It’s no secret that startups fail. Depending on the source of information, it is estimated that about 90% of startups fail due to various reasons. A lot is written about the reasons why startups fail, but there is little information on what happens with the entrepreneurs after the collapse of their businesses.
A successful exit may also be a challenge as many entrepreneurs feel in the middle of nowhere. Their business is not their responsibility anymore and they are still not ready to start a new venture.
When I founded Transformify, I already had more than a decade of experience as a senior executive with Skrill/ Paysafe and Coca-Cola. People around me were in disbelief as in their eyes I already had it all. Why should I take the risks associated with starting my own business? Even more, some friends were asking me what would happen if Transformify goes bust. To make the decision harder, their views were polarized as some believed that it would be easy to get a job and others were skeptical pointing out that entrepreneurs are entrepreneurs for life and there are no other options for them.
Over the years, I was speaking with many recruiters, after all, Transformify is an HR Software company, and each time they were reluctant to hire entrepreneurs or even candidates having an entrepreneurial mindset. Entrepreneurs were often perceived as dreamers who were never happy with what they had at the moment and always ready to embark on a new venture.
So, what are the possible outcomes for entrepreneurs?
For the lucky few who see their businesses acquired, there are three options:
1. To accept a job offer and join the management team of the acquirer.
Some founders want to stay on board and help the new management. Others simply can’t just leave the venture that was part of their lives for years. Others need to stay for a period of time as this is part of the term sheet that has been signed. Whatever the reasons are, if you want to stay on board after the deal is closed, make sure that this is communicated with the acquirer and reflected in the signed agreements. Also, it is advisable to have in writing your future job title, pay rate, stock options, bonuses, etc. If you are lucky, you may really enjoy your new role and grow with the company.
Jenn Labin who saw her company acquired by MentorcliQ had a very positive experience:
I was an entrepreneur and business owner for almost 10 years. MentorclicQ acquired my company and I had the opportunity to join the team. It was a big step as I was used to being a ‘’girl boss’’, managing my own business and having more flexibility as I am also a mother. I have to say, that the last months were fantastic as our CEO recognises what each and every team member can bring to the table and motivates us to embrace the company culture. From trainings, to video presentations to meetings, we have been provided with everything that’s needed for a team to thrive. People having an entrepreneurial mindset are problem solvers and risk-takers and that definitely adds value to the company regardless if they are the owners or members of the team.’’ Source: Transformify HR Blog
However, it may not always be a positive experience. Often, mergers lead to internal conflicts and ‘’Game of Thrones’’ situations. If it has not been discussed and included in the signed agreements, you as a founder may not be protected and find yourself on the street in no time losing stock options and other benefits. Alternatively, your role may change, you may be shifted to responsibilities that are of no interest, etc. There are many tactics that can be used to make you leave if this is what the new management wants.
2. To retire or start a new venture.
Although this is the dream for many entrepreneurs, very few actually live it. Most of us are tempted to start a new venture or to join a fast-moving organisation and grow with it.
3. To secure a job elsewhere.
It’s not an easy move but some companies like Dell Technologies are open to people who can bring innovation and diversity of thought. Brian Reaves, Chief Diversity & Inclusion Officer, Dell Technologies, said:
Going back to the same talent pools (set lists of universities and referrals) will continue to result in homogenous groups. At Dell Technologies, we’re working to increase our pipeline of diverse talent by piloting non-traditional hiring programs and expanding our list of universities where we have “boots on the ground” to recruit. Adjusting our recruitment mindset is a business imperative. There’s a looming talent shortage in the tech industry and we need to identify and reach all exceptional talent to avoid the pain points that shortage could cause.’’ Source: Transformify HR Blog
It is an unpleasant situation and on top of the disappointment, startup founders are likely to be left with little money or in debt. Negotiating with recruiters in such situation is a tough job as most of them are reluctant to hire entrepreneurs at heart in the first place. However, there is an asset most entrepreneurs still have post-startup failure – their network of clients and partners. These are the people who know you, who have seen your struggle to make your company a success and they are likely to give you a referral or extend a job offer.
On Transformify team we have people who have been freelancing for a long time and have businesses of their own. Learning from their mistakes and experiences is actually a big advantage. Our designers and developers may have other clients and this is even encouraged as that’s how they broaden their horizons and learn new skills. When it comes to loyalty and quality of work, freelancers and entrepreneurs at heart are actually more reliable than typical employees. They know that a warm intro or an excellent reference can bring new clients and open many doors for them.
Regardless of the outcome – a successful exit or startup failure, there is something most entrepreneurs have in common – they are problem solvers capable of finding their way out of any situation.