Dear SaaStr: When Should a CEO Tell Startup Employees That The Company Is Going Under?
I recently asked this of an candidate I interviewed that just went through the shut-down of a top-VC backed start-up. It’s more common these days than in the past, given all the explosion of capital in 2020-2021 … into startups that aren’t going to make it.
It was a good reminder of two things:
- everybody knows; but also
- 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 know as soon as it really gets harder. Everyone knows in a startup, even a big one.
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 the truth — up to a point. Maybe 80% of the truth is a good rule. So:
- If there’s a 10%+ chance you are going to pull through, I say hold back. Especially, because sometimes we are too pessimistic as founders.
- And 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 you’ll pull through, that is rough. I’d 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. You are going for it. And here’s the path forward. Show them.
- If it’s 0%, tell them that day. Don’t wait. You owe them that. And … they already will sort of have known. The best will already know.
Here’s the thing. Almost everyone almost failed in the early days at least. I almost did. But I never did. Be honest, be transparent, but kee[ pushing.
