for the end. Here's how we saw it go down.

Hyperbole increased on the upper floor. Lots of "big talk " about the future and less chat about the job at hand.

There was a round of death rattle hiring where a whole bunch of people were added to the team.

Then last in first out.

Some of those new hires were there for less than 3 months before they were let go.

Then bloodletting. One or two redundancies a month. Their work being shared between the remaining staff. Told each round would be the last as the company restructured.

The worst bit, the people being fired knew they were going when they came to work in the morning to find they had been locked out of all the IT systems. They then spent the rest of the day sat around waiting to be summoned to be let go.

Meanwhile, the upper floor seem to be driving new cars and spending a lot of time outside the building. You also notice some new management faces and overhear chat about another business.

This massively increased workload and killed morale. Going to work felt like putting on your dead best buddy's coat and doing an impression of them to yourself in the mirror whilst you had to hold down your own job, which had gone from pressured with purpose to pointless slog.

But in return you are promised a raise in the future.

And then one day... You turn up. Your team are all stood outside. The doors are locked and the paperwork is on the post. Most of us got paid most of our last paycheck.

Talking about tech startups:

Depends on the startup. If they have a good team, they might get acqui-hired. If they have any patents or other IP, they might get acquired (for not much). Investors get the bulk of these types of exits, and the founders and employees get screwed.

If the startup doesn't even have that, they may just wrap up the operation and go out of business.

Often the VC's, if they have control of the company, will bring in "gray hair" managers to try to turn things around. The kids formerly running the show may or may not stick around. The first thing the gray hairs do is cut back to a skeleton staff, cut the snacks, and even coffee. They'll try to sublet the surplus office space. One startup I worked at had a fire sale on desks and laptops and such. I got some good deals. Infosec goes out the window, as do most new features. You trim back to the barest minimum infrastructure and staff. If your books seem reasonable, then they try to sell what is left. It can be very strange being one of 5 or so essential staff left after 50 or 100 of your coworkers are gone.

The IT startup I worked at went from providing free food, snacks and beverages to bringing in management consultants clocking hundreds of dollars per hour and finally investing in tonnes of household chemicals while they couldn’t afford to pay our wages. I think they went through bankruptcy at least three times while I worked there, before the former CEO and CTO fled the country.

Edit: The VC’s were in cahoots with the management consultants. No idea if they were involved with the household chemicals. The fools who invested in the IPOs however were fucked over twice.

In my experience, as long as the leadership is somewhat transparent, it'll be completely obvious. And usually begins with attempts to reduce burn rate like auditing of assets/expenditures and of course layoffs.

I'm assuming you're asking as an employee and not functionally how to shut down your business.

There are absolutely lawsuits around startups where funds were believed to be misappropriated, but if the startup was responsible and just couldn't become profitable through bad luck then that's just part of the risk of investing and why investment firms do research on the companies they are interested in. The reason it would close down would be because the investor just doesn't want to lose anything more.

This documentary tracks a startup for 2 years. That startup did not make it through.

Startup.com(2001)

The one I was at just gathered everyone together to let them know layoffs were coming. I was also part of the tech support for the office so I stayed a bit longer to help them wind down systems, wipe hard drives, that sort of thing. The owners were pretty nice/upfront about the whole thing, basically gave everyone something like 2-3 month's pay upfront & told everyone the business is winding down.

The owners did try to find a buyer for the tech & maybe break even or recoup some losses but that didn't pan out. AFAIK the investors just took it as a loss, it's a startup and sometimes startups fail.

We weren't in fancy offices or anything like you see in movies & whatnot, it was more like working in an industrial warehouse converted for office use. Like the kind of building that doesn't provide hot water unless you install water heaters yourself, no central AC, that sort of thing. We had one final party & trashed the space on the way out LOL. I think they just walked away from the lease, it's not like there was any $$ coming in to pay it anymore.

In the last few months after moving out a few remaining people (the owners, tech support, etc.) worked from within the investment group's own offices (they gave us a spare room to work in). Mostly to deal with the old systems/hard drives & prep the existing data in case the owners found a buyer.

Depends on the employer. Some will cut their losses fast, others will hold on till the bitter end.

I somewhat know one of the latter. His startup was going down hard two years back, but even now I still see him active once in a while on the same project. No idea how it's faring, but the guy is still at it. Doubt he still has the same team though, so be ready to move if you're one of the more expensive hires.