How to Bankrupt a Startup – A Funny Take From SXSW


No one starts a business with the goal to go bankrupt, but yet somehow 9 out of 10 businesses fail within the first 3 years. Many startups outsource financial aspects of the business to companies like Early Growth, which provide 409a valuations and help with equity management and taxes as well as other things. Obviously, this will help many of these startups, but those who don’t will struggle with bankruptcy. Of course, there are still many ways to build credit when you go bankrupt, but it’s a situation nobody wants to find themselves in. Good thing we are in our 4th year 😛

A panel at the recent SXSW conference had a humorous take on how to bankrupt a startup. It was a collection of entrepreneurs telling their war stories from the front lines of multiple failed businesses.

Once you listen to your way through the first 1/3rd of the podcast of pure humor you get to their actual advice, but be warned the satire continues.

For your reading pleasure, here are the main points I grabbed on how to make sure your business fails:

– hire a CEO who doesn’t know anything about your business/industry.
– over engineer everything and build more than you need before launching and testing.
– worry about growing your site without considering how you are going to make money.
– spend a lot of resources building up your company infrastructure before starting.
– make your plan to have x employees by x time.
– never question your current business plan.
– don’t check your growth against your cash flow.
– don’t have enough cash.
– make sure everyone you talk to fills out an NDA and only talks to people who will fill out an NDA.
– don’t make an exit plan.
– make raising investment money the main source of your revenue.
– don’t start until you have all the money you need.
– follow every new fad on the web.
– micromanage everything.
– ignore the naysayers and continue to drink your own Kool-Aid.

One of the panelists ends by comparing starting a business to playing the nickel slots in Vegas. Some entrepreneurs play the slots with only the strategy to win the big jackpot while ignoring the odds. Others play knowing the big jackpot is a slim possibility but keep their eyes on each spin and have a plan besides just winning the big jackpot.

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