Search.

Published on the 6th of June, 2024 At the end of last year, I quit my Techstars job. I loved it, but... let's just say TechCrunch covered the mass exodus better than I ever could. So, there I was, toying with ideas before heading off to China for a few months (happy to share that adventure upon request). One idea that caught my eye was what SimpleClosure and Sunset were doing in the US: automating the shutdown process for startups. These companies had raised significant funds and reached the magical $1 million ARR mark in under a year by addressing a critical yet overlooked problem[1]. The Ugly Truth Most startups fail. While you can start a company in minutes today, shutting one down takes months, a heap of cash, and more headaches than you can count. As an early-stage investor who loves being the first money in, I've seen my fair share of founders hit a dead end. In the tech industry, you can go from hero to zero in record time, and when that pendulum swings the wrong way, founders are often left to pick up the pieces alone. Early-stage funds typically lack the resources to support their founders through these tough times, focusing instead on their few winners. It's not out of malice; they just play by the rules of the (“Darwinian”?) game they are in. So much has been done in the UK for starting your business and raising money[2]. Yet, the process of closing down a startup is still paved with inefficiencies, lack of transparency, and little to no support for founders. It’s a legacy industry crying out for digitization and automation. Thus, the idea of UNWIND was born. Our mission? To help founders close down their startups with the right support and enable them to move on to their next chapter faster. Our north star? To make the shutdown process transparent, fair, and compassionate. Have you ever checked out the websites of most insolvency practitioners? They inspire about as much confidence as a second-hand car shop[3]. These are supposed to be your trusted partners during one of the toughest times in your career, yet their digital presence screams anything but. Turns out most are spending fortunes on Google Ads to generate leads, promising pricing and timelines that few actually meet. Non sequitur: In December, I had a casual chat with my friend Aneesh before jetting off to a place I had carefully selected for its lack of internet or telephone coverage. He's a four-time founder and angel investor, and he instantly got the problem. While I was away, he started digging into it and talking to some insolvency practitioners and founders. By the time I got back around mid-March, we were ready to roll up our sleeves and tackle this head-on. The Name Game Flatline Ventures? Not quite the vibe we were going for. You know you're in business when you nail down a name. Credit for ‘UNWIND’ goes to my partner—it just clicked. Short, memorable, and with a fitting double meaning: to unwind a company or relax after a tense period. Perfect. We launched a simple website, started indexing on Google, and created content to drive traffic. We began conversations with founders facing tough decisions, built a comprehensive FAQ section, wrote some (insightful?) articles, and spoke with several insolvency practitioners. I even contemplated taking the notoriously difficult insolvency practitioner exam for a moment. We had our good days—validating the need for a better solution through discussions with VCs, founders, and insolvency practitioners. The current practices feel like they date back centuries. I wouldn't be surprised if they originated around the time of limited liability companies—basically created during the Industrial Revolution to de-risk private enterprise, so you wouldn’t need to marry off your daughters in an emergency or send your wife to live with a distant relative in the countryside if things went south. But there were also bad days. Our Customer Acquisition Cost (CAC) was sky-high, and there were limited ways to bring it down. This led me to create a chatbot (MIRA™) and a financial simulator to help founders navigate the shutdown process without spending hours on calls and back-and-forth messages. Despite this, it quickly became evident that our Lifetime Value (LTV) would remain low. Shutting down a startup is ideally a one-time event, making our product infrequent[4] without the high price tag to justify it. Additionally, in the UK, appointing an insolvency practitioner is almost always mandatory[5], adding complexity, time, and cost. Their fees are capped, and everything charged during liquidation (voluntary or otherwise) must be reported and justified. Liquidation is heavily regulated, making it difficult to scale as in the US, where the process can be more streamlined and flexible. Sunset and SimpleClosure, from our understanding, do most things in-house. That simply would not be possible in the UK. And Now What? [6] When evaluating a new product or early-stage business, I rely on my version of Design Thinking: desirability (do people need this?), feasibility (is it technically possible?), viability (does it make financial sense?), and scalability (can it grow?). Here’s how UNWIND stacked up: ●      Desirability: There is a clear need for a straightforward, transparent, and empathetic solution tailored to startups. Shutting down a B2B SaaS isn’t like closing a bakery. Check. ●      Feasibility: It boiled down to building an automated workflow with access credentials and solid document storage and security. We weren't reinventing the wheel here. We also found insolvency practitioners willing to partner with us. Regulatory hurdles? Not a walk in the park, but doable. Check. ●      Viability: High CAC, low LTV, and tight margins make financial viability a challenge. Our product is highly infrequent without the payoff. ●      Scalability: The plan was never to raise VC funding or breed a mystical animal. Still, we needed a future path with enough market potential to justify our time and a sustainable business model. Without a high price tag or frequent use, scaling seemed difficult. The UK’s regulatory environment further complicates matters. We scored two out of four, not exactly stats that justify going all-in. This realisation took a few days to sink in, but the conclusion was clear. Then, Aneesh floated the idea of offering UNWIND as a free resource, an idea I initially resisted but soon fully embraced. We spent hundreds of hours educating ourselves, speaking with potential customers, writing articles, and developing products. The one I’m most proud of? MIRA™. Not a big deal, but I had to jump through a few technical hoops to make it work elegantly. The need for an unbiased tool is clear, so making all these resources available to founders made sense to us. As of today, UNWIND is a free resource. Our mission remains the same: to help founders navigate the difficult process of shutting down a startup, providing a supportive community (Join here), and alleviating the stigma associated with failure. To know more, visit UNWIND Ventures. Notes [1]  SimpleClosure raises $1.5M in less than 24 hours (Techcrunch) The business of winding down startups is booming (Pitchbook) Why VCs are investing in startups that help other startups shut down (Techcrunch) [2] You set up a business in less than 10 minutes on gov. uk. Companies like Seedlegals and Odin have done a lot to simplify the startup's early days and raising capital. [3] I actually have the utmost respect for Ling: 1) she is hilarious, and 2) she runs a very tight business. [4] I have a passion for getting my head around the economics and habits of infrequent products. Here is a good article if you are not familiar with the notion. https://www.reforge.com/blog/iced-theory-growing-infrequent-products [5] The only exception is in the case of a strike off the registry or going dormant. [6] House of Light, Mary Oliver

March 30th, 2024 (last updated April 15th, 2024) Deciding to close your startup can feel like you've hit a crossroads with only one way out. But, before you take that path, it's worth pausing and considering a few different routes that might lead to unexpected new destinations for your business. Here's a rundown of those options, each offering an opportunity to give your startup a second wind or realise some value to make things easier. Seeking Acquisition Opportunities Sometimes, another company might see value in what you've built, even if it hasn't turned out exactly as planned. An acquisition could offer a way out that also rewards your hard work. Pivoting the Business Model or Product Offering What if a slight change in direction is all that's needed? Pivoting could mean tweaking your product, targeting a new market, or overhauling your business model. It's about finding the fit that eluded you the first time around. Some studies show successful startups pivot on average 1-2x before hitting product-market fit. Downsizing the Team and Reducing Burn Tough times call for tough decisions. Reducing your team size can be one of the hardest choices you'll make, but it can also extend your runway and give you more time to explore other options. To buy yourself more time, also cut any expenses that are not business-critical. Seeking Additional Funding or Investment Securing more funds can be challenging, especially in a tight market. If you believe in your startup's potential, convincing investors to do the same could be the lifeline you need. Consider a flat or even a down round if you are convinced you can turn things around. Considering Strategic Partnerships or Collaborations Joining forces with another business can open up new markets, resources, and capabilities. It's about creating win-win situations that benefit both parties. Going Dormant Going dormant could be a viable option if you're not quite ready to let go but need a break to reassess and strategise. It allows you to pause operations without fully closing down, giving you space to plan your next move. Read more on our post about this here. Making the Decision Choosing the best path forward requires a deep dive into your startup's current situation, market potential, and personal goals as a founder. It's not just about salvaging the business it's about aligning with your vision of success, sustainability, or choosing a graceful exit. Before you decide to turn off the lights, take a moment to explore these alternatives. You might find a road less travelled that leads to your startup's next great adventure.

First published March 31st, 2024 / Last updated on April 22nd, 2024 What happens for your SEIS & EIS investors if things don’t work out with your startups and you call it a quit? There are different scenarios to consider while keeping in mind the investors who supported you since the beginning of your journey. First, let’s remember that to qualify for SEIS/EIS tax relief, you must satisfy a number of conditions. On the company side, the main criteria are: Be based in the UK and have a permanent establishment Not be listed and not planning to list within 2 years Have less than 25 full-time employees and then £350,000 in gross assets for SEIS, or less than 250 employees and less than £15m in gross assets for EIS Carry out a qualifying trade and not be engaged in any excluded activities like financial services, property development, or farming Use the investment proceeds for the qualifying trade within 3 years On the investor side, the main criteria are: To be a UK taxpayer and over 18 years old To not hold more than 30% of the company’s share To not be an employee of the company unless they are also a director To pay for the shares in full and in cash To hold the shares for a minimum of 3 years There are also several criteria relative to the shares: Must be ordinary (although some lawyers found a clever way around this), non-redeemable, with no preferential rights Raise no more than 3250,000 through SEIS and the rest later through EIS What happens to SEIS and EIS tax reliefs when we wind down? It depends on a few factors and should be assessed carefully on a case-by-case basis. The first and critical distinction is whether or not you voluntarily shut down. Scenario 1 - Your startup is insolvent If a resolution is passed to enter into a CVL or the court makes an order for the winding up of the company (court-mandated liquidation), or if the company is dissolved, the company will fail to satisfy the ‘trading company’ condition for tax relief. However, this failure is disregarded where the winding up or dissolution is for genuine commercial reasons—usually that the company is insolvent. So, in this scenario, it is unlikely that HRMC will withdraw the tax relief from the investors. This is precisely for this scenario—and its opposite— that the scheme was put in place in the first place. Scenario 2 - You decide to enter voluntary liquidation But what happens if the company decides to shut down voluntarily? As for the above, SEIS/EIS investors might be eligible for loss relief if the company is voluntarily wound up for genuine commercial reasons—in this case, the likeliness of becoming insolvent. The key is that the voluntary liquidation or shutdown must be for legitimate business reasons, even if the company is not technically insolvent. As long as this criterion is met, the investors can still claim the various tax reliefs associated with SEIS and EIS investments, but only in the case of MVL (Members’ Voluntary Liquidation).  Suppose the company is simply struck off the register. In that case, the investors may not be eligible for this loss relief, and any distributions over £25,000 would be treated as income and subject to higher income tax rates rather than the more favourable capital gains exemption of an MVL. Scenario 3 - You sell your startup Loss relief will still be available to your investors as long as they receive less for their shares than what they paid for initially. In that case, the rule of 3 years does not apply—they still will be able to tax deduct the loss. Note that if you were to sell the shares for more than what was paid for within 3 years, your investors would not be eligible for Capital Gains Tax (CGT) exemption and might have to repay HMRC their Income Tax relief. Scenario 4 - You go “Dormant” Your company is still registered at Companies House but has no activity. This is not great for your investors because you can’t return them their capital—if there is anything to be returned—and they can’t claim loss relief unless they are able to make a negligible value claim while still holding their shares. You should only consider going dormant if you need a break and think your startup might make a comeback. Do we need to do anything specific to ensure our investors can claim these reliefs? As you navigate the winding-down process, keeping clear records and communicating with your investors is critical. They'll need accurate information about their investment and the company's closure to claim relief. You don't need to navigate this alone, though—seeking advice can ensure you're dotting the i's and crossing the t's for everyone's benefit. Read more about SEIS/EIS loss relief for investors at the gov. uk website. Conclusion While winding down isn't the outcome anyone hopes for, SEIS and EIS were designed with the understanding that not all startups succeed. These schemes offer a cushion for investors, acknowledging the risks they take by supporting startups like yours. Loss relief, in particular, is a way to recognise their contribution and mitigate their financial loss. Remember, the end of this journey could be the start of a new adventure, benefitting from invaluable lessons learned and relationships built. FAQs For Investors: Generally, as long as they've held their shares for the minimum period (3 years for both SEIS and EIS), investors can keep their initial income tax relief. If your startup hasn't done as hoped, they might be eligible for loss relief, which can soften the blow by offsetting losses against their income or capital gains tax. Capital Gains Tax (CGT) Exemption: If investors make a profit on their shares (we all hope for a positive outcome, even in tough times), this gain is usually exempt from CGT, provided they hold the shares for the required period. What if we wind down before 3 years? If the company closes and the shares are disposed of before the 3-year mark, investors could lose some of the tax reliefs they initially claimed. However, loss relief might still be an option, depending on the circumstances.

A COMPREHENSIVE GUIDE Last updated on May 30th, 2024 The importance of sending regular investor updates cannot be overstated. These updates are a critical communication channel, serving as a bridge between the founders and their backers through the highs and lows of the startup journey. A well-crafted update can bolster investor confidence, encourage further support, and make them feel closer to your company (Seedrs). However, the road to mastering this form of communication is fraught with potential missteps. While providing these updates is essential to maintain transparency and trust, many founders struggle to balance openness and optimism, mainly when the news isn't good. By examining common mistakes, outlining best practices and integrating key insights and recommendations from industry experts, we aim to guide founders in effectively engaging with their investors during challenging times. Investor Updates: A Crucial Practice Investor updates are more than mere formalities; they're essential in maintaining a healthy relationship with those with a stake in your venture. Regular, thoughtful updates can turn your investors into advocates and advisors, providing support when needed. Whether monthly or quarterly, the cadence of these updates can significantly impact your startup's trajectory, directly correlating with the business's ability to navigate growth and adversity. As entrepreneurs, you must switch from "What do I want to say?" to "What do they need to know?" (source). Such discipline in communication directly correlates with a startup's success. According to NFX, "Sending world-class investor updates is one of the highest-value rituals you can learn." These updates serve as vital touchpoints, keeping investors informed and engaged with the startup's journey, including the hurdles it faces. Startups that provide regular investor updates are 3x more likely to receive follow-on funding. Visible Data Set & Investor Survey 60% of investors don't hear from their portfolio companies quarterly Hustle Fund If you don't write regular updates, your investors won't want to help you. It's hard to help a company and put your own social capital on the line with your network when you have no idea what is happening in your own portfolio company. Elizabeth Yin If your investors think about you positively and frequently, they'll not only help you with specific requests but point serendipitous opportunities your way. That's one way you can "manufacture" luck. Aaron Kharris Example of Investor Updates Let's take a hypothetical example of an effective investor update from a startup facing significant challenges: Subject: Monthly Update: Navigating Rough Waters Together Company X does Y and Z. [Your investors likely receive dozens of such emails per month. It is helpful to remind them who your company is in one or two sentences.] Dear [Investor's Name], This month, we've encountered significant challenges, including slower market penetration due to increased competition and higher-than-expected customer acquisition costs. Despite these hurdles, we successfully launched our beta product, attracting over 1,000 sign-ups in the first week—a testament to our team's resilience and the potential of our product. Key Metrics: User Growth: 15% month-over-month, below our target of 20%. Cash Flow: Six months of runway remaining due to unforeseen expenses. Challenges: Market Penetration and Product Development Delays have set us back, but we're taking decisive action to navigate these challenges. Next Steps: Implementing cost-cutting measures to extend our runway. Seeking strategic partnerships to enhance market position. Ask: We value your expertise and connections in the [industry] space and welcome any introductions or advice you can provide to help us optimise our strategy. Looking Forward: We're committed to navigating these rough waters with resilience and determination. Your continued support and insights are invaluable as we work together towards our shared vision. Shout-outs/Thanks: Always include shout-outs for folks who have helped us in the previous month. Thank you for your trust and partnership. Best, [Your Name] Here is a comprehensive library of examples of investor updates. You should choose a template and stick to it month by month. Always try to be as quantitative as possible and keep things to the point - think about your audience. Handling Bad News Addressing the "lowlight" or "challenges" section is vital and is too often overlooked. It's here that the true test of transparency and trust-building lies. Acknowledging and sharing setbacks openly not only demonstrates integrity but also opens up opportunities for assistance from your investor network. Being upfront about the hurdles your startup faces encourages a collaborative approach to problem-solving and reinforces investor confidence in your leadership. The shock of receiving bad news without any warning can severely damage trust between founders and investors. It's crucial to: Avoid Surprises: Sudden negative updates can leave investors feeling blindsided and may diminish their willingness to offer support. Empathize with Your Investors: Consider the impact of potential insolvency or failure on them. While the financial implications might be limited in jurisdictions like the UK, the relational and reputational impacts can be significant. Being upfront about the challenges your startup is facing is essential. Never sit on bad news or sugarcoat or omit uncomfortable truths. Communicate swiftly and honestly, especially when something bad happens. You don’t need to send an update every day, but in times of uncertainty, be extra responsible, available, calm, clear, and data-driven. NFX Regular, transparent updates that articulate the reasons for any downturn—whether due to market conditions, operational challenges, or strategic missteps—help investors grasp the situation's context. This approach not only preserves trust but also bolsters credibility during tough times. Navigating Towards a Shutdown When a shutdown becomes a real possibility, the way you communicate with your investors becomes even more crucial. Consistent, proactive communication is essential, detailing the steps to mitigate the situation. This includes any restructuring, cost-cutting, or strategic pivots. During such discussions, empathy is crucial; recognising investor concerns and addressing specific questions can demonstrate respect for their support and partnership. Even when facing a shutdown, consistent updates keep investors informed and engaged, fostering a collaborative atmosphere even in tough times, as emphasised by practices recommended by Toptal. Increase Communication Frequency: As the situation grows more dire, updates should become more frequent. This doesn't mean weekly updates full of fluff but meaningful, timely communication about significant developments. Personal Meetings: Whenever possible, meet with investors individually or hold small group calls to discuss the situation. Personal touches matter when delivering tough news. Outline the Wind-Down Process: Clearly explain how the startup plans to wind down operations responsibly. This includes how remaining assets will be handled, any plans for employee transitions, and how customer commitments will be honoured. Mistakes to Avoid In the spirit of fostering a healthy investor-founder relationship during challenging periods, there are several pitfalls to avoid: Lack of honesty and transparency: Misleading statements or failing to disclose the full extent of challenges can irreparably damage investor trust. Inconsistent updates: Communication should not fluctuate with the startup's fortunes; regular updates are crucial, especially during downturns. Failing to provide context: Without a clear explanation of the underlying reasons for the startup's struggles, investors are left in the dark, undermining their trust and the founder's credibility. Neglecting to outline a clear plan forward: Investors need to know there's a strategy for navigating out of the current situation, even if that plan includes winding down operations. Underestimating the Closure Process: If shutting down, not planning or communicating the process thoroughly can complicate the situation further, affecting everyone involved Going "dark": Only reaching out when in need, rather than maintaining a regular update schedule, can lead to a breakdown in communication and trust. By avoiding these mistakes, as detailed by Faster Capital, and embracing a comprehensive, candid approach to investor communications, founders can foster stronger relationships, navigate challenges more effectively, and lay the groundwork for future endeavours, regardless of the current venture's outcome. Conclusion Communicating with investors during challenging times is as much about preserving relationships as it is about addressing the current crisis. By approaching these updates with honesty, empathy, and a clear plan, you can maintain trust and lay the groundwork for future ventures. The journey of a startup is fraught with ups and downs, and how you communicate during the downs can define your character as a founder and the legacy of your startup. Remember, the end of one chapter could be the beginning of another, and handling closures gracefully can open doors to new opportunities and enduring relationships with your investors.

April 15th, 2024 “When you run out of money” is the easy answer. It does not make the process of shutting down any easier; on the contrary. It is likely that, by then, you might owe money to your employees for severance, HMRC or some suppliers and will be pushed into compulsory liquidation. This is not trivial — compulsory liquidation is a significant action with lasting impacts on the company’s directors, including potential investigations into their conduct. At this point, you might no longer have the option to go “dormant” either. (for more information) However, shutting down is not an easy option either. The easiest thing to do is to let the startup run without growth and become what we call a “zombie company” (more on that in a future post). Why is it easy? Because it doesn't require an active decision; just continuing to do the bare minimum to keep the company alive. Deciding if and when to shut down a startup is a profound and often distressing question for founders. Here, we propose a 3-steps approach to guide you through this challenging decision. 1. Recognising the Signs Shutting down a startup is never a straightforward decision. It's a process laden with emotion and significant implications for your team, investors, and yourself. Here’s what to consider: Can you and your company afford it? One of the most clear-cut signs that it may be time to consider shutting down is financial sustainability. If your startup is running out of money and you are unable to secure additional funding, it's essential to consider closure before you reach a zero bank balance. It is generally advisable to have 3 to 6 months of runway in front of you. This foresight allows you to wrap up operations responsibly, ensuring all obligations and final paychecks are met, which is not just a legal obligation but a moral one, too. By the time you get there, you will probably have decreased your burn, and as “founders eat last,” you will probably decrease your salary to little to nothing. We see countless founders putting themselves in financial distress to keep going. Pause for a second and ask yourself if this is worth it. 2. Has the market changed sharply? Market dynamics play a crucial role in a startup's success or failure. A downturn in the market or a lack of demand for your product can be critical indicators. If market conditions are continuously unfavourable and show little sign of recovery or change, it might be a sign to draw things to a close rather than persist in vain. Hopin is a good example of this — they shot to fame during COVID but failed to find their market once the pandemic was over and entered liquidation a month ago. Another recent UK example is Fronted, founded by executives from Apple, Monzo, and open banking fintech Bud. It closed last summer as “it was hit by rising capital costs which went ‘through the roof’ late last year” [Fronted CEO Jamie Campbell]. 3. Do you still have the energy and drive to keep going? This is a very personal question that only you can answer. As a founder, you need to recognise that your passion is a driving force for your startup. Losing this drive can diminish your effectiveness and may signal that it's time to consider other paths. Continuing out of obligation to others, like investors or employees, rather than a genuine desire to persevere can lead to burnout and diminish the chances of success. Don’t keep going for other people, and don’t feel guilty about your decision. Your only responsibility to your employees, investors, customers, etc., is to close down your business in an orderly fashion. 4. Is there still enough growth and potential to grow? Evaluate whether your business is growing or at least has the potential to grow. If your startup has hit a plateau and all attempts at pivoting or finding new growth avenues have failed, this stagnation can be a strong indicator that it’s time to reassess the viability of continuing the business. Of course, this is a tough one. There are countless companies that pivoted years in and experienced a few near-death experiences but became insanely successful, as reported by Michal Friedland. 2. UNWIND simple Decision-Making Flowchart To aid in this difficult decision, UNWIND Ventures created a simple decision-making flowchart that serves as a practical guide to evaluating whether to shut down your startup. Do I want to keep going? Start by asking yourself if you still want to continue. If the motivation is no longer there, it's crucial to recognise this early. If you do, ask yourself, “Why.” Remember that it is a very personal decision, and you should make it for yourself, not for others. As founder, you are the fire behind your company's success. Do I have a plan? Do you have a feasible plan for pivoting, or can you realistically raise more funds? Next, ask yourself the right questions: Don’t wait until funds are depleted. Assess your financial runway and determine if you can sustain the business until it turns around or find additional investment. Assess your available resources—financial, human, and emotional—and make sure your investors are aligned with your plan. Ask yourself again, “Am I really sure I want to keep going for the right reasons?” Make sure you have the stamina to make it to the other side without completely burning yourself out. 3. Exploring Alternatives Before Closing Before you decide to shut down: Consider Selling: Look into selling your company or its assets. This can provide some returns to your investors and might be a viable option if the core business or its assets hold value. It is also a more graceful way to end things (for more information) Return Capital: If possible, returning some capital to investors can help preserve relationships and maintain your reputation for future ventures. However, be aware that some investors are quite ambivalent about this. Here are two sides of the same coins: "It’s often obvious when it’s time to return capital and move on. Burning money for the sake of it is silly, and most founders are talented people just working on the wrong thing." Pat Matthews, Founder and CEO of Active Capital “I think my LPs don’t pay me to avoid mistakes but for how right I am when I’m right. So if the founder/s want to keep going, I’m usually ride or die.” The key here is the founder wants to keep going—many of the investors in the thread said the same thing, they’ll back the founder until the end, if the founder has conviction.” Rodrigo Mallo, GP at Outsized VC It is critical to communicate with your investors during tough times and align with them on the path forward (for more information) If shutting down is the only viable option, handle the process transparently and proactively. Communicating openly with your team and stakeholders will help maintain relationships and respect throughout the industry. It's also essential to manage the legal and financial aspects meticulously to ensure a smooth transition and closure. Final Thoughts Shutting down a startup is never easy, but sometimes it's the right decision. It allows you to apply the lessons learned to future endeavours and prevents prolonged difficulties. Remember, every end is a new beginning. Embrace the lessons, protect your relationships, and prepare for the next chapter with the wisdom gained from this experience. At UNWIND Ventures, we understand the complexities of this decision and are here to support you, whether it's finding the right way to wind down or exploring options to pivot or sell. We are with you every step of the way, ensuring that you can move forward with confidence and clarity.

A Guide to Compassion and Transparency April 7th, 2024 Closing down a startup is undoubtedly one of the most challenging decisions a founder has to make. It's not just about ending a business venture; it's about navigating your team's emotions, expectations, and futures — the people who believed in your vision. Here's how to approach this delicate process with the care, respect, and honesty it deserves. The Heart of the Matter: Communication When the tough decision has been made, how you communicate the shutdown to your team can significantly impact their response and well-being. It's crucial to approach this conversation with transparency, empathy, and responsibility. Make a Plan: Shutting down your startup is a process, so having a plan in place is critical. This should include everything from how you'll communicate with your employees and customers to how you'll dispose of inventory and assets. (source) Transparency is Key: Your team deserves the truth about the company's status. By the time a shutdown becomes inevitable, there are often signs that your team has likely picked up on, such as changes in spending habits, missed targets or hiring freezes. Acknowledge their awareness and be upfront about the situation (source). Respect Individual and Collective Contributions: Recognise your team's dedication and hard work in the venture. Emphasise that the decision to shut down is not a reflection of their efforts but a response to broader challenges. There is also some accountability from you to them as colleagues — and let's face it, in an early-stage startup, you're almost like friends or family working together (source). Prepare for the Legal Aspects: In the UK, the process is more straightforward for smaller teams (less than 20 people) than for larger layoffs (20 people or more); handling the process with a clear understanding of your legal responsibilities as an employer is essential. Also, if you are a UK regulated company, a fintech company, or have been managing money on behalf of some of your customers, you have some extremely important responsibilities in terms of an orderly wind down. Be Prepared for the Emotional Impact: Winding down a business can be an emotional experience, so it's important to be prepared for it. This may mean seeking support from family and friends or talking to a therapist about how you're feeling (source). Be Ahead of the Problem Some of the best founders often think of this stage as "yes, I have to do what is needed to wind down the company legally". But you must also ensure you get all your people on a lifeboat and to safety, even if 'You stay with the ship'. And strangely, as they say, leaders eat last. Founders often have to think of themselves last and ensure the team is initially secure. What does the bad version of this look like? There are countless stories of how founders have completely messed this up. In fact, many people remember those companies that shut down so badly that they couldn't even pay the last payroll. Or worse, inform people after they've missed a payroll that they're shutting down and leave employees hanging about not sure what the future looks like. And employees become creditors in the legal process. TERRIBLE. That is the worst thing you can do. You need to be ahead of this problem. Don't wait until you have nothing left in your bank account (source). Sooner rather than later, estimate the severance payment you must put aside and start thinking about how much more time you can give your employees. Can you add a couple more weeks, maybe a month, by trying to pull the cord early? Actions to Soften the Impact A founder's responsibility doesn't end with the decision to shut down; it extends to how you support your team through the transition. Early Warning: Provide as much notice as possible. Giving your team a heads-up, even when you're still hoping for a turnaround, allows them to prepare mentally and financially for the possibility of a shutdown. (source) Active Support in Job Transition: Go beyond the basic severance package. Offer to help with CVs, LinkedIn endorsements, personal recommendations, and introductions to your network. Leveraging your contacts, especially with founders who are hiring, can help your team find new opportunities more quickly. Consider an Acqui-hire: If your team is cohesive and talented, they might be attractive to other startups or companies. This provides them with new roles and could bring in some funds to help cover the shutdown costs (source). Product and Customer Responsibility: Work with your team to ensure a responsible wind-down of products or services. Whether transitioning customers to other providers or securely handling data deletion, these tasks are vital for maintaining integrity and trust. Maintain an Open Dialogue: Encourage questions and provide a safe space for your team to voice their concerns and feelings. Honest conversations can help ease the uncertainty and fear associated with job loss. After the Announcement How you conclude the shutdown process can leave a lasting impression on your team. Letters of Recommendation and Employment Verification: Prepare letters confirming employment dates and roles. These documents are invaluable for your team's future job applications, especially if the company ceases to exist. Narrative for the Future: Help your team frame their experience at your startup in a positive light. Discuss how to describe the lessons learned and skills gained in a way that adds value to their resumes and interviews. A Proper Goodbye: If possible, formally organise a final team gathering to close the chapter. It's a chance to express gratitude, share memories, and say goodbye in a meaningful way. Stay Available for Referrals and Checks: Keep lines of communication open for future employment checks or referrals. Your support in their next steps is crucial. Final Thoughts Shutting down a startup is a profound challenge, marked not just by the end of a business but also by its impact on the lives of those who helped build it. You can help your team transition into their next chapters more confidently and positively by handling the process with empathy, transparency, and proactive support. At UNWIND, we understand the weight of these moments. Remember, how you end this chapter can define the next one just as much as how you began it.

April 2nd, 2024 In the entrepreneurial landscape, failure is often seen as the opposite of success instead of a stepping stone towards it. With over 90% of startups winding down, it's evident that the journey of building a company is fraught with challenges and setbacks (source). Yet, it's also a path paved with resilience, learning, and, ultimately, growth. As you navigate the aftermath of a startup's closure or are contemplating moving on, it's crucial to remember that this end could very well be the beginning of something new and even more impactful. “My mother used to call failure a stepping stone to success, as opposed to the opposite of success. When you frame failure that way, it changes dramatically what you’re willing to do, how you're willing to invent, and the risks you’ll take. I don’t mean you have to try to fail. That will take care of itself. But, in my own life, a key component of whatever successes I’ve had has been what I’ve learned from my failures.” - Arianna Huffington (Founder of The Huffington Post). Learning from Those Who've Walked This Path The tales of Reid Hoffman, Jeff Bezos, Evan Williams, and Nick Woodman shine a light on the resilience required to navigate the entrepreneurial journey. Let’s take Even Willians as an example. Before his success with Twitter (now X), Blogger, and Medium, he faced two startup closures with Odeo and Pyra Labs. Blogger, initially a side project of Pyra Labs, and Twitter, a project within Odeo, serve as prime examples of how the conclusion of one venture can indeed sow the seeds for the next (source). Williams's experiences underscore the importance of leveraging the "unfair advantages" acquired through past ventures to navigate future market complexities with a renewed perspective. The Unfair Advantage of Experience A study by Ali Tamaseb (Partner at DCVC and author of “Super Founders”.) reveals that nearly 60% of CEOs and C-suite executives who have founded startups valued at over $1 billion brought prior founding experience to their roles. Many of these individuals had experienced failure in their initial ventures. For many of them, their first or even second startups failed. This statistic highlights the invaluable lessons learned from past experiences, regardless of their outcomes. Second-time founders are equipped with a clearer understanding of the startup ecosystem and an enhanced ability to navigate its ups and downs (source). Ryan Hoover, founder of Product Hunt and investor at Weekend Fund, encapsulates this sentiment: "Second-time founders have more experience building, recruiting, raising, selling, and scaling a startup. They’ve encountered challenges that were previously invisible; unknowable to those without the experience. Their network is larger, opening doors to potential customers and future hires. And they have more credibility in the market, even if their previous venture failed. There’s a reason VCs pay a premium to back second-time founders." Embracing Vulnerability and Customer Feedback Adam Forbes highlights the shift in approach often seen in experienced founders: "Second (and third, fourth, and fifth) time founders know there is no business without a customer, so everything starts here. They talk and talk and talk to customers. Non-stop." This mindset of humility and openness to feedback contrasts sharply with the overconfidence sometimes displayed by first-time entrepreneurs. It fosters an environment of rapid experimentation and adaptation, key ingredients for a successful startup. “We innovate by starting with the customer and working backwards. The focus is not the product, but the customer” - Jeff Bezos (Founder of Amazon) The End Is Just a New Beginning Closing your startup can evoke a whirlwind of emotions, but it's crucial to see this not as the end of your entrepreneurial path but as a pivotal moment that shapes your journey ahead. As Winston Churchill once said, "Success is not final, failure is not fatal: It is the courage to continue that counts." In the world of startups, this sentiment rings especially true. Each failure is a stepping stone, each setback a lesson, and every end a new beginning. At UNWIND Ventures, we recognise the complexities involved in winding down a startup. More importantly, we believe in the potential that emerges in the aftermath of such decisions. The closure of one chapter heralds the opening of another, brimming with new opportunities and possibilities. Let's embrace the lessons learned and the spirit of resilience as you venture into the next chapter of your entrepreneurial journey.

April 4th, 2024 Facing the tough choice of what to do with your startup—sell it or shut it down—is a crossroads moment filled with emotion and hard decisions. You've poured your heart, soul, and endless hours into building something special, so have any partners or team members involved. When the path forward seems unclear, be it due to financial hurdles, the allure of new ventures, or simply the lifecycle of your business, remember: you're not at a dead end. You have options, each with its own set of considerations. Timing Is Everything Don't wait until you're on your last leg—financially or mentally—to consider and execute your plan. In the best-case scenario, your startup is growing, you have a good team and a competitive advantage, and you are in a strong position to sell. In the worst-case scenario, you are about to run out of cash or have already run out, the team is imploding, or you are burnt out, and your only option will be to close down, more or less painfully. As Jason M. Lemkin outlines in his newsletter SaaStr Insider! "Before You Fail / Run Out of Money / Etc. If you are slightly hot but with few revenues or have something but not enough, sell while you still have time. Don't wait until you have 30 days of cash. Way, way too many startups wait too long in this scenario." You Are Not Alone A Sifted survey found that 49% of founders are considering quitting their startup this year (source). As a founder, you should consider exiting when building your business is taking too much of a toll on you—53% of founders surveyed told Sifted they'd experienced burnout. On its side, Startups Magazine reported that 72% of early-stage startup founders have grappled with adverse mental health impacts since launching their business, with a further 37% contending with severe problems such as anxiety, depression, bipolar disorder, or substance abuse (source). Of course, there are other reasons to consider exiting your business through acquisition or closure. Whatever your reason, you should have a clear and honest assessment of your situation, your alternatives, and your expectations before selling or closing your startup. Valuing Your Business First, don't sell yourself short by thinking your business lacks value if it isn't making a profit. Your company's true worth isn't just in current profits but also in assets like your client list, brand reputation, potential future earnings, software, intellectual property, and the talented team you've built. Potential buyers value these assets for many reasons, including reducing competition. Unsure about your business's value? Speak with your investors, hire a freelancer with M&A experience, or speak with UNWIND. Selling vs. Closing: Weighing Your Options Deciding whether to sell or close your business involves carefully evaluating the pros and cons of each option. Selling could mean: Creating value/liquidity for you, your team and your investors Seeing your business legacy continue A possible ongoing role or revenue for you An immediate release from business responsibilities Providing security for your team But, it also comes with: Potential lock-up periods and non-compete clauses Lengthy and stressful negotiations The risk of a deal falling through Closing, on the other hand: It is quicker and maybe more straightforward Ends the chapter on your terms Frees you from non-compete restrictions It lets you potentially repurpose or sell some assets Yet, it involves: Paperwork and potential personal liability The task of settling up with creditors and informing customers Impacting your employees and business relationships Making the Choice Consider each path carefully, envisioning the personal impact and consulting with trusted friends, family, and advisors. If partners or stakeholders are involved, discussing a sale's viability and the implications of closing is critical. If you raised some money under S/EIS, both options have potentially different tax implications for your investors (source). Ultimately, choosing between selling or closing your startup is profoundly personal and complex. It's about balancing emotional, financial, and practical considerations. Whether you decide to close this chapter and start fresh or hand over the reins to someone new, know that both paths are steps on your entrepreneurial journey. And remember, at UNWIND Ventures, we're here to support you through these pivotal moments, providing guidance and understanding as you navigate the future of your business venture. FAQs Why close a business? Consider closing if the company is no longer sustainable, you're ready for new challenges, or the commitment outweighs the rewards. What's the difference between selling and closing? Selling transfers ownership and operations in exchange for compensation, while closing means ending the business's operations entirely. Is selling a business stressful? Yes, selling involves complex legal, financial, and operational considerations, requiring careful planning and execution to ensure a smooth transition.