Difficult situation, I have to shut down my company, not sure how to proceed.

I started the company (Mobile App) at end of 2011, solo, and doing everything on my own. My Wife, who has full time job, agreed to let me go freely to chase my dream, she will support the family expenses (Children’s education, medical, housing load, and etc)..

In 2012, I met my cofounder, and we have raised a couple of small seed rounds (Angel, small VC) to run the company, and since then the company is doing fairly ok. We’ve been featured on major news, users are growing, we grew from a team of two to team of five, and we have some revenue. My cofounder and I draw a small salary to support our day-to-day expenses.

Now, when we are about to close a bridge round before our major Series A, my wife has been asked to leave her current job and she can no longer support the family. And, due to the nature of her job, it’s very challenging for her to find similar job with same pay. Plus, I don’t think it’s fair for me to ask my wife to continue to support the family. I have started to look for full time jobs to support the family. In others words, I may have to close the company.

This gets complicated, as I am still a major shareholder of the company, my investor and my cofounder still want me to continue to run the company. However, I need to get a certain minimum amount to support the family, which is difficult to justify to the board, and our future investors.

What are my options here?

  • Can I technically sell my share to my current VC and cofounder (based on discounted market value), quit, and look for a full-time job?
  • Get someone to acquire the company at a very very low value? But, the VC has the preferred share, in the end, my cofounder and I might end up with nothing (after three years of hard work). And, at the same time, the VC and my cofounder really want to see the business keep going.

 

 

 


  • Tough situation, I really feel for you. Know this…you’ve got this far and you’re putting family first, so you are no doubt an extremely well-rounded, trustworthy, capable person. I’m sure you’ve proven yourself time after time to not only your own team but to your board/investors too.

    I don’t see any way around this, its one of life’s tough challenges. Perhaps the best car to play here is the honesty card. I’m sure you are well respected so go to them and let them know straight up exactly what the situation is.. and let them know now. Your team and your investors invested in YOU more than anything else when they joined you, and you are the BEST person to run the company. Do you think they’ll want to find someone else better to run it? The answer is no.

    You need to go to them and explain the situation and be specific on exactly what you need in the way of extra stipend (or whatever) to keep your family in order -nothing more, nothing less. Don’t expect them to jump on board, in fact they may not. So have a backup, your backup is a carefully thought out performance-based strategy where you will hit certain specific milestones which will be important for the business – if you are allowed this extra stipend.

    Good luck and godspeed. Your issue is close to my heart as I may be in (somewhat) similar shoes in the next year or so.

  • To the OP and the poster above — situations like this will become the NORM, not the exception.

    There is a glut of startups that do so-so and never really get ahead, thereby wearing out the founders and their families. It would have been better if there had been LESS (inexperienced) angel money around.

    You must get out of this middle ground limbo. Either you find a strong investor that warrants you to jump in completely, or get out and have a nice life with a stable job.

  • If you’re the majority shareholder and you think the startup

    a) Has a future

    b) Will be able to recruit someone to take over your spot either as an employee or co-founder.

    You have a few options other than shutting it down or giving up your stock for cheap.

    My thoughts are to talk with the investors and come to an agreement to sell a portion of your shares back to the company for cheap (basically nothing – i.e. the price you bought it for) which in effect will reduce your stake in your company. This will allow the remaining founder/investor to use that to possibly recruit another co-founder. You then hold on to the remaining shares at a lower percentage as a token of you being the original founder.

  • If you have an enterprise that is growing… talk to your investors, maybe you should be raising a bit more (receive a raise) so that you can care for your family while you grow the business. Most investors see this as highly beneficial fr the enterprise.

  • I am original poster, just a update..

    We have several discussion with the board, and we all agree the best option is for me is to “sell” back majority of shares back to company (Zero dollar value), and I will retain some minor share as active Technical Advisor to help the company to move forward

    It’s not a easy decisions..

  • OP – I’m in a very similar situation as you. It’s been incredibly difficult for me and I feel great sympathy for you.

    Do you have an update as to the process is going?

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