183. Shut Down Week and Write Offs

VC Minute
This week, we're covering an important but difficult topic: shutting down your startup. If you're asking yourself the question, you may already have the answer. And your investors may have already written your company down.

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Hey, everybody. I hope you enjoyed the long weekend and that you’re able to take some time for yourself. What we’re going to talk about this week is shutting down your startup. The theme may seem a little depressing, but I assure you that my heart is in the right place because this is a very serious topic and you may need to hear it, or you may have a friend that needs to hear it. And if that’s the case, send this week’s episodes over to them.

But first, I want you to hear a little bit more about AVL Growth Partners and why I love working with them. They’ve been a trusted financial ally, providing invaluable insights to several of our portfolio companies. I’ve known them through the startup community for over a decade, and they have a stellar reputation. Head to AVLgrowth.com and explore how they can be pivotal to your growth. AVL Growth Partners. Your success. Their expertise.

The advice that we’ve gotten this week is just as relevant in 2024 as it could be in 2034. And who do I mean by us? Yours truly and my good friend, Eric Marcoullier. Eric was a multiple-time founder. He’s an O.G. startup guy who dropped out of college many moons ago to go to the Bay Area and build startups. Now he lives in Boulder. He’s a full-time CEO and startup coach, and he’s phenomenal. He’s got two amazing episodes that I will save for Thursday and Friday of this week.

I was just talking to a founder the other day, and he had a question as to whether or not he should shut down his startup. This was the first time that I met him. I didn’t know anything about him; I knew very little about his startup, but I had to ask him, If you are asking yourself that question, I think you already know the answer.” We’ll see where he lands with that.

What I want to address today is: don’t hold on to your startup just for your investors. Many founders wouldn’t. But there are also many founders that I’ve met who feel an obligation or feel that they want to do right by their investors in some way, especially if those investors came in early and especially if those investors have a personal relationship. I can’t speak to the personal relationship side, but I can speak to the VC side. And I can tell you that if you are questioning whether or not you should shut down your startup, your VCs may have already written you off. And I mean that in the accounting sense, maybe also in the emotional sense. You see, what’s happening behind the scenes is that we keep a set of books that report on the value of the businesses that we’ve invested in.

Most funds review that book value regularly. For SpringTime, for example, we review our portfolio every quarter and decide: are there any here that we should write down or write off? We feel that being a good fiduciary of our investors’ money means that we need to keep our representation of our portfolio as accurate as possible on the books.

If your investors have already written you down, all they’re going to do is turn those unrealized losses into realized losses. And that’s okay because you know what? This is venture investing. Startups are going to go under. We accept that, as part of this, our model is underwritten by it. Eric is going to talk a lot more about why you shouldn’t hang on for your investors’ sake. But I can tell you that, from my perspective, your investors may already be ahead of you. You’ve got to listen to Eric’s episodes at the end of this week.

About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast – get to know AVL Growth Partners at avlgrowth.com. (Sponsored)

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