Preparing To Shut Down a Startup

Preparing To Shut Down a Startup

January 22, 2024 by investor

Preparing To Shut Down a Startup

Sometimes the startup you launched does not make it and must be shut down.

In shutting down a startup take the following steps:

Give an early warning signal to the employees.

Let them know what is happening such as we’re raising additional funding.

Give them a few month’s notice but make clear if things don’t turn around a shutdown may ensue.

When it becomes clear a shutdown is going to happen, then set a closing date.

Give notice to the employees about the shutdown date.

The more notice you give employees the better.

Inform the investors of the shutdown.

Own the failure with investors and articulate the mistakes you made.

If you have any customers, notify them of the shutdown.  

If you have meaningful revenue then you should consider selling the company. 

If you can’t sell the company then you should transition the customers to other solutions.

Finally, close all contractors, bank accounts, and credit cards, and shut down the legal entity.

File your taxes and leave nothing left standing as it could come back to bite you.

It’s tough shutting down a business but there’s a proper way to do it.


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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.