Brutal Startup Failure

41 points by theHolyTrynity a day ago

My first (vc backed) startep failed after three years.

We started in 2021, working in crypto. Looking back to the time we got started, I made some serious foundational errors: - Selling 40% of the company at preseed for 1.2mln and signing a predatory shareholder agreement - Trusting a co-founder relationship which never really worked, hoping to fix it along time

But 1.2mln$ in the bank made me forget about these issues. Started to work on the business heads down.

After 18 months of iterating, things were finally moving. Our vision became clearer, and we got into a well-known accelerator. But that’s when everything started to unravel.

My relationship with my co-founder began to deteriorate rapidly. I felt like I was doing everything—closing clients, managing product, handling content, brand, fundraising—you name it.

My co-founder, on the other hand, wasn’t pulling his weight. His network and skills weren’t contributing to the startup’s success. I raised these issues multiple times, and each time he made promises that he would step up and deliver. But in reality, anything he touched would underperform.

Eventually, the investor and I decided to revoke his powers. That's when the nightmare began: a drawn-out legal battle that lasted 12 months (one third of the startup life).

My biggest mistake was not thinking long-term. I didn’t fully grasp the fact that I was locked into a relationship with this co-founder for the next 5 / 10 years, with him owning 30% of the company and having no intention of selling. His ego was bruised, and I was overly confident that I could fix everything by just working harder on the business.

That led me into a nearly unbearable situation: - I was working myself to the bone, with a very low salary - I owned less than 30% of the company. The rest of the team had little to no equity. - 70% of the company was split between an investor with no clear value-add and a co-founder ready to go to war.

On top of that, the investor still owed us money and refused to invest further. They helped me fire the co-founder, but after that, it was radio silence. I couldn’t even raise new money with this cap table. The only way out was to negotiate a deal: - The investor would give up some of their shares. - The investor would provide the promised funding. - My co-founder would sell at a reasonable price based on what we had in the bank.

But months of negotiations went nowhere. The co-founder demanded 10x what we could afford and threatened to sue the investor. The investor, on their part, refused to inject more capital into the company.

Despite all this chaos, we actually reached break-even, but the co-founder’s constant weekly threats and harassment drove me to a dark place. My stress levels became unbearable, and I lost all enthusiasm.

Eventually, I made my final offer to the co-founder: "Take $150k now, or we shut down the business." In a formal shareholder meeting, he not only rejected the offer, but called it ridiculous. That’s when I snapped. I hired a lawyer and resigned. The company shut down. 10 employees fired.

Huge. Fucking. Failure.

Now, my co-founder is suing the investor and walking away with around $100k from the settlement. Meanwhile, I walk away with nothing, except lawyer fees.

Lessons Get the foundation right. Product market fit is achievable with time and the right team. The foundation is much harder to change later.