Startup Therapy Podcast

Episode #87

Ryan Rutan: Welcome back to another episode of the startup therapy podcast. This is Ryan Rutan from startups dot com, joined by Wil Schroder, my friend and ceo of startups dot com. Well, we're going to talk about a tough topic today. Not that that's unusual for us. I think most of our topics are relatively tough, but this is one that pretty much everybody ends up going through. Uh nobody really talks about unless there's a huge success at the end, but it is really part of the process for for most startups. And it's a particular interesting time to be talking about this because of Covid and, and because of the impact that's had on the business environment. And and we're talking about is the startup shutdown cycle. Right? And that, this is something that, that is kind of part of the process, right, many startups end up shutting down once, twice, three times in the course of finally finding their stride and like, Look, you've done this how many times now? 9, 10, 11, 12 times over. How often has the has the shutdown been part of the process of actually getting going?

Wil Schroter: You know, it's surprising, it's kind of always part of the process now. And when I say that a lot of founders don't realize that going bankrupt going broke isn't something that just happens once. A lot of startups kind of run through this cycle, like you said a few times, Ryan in my case first startup that I started, I went through the literally bankruptcy cycle. I wasn't, I didn't file for bankruptcy, but I was bankrupt within 24 months of starting, which isn't unusual at the time, I didn't know, you know, there's nobody to talk about it and I couldn't compare notes with anybody. I just thought I was the only abject failure out there. And over time as we've had an opportunity to talk to more and more founders, I mean thousands of founders at this point, we're starting to realize that the startup shutdown, start backup cycle and when I say start back up, I mean with the same business is actually just part of the cycle.

Ryan Rutan: Yeah, it's, it's often, I mean increasingly we're hearing this called other things too right? Like pivoting,

Wil Schroter: pivoting,

Ryan Rutan: right? It's not always, you know, a full on shutdown or positive operations, but sometimes it is right. If you're making a real hard turn on, on product or team or something like that quite frequently, that pivot is essentially equal to a minor shutdown, right?

Wil Schroter: It is. And look in my mind because I've been through this and you've been through this enough times and I think we've had the benefit of talking to so many other founders so we can kind of live all these lives, we're a little bit more numb to it. It's not great. And one of the things I think, you know, we should probably caveat all of this by starting off with is this isn't one of those situations where we're like the parents telling a kid, I know you're getting beat up in high school, but you know, it's gonna build character and you're gonna be able to see your way through it as if that's going to make the broken nose feel any different. I just want to just point out there's nothing we're saying here to say, hey, it's not a big deal or hey, it's okay or hey, don't worry about it, right? It is a big deal. It's stressful as hell. It's one of the, one of the toughest business and life moments to go through and it's a nightmare. However, it's also kind of part of how all this goes. You know, and, and Ryan, I think like you'd equate, it's like suicide drills,

Ryan Rutan: right? Yeah, not something you want to do and you definitely don't appreciate at the time, but when you're in the 88th minute of the game and you're still playing and you can still run, it starts to make sense that you're like, that was a necessary aspect of, of what I needed to do to get to this point to be able to do this. But yeah, but when you're doing it, it sucks

Wil Schroter: and it's also not relegated to just newbie founders. You know, again, people tend to forget that Elon musk, even though he had his brief stint as the world's richest man and might get back there someday again. He was also the world's bro kissed man. Uh, he was, he was going through bankruptcy proceedings himself in the mid two thousands. People tend to forget that part. You look at people like brian Chesky, I mean we did this amazing, amazing interview that we hosted on startups dot com. And if you go on there, you can find this in brian Chesky from Airbnb. This amazing interview where he basically said, look, everyone understands the way Airbnb is now, but people don't know about the part where I'm living on my parents basement. They don't know the part where I was eating cereal that I had sold in this one thing, that little scheme to try to make some money um, and had a bunch left over and eating it for breakfast, lunch and dinner. People kind of overlook

Ryan Rutan: those parts.

Wil Schroter: And the point is, if you're going through this right now and many people are just understand, even though it sucks and it does the richest most successful people also went through it and they had no idea at the time what the other end was going to look like. I mean it's such an abyss at the time. But I think what I'm hoping people will take away from this right now as we unpack this and try to understand it is, there is another side to this, you know what I mean?

Ryan Rutan: Yeah, the thing we have to remember is that we analogize startup companies in a lot of ways, right? The sports match, it's, you know, trying to win the Super Bowl and I think the sports one is interesting, I'll stick there for a second, it's not a game that we're playing in, right? And it's not, you know, we, we actually, in the previous podcast, we referred to as kind of like the first quarter, the second quarter, the third quarter, the fourth quarter. And it's not quite correct, right? Because this is a, what you're really building is a sports franchise, right? That has to come back season after season, game after game and they're gonna be losses, they're gonna be times where, you know, it just goes horribly for, for years or, you know, if you're the browns forever. Um, you know, you hope you're the new England patriots and not the Cincinnati Bengals, right? Sorry. Ohio, I just really trashed you.

Wil Schroter: But

Ryan Rutan: that's, that's the course of it. Right? There. There are ups and their downs, there are rebuilding seasons, that the startup doesn't die just because it's not necessarily doing business. We've certainly talked about this before, which is that, you know, startups don't run out of money. Startups don't go out of business, founders run out of money And founders stopped doing business, right? And, and that's a very different thing. But simply because, you know, you have to mothball the thing for a while or hell this year, last year, 2020 people were regulated out of business for periods of time, right? They were told like, you have to close your doors, you cannot open, you cannot let people in here, you cannot sell food, you cannot sell beverages. God forbid you were like a gym or something where people wanted to come and breathe heavy and sweat like you just can't do that right? So they were forced shutdowns too, which was something that, you know, I don't think in, in recent history, I can't think of a period in which we had the same level of of mandated Startup shutdown that we saw in 2020.

Wil Schroter: And here's the thing, Covid obviously presented just an apocalypse right of shutdowns. But the, the little known fact is this has been happening all along. This is the nature of the startup cycle.

Ryan Rutan: Yeah, we just saw a higher concentration of

Wil Schroter: Yeah. And and and it was so forced, right? And it was so public. I mean if you had shown the media spotlight on the failure rate of your average startups on any year, it would seem like an apocalypse. The only difference is that nobody's reading about it,

Ryan Rutan: there wasn't a viral news story to us to accompany it. Yeah,

Wil Schroter: yeah. The only way you get written up as a failure is if it was a really big failure and therefore your success in a different way.

Ryan Rutan: Exactly. You have some HR violations in there. Listen,

Wil Schroter: sh it happens all the time. And so I think where founders get stuck is at first they see things going sideways and they think, oh my God, I can't believe, you know, I did all these things wrong. I was steering the ship in the wrong direction. This is all on me. And it's, this isn't about an accountability thing, It's about saying, you know what that does tend to happen. It's actually not that unusual, right? Because like we always say we're running into the abyss and here's the thing, we're generally never operating with that much money to begin with, right? Maybe we saved a little money. We raised a little money, etcetera were like the gambler at the casino. That's always on their last hand, right? And we're hoping the next hand will work and we're hoping we're going to make it work, but we're making bets and sometimes it doesn't. And sometimes we have to leave the table for a while ago, go build our finances back up and try again

Ryan Rutan: and then come back with a pocket full of cash.

Wil Schroter: Think about how hard it is for a founder who doesn't know that this is part of the process, Right? That, that doesn't understand that. Hey, this actually happens to a lot of people and hey, I might have to do this a few times right in their mind again. This is end of times, it's forever, right, correct? We're in truth, this is probably just one step of many of a much, much hopefully longer journey, you know what I

Ryan Rutan: mean? Yeah, It's, you know, it's funny, but I'm thinking about in terms of my, my youngest right now has just started preschool and we dropped him off this morning for the second day, the first day. It was, it was, it was sort of okay because he didn't really know what's going to happen the second day. He knew what was gonna happen and he completely freaked out and he completely lost his mind this morning because for him, this could be forever, right? Like, yeah, my parents came back and got me yesterday, but what's to say they're gonna come back and get me today or it's like when a kid goes through object permanence for the first time, right? Like I think there's, there's some degree of, this is like going through startup permanence, right? Yeah. The thing can continue to exist, right? It is an end of times. It's not all or nothing, right? There isn't, you know, a giant hole that it falls into at the end, that you can never recover it from. And that's just not the case. But when you're going through it, especially for the first time, like you said, we're lucky in that we're lucky to be one way of looking at it, we're lucky that we've been through this enough times that we sort of know that this is part of the process and you know, we're flying the wall for thousands and thousands of other of other founders and startups. Um, and get to live by proxy and see that you know, everybody's going through the same thing and that, you know that there is life after shutdown even for that startup, right? And I think that we should make that clear. We're not talking about making multiple attempts at starting different companies. We're talking about multiple attempts at starting the same company. Right. Very important point

Wil Schroter: here. You know, early in my career, like I mentioned at the being in the episode, I basically ran out of money had to shut the whole thing down when I was running an agency. And here's the thing in retrospect, people looked at it and said, well you have nothing to lose. Right? And to be fair, like I grew up with nothing. So having nothing to lose. Sounds like, hey, it's, it's an easy proposition. But funny thing about that when you have nothing, Having less than nothing is actually a problem because you have nothing to pull from, right? I mean at the end of the day, if you have $0 in your bank account, you gotta eat somewhere. And so I was in this interesting position where the company had run out of money, I was about $100,000 in personal debt. I'm real debt, like credit card debt and stuff that people were actually coming to collect on that investor debt. And and I was in a place where I just had no way to make money. I think I was like 21 at the time. So like my alternate job at the time, I think I was going to work at best buy like making $5 an hour of time.

Ryan Rutan: I just, I just pictured that thing that's on the credit card statement. If you make the minimum payment, you will pay this off in 32

Wil Schroter: .8 years. I was looking at exactly that and I was thinking about man, what a hole I have dug myself into. And I haven't even done anything yet. Like some people dig themselves in that hole, but they have a degree. I didn't even have that. And so in my mind, I thought about it like, well at this point I've lost everything. There were no fables about how people come back. There was just fables about how people end, right. You know, it was like dawn of the Internet, you couldn't even google it. Yeah, google. It didn't exist. You had no way to find out that the rest of the world was going through any of this stuff. And so I just assumed I was totally screwed. I made all these bad decisions and I kind of expected to make them because I didn't believe in myself, but I made all these bad decisions And I was in a spot where I guess I'm just the failure guy, right? I'm 21 years old. My career hasn't been set. I haven't done anything right at all in any capacity. So I guess I'm just going to be a failure guy. So at that point I thought about it and I was like, you know, if I'm going to be failure guy, I at least may just keep running this path because I'm going to be as much failure guy at this as anything else I go do, like if I go get a shitty job somewhere, it's not going to really improved my outlook. Well

Ryan Rutan: there's no upside at that point. You're going to stay in that same space, right? There's nothing to climb out of at that point, you're just relegating yourself to the bottom of the hole.

Wil Schroter: It's just a different version of the bottom. And so I said, look, I'm just going to keep running forward. Basically. What that meant was I'm going to keep calling clients, I'm going to keep trying to get more work. I'm going to keep trying to fend off creditors for as long as I can so stressful. But I don't really have another way forward. Like this is all I've got

Ryan Rutan: in this point. Like at what point did you consider that it had shut down and then this, this part where then you jump back in and you start to reinvigorate and you're like, well I am just going to move forward. How long was that period? How long did you go? Where for? You know, de facto the startup wasn't operating,

Wil Schroter: I would say nine months to a year and I would also say that I didn't tell anybody we weren't operating right. I mean Portugal, I was embarrassed, but the other part was, I just assumed that if I just kept my feet going, I'd at least have a smaller version of the business that maybe I could just run by myself, you know, without staff. And so I was just, I mean I was desperate, I was just holding on for something.

Ryan Rutan: What was the mindset like in, in that year? I wanted, I want to talk about how that turns as we get closer to the end, whether it was a seminal moment, something happened, was it happenstance a big client came along, but like how bad was the mindset during that year?

Wil Schroter: It was really bad. I remember, I don't know why this sticks out the most, it was a long time ago, but I remember sitting across from my landlord and it was just this, it was good enough guy and he had just signed this new like shining office space that we have moved into like six months prior and at the time Ryan, I was so excited. I was telling him about future of internet like I might as well have been describing like I'm building google right and he was like, oh my God, you know what a breath of fresh air, you know, you've got so much energy and I just like, it was almost like a fatherly presence, Like he just, he was so proud of me and I remember going back to him and sitting across from him and not only feeling defeated but feeling ashamed and I'm trying to explain to him what's going on. And like I was like getting choked up. It was awful. And I just remember that moment so vividly and then all these things are racing through my head like, what are all the things that I did wrong? What could I have done differently? And he was so cool about it. Like not at all what I expected, right? I mean we're like six months into a three or five year lease and he was like, look, stick with it, just keep going. And I was like, huh? Like I expected to get railed Really? I just assumed he was gonna kill me. And he was so cool about it. He was like, look, this is part of the game, right? He didn't say in the way where he was saying like, hey, you're going to come back. He more meant it like, yes, you're an abject failure. Maybe someday you'll start something else. It was different. Keep your head up speech. But I guess what I'm saying is I remember walking out of there in that moment, felt like the failure because we lost our office space, which back then was like, you know, the, this, this pinnacle of your success. I had sat across from our small staff and said, hey guys, you know, we can't make payroll anymore. And we weren't paying that much to begin with. But it was all that people were making including myself and I went back to my college apartment, you know, and I was like, damn man, Like I put so many hours and I have nothing to show for it. Like it was tough,

Ryan Rutan: it's de motivating to. So, so then this is this is the interesting part of the question. And so what changed? Right, like what flipped was there? You know, did a client come out of the clouds? You know, you just decided to not accept failure. You muscled through? Like, what was it?

Wil Schroter: I would love to tell a story where I just had so much determination that I was gonna make it no matter what. And and that sounds awesome. It's just not

Ryan Rutan: True. Your linen at the front of the 300,

Wil Schroter: right? Yeah. I was like, look, my back was against the wall. I was totally screwed. I was embarrassed as hell. And I just didn't want to tell anybody that I had failed. And so what I did is I just kept going to clients. Like, nothing had changed because I, you know, I could still pick up the phone and call somebody regardless of the status of the business. And we already had built up like a pretty good portfolio. We were doing some work for like intel and BMW and all these great clients. So I just kept at it and in the back of my mind thinking like how am I going to find like, you know, a job at best buy or something in order to like pay my bills. And so it just so happened later that year, we end up consulting with what was in a small ad agency. We had a great relationship with them. We merged the agencies Toward the end of the year, we had an opportunity to pitch Eli Lilly, which is a pharmaceutical company and we ended up having one of the most lopsided wins in agency history. We're about a 50 person company And we want about $250 million $7 billion dollar company but sort of didn't feel that way at the time you were

Ryan Rutan: failing, you went through a year of feelings of abject failure and depression and then you turned to drugs. Did I get that

Wil Schroter: right. Yes. Yes. Actually actually that that that's a whole other podcast. I'm just kidding but seriously, like, look, I didn't know right? I had no idea. That's not how I saw things going and I don't think anybody else does either, except I don't think folks also realize that there's usually a few of those, you know, they're like, well, you know, if we lose all the money, that's it, this is a one time shot, you get to go to the casino once and if you lose it, you know, you're done. Not true people come in and out a few times, right? That's actually more the cadence than not

Ryan Rutan: think about with like, you know, product launches that we've done within startups dot com where like we launched something and like, it just, it blows up immediately. It looks great in like months, 2345 and it's just like heading exactly the other direction and you're like, holy sh it, what happened right? Like, and, and you know, do you give up at that point? No, you don't, you try to figure out, you know, what's what's wrong, like, and, and, and we've, you know, we've, we've axed products, you know, we've changed services, we've done a lot across this 10 years. We've been, I guess we were, we were big enough and, and diverse enough, um, that we never went through a period within startups dot com that I would say where we felt like we shut down, not even close

Wil Schroter: actually. You know what Ryan, I'm gonna throw a curveball at you. That's almost partially not true virtual.

Ryan Rutan: Well, yes, but that happened, I'm not taking, I'm not taking, I'm not taking credit for the part where it went downhill first. Like

Wil Schroter: we, but what,

Ryan Rutan: what a case that's part of our story, It's absolutely a case study. So if we're to look at virtual, that's, it's absolutely

Wil Schroter: true, here's a business and I'll be mindful of of what I share because there's there's some folks that, you know, want to keep certain things confidential. But here's a business in virtual dot com which we own, which we purchased five years ago where that business went, went down overnight. They had 450 full time employees and shut down within 48

Ryan Rutan: Hours. Mind you, yes, it went down in 48 hours. And what's, what's amazing is that like in the period right before that it was going exactly the opposite

Wil Schroter: direction. It was unbelievable.

Ryan Rutan: It was on startup unicorn trajectory, right? Like it was doing everything it wanted to be doing.

Wil Schroter: And so, you know, some things went sideways for them internally. I won't get into the details of how it happened. But I can tell you that really within about a period of 48 hours the business went from meteoric rise to, we're shutting the whole thing down. I've never seen anything like it. Well, not true now, I've seen one thing like, and I've never seen anything like it before. We ended up buying that business and turning it around and you know, making this this wonderful business that it is today. But think about that, that business at that moment, it was end of days. Everyone was getting their their pink slips, All the clients were getting let go. If you if you google it, you'll find out. You know, there's all this history about it and yet it ended up living a second life. That's literally the shutdown that we're talking about in the second version of it, right? Because

Ryan Rutan: that was the real shutdown.

Wil Schroter: Yeah. Well when we looked at the business, you know, we looked at it and said, hey this, this business should not be shut down. Like this business deserves a second life. And look to be fair, we restarted that thing from scratch, right? You know, kind of burnt the whole thing down and started the whole thing up. But the point is that even for something like that, it's part of the damn cycle. It's a weird part of the cycle, right? But it does happen right? And there is always a second path. There's always the okay ship that didn't work out well. So what's that second path look like for us? The problem folks get into and Ryan, I think you see this as well is they assume the initial up into the right trajectory is the only path of the business. You know, we start at zero and we just keep on growing. It's just not true. Sometimes you start at zero, you grow, you go back to zero, you grow for a while, you go back to zero or something close to it. That that lumpy path. If you chart the real growth of a lot of companies kind of looks like that. I just don't think anybody talks about it.

Ryan Rutan: No, we normalized the curves out and we say, you know, you know, generally speaking it was growing over time, but yeah, when there are always these tumultuous periods, right? Bear in mind you're also looking at a two dimensional graph for what is a very three D

Wil Schroter: experience, right?

Ryan Rutan: So there's there's always more to the story than you know, just looking at those growth charts, but, but even if that's what you're looking at, like yeah, it is a very lumpy undulating path that leads you from 0 to 11 to 100 100 to 1000 and so on. And like you said, it's, it's not always on that same path right? Like with, with virtual to go back to that example, a lot about that business had to change a lot about it was, write a lot about, it was right, but not enough of it and that's why it crashed and the major changes had to be made. But the core of the business is still very much the same, right? The business, it is still the same business right? In terms of what it attempts to achieve the value that it brings for its clients. Um its stated mission is essentially the same how it's achieving that has changed significantly.

Wil Schroter: Ryan, I had a friend of mine, she called me up a couple weeks ago and she said she was looking to shut down her business and we talked about it for a while and one of the things that I started off with is a shutdown is you should view it versus a temporary pause. It never feels temporary at the time. It feels apocalyptic and I get that, But a shutdown should also be considered. What does V two of this business look like? Right. So if we talk about virtual, be one of the business would have been 450 people and losing tons of money and trying to survive off venture capital. Right? And you know what, that's fine. It didn't work for some bizarre reasons, but it didn't work. So V2 of that business is going to be a differently run business, a profitable business, a business that's focused not on just hyper growth but on meaningful growth. Right? You know, basically find customers instead of investors to grow the business. And I think that for a lot of founders, if they were to really analyze their business and say, look, should hit the fan, I'm going to have to do a hard stop. Okay, but is there a new version of this business of V two or V three? That does make sense. There's always this baked an assumption that the current version of the business is the only version of the business. And I just, I think that's worth debunking a little

Ryan Rutan: you and I have seen this enough to just know how ludicrous that is. It's as if saying that like the day we sat down and scratched out the first notes around, you know, any of the businesses that we've started and somehow we nailed it from day one and that that was going to just be perfect and that was how it was going to be. Like it's just

Wil Schroter: never the case or said differently if this was the most perfect version of the business, why are we out of business? You know what I mean? There are do overs in this sport, right? There are absolute do overs and sometimes the do overs are what define us as great companies, right? And so I think for us Ryan when we look at you know something like virtual or a lot of other businesses that we've either helped out in some cases bought etcetera. We, we look at the current version of the business but we really think about it is what is the next version of the business look like right? If you could reset all the decisions, what does that look like? And I think what that means for a founder is willing to learn how to manage a shutdown, right? Not just have one but actually manage that process. If I were smarter, not, not smarter and more experienced when I was 21 years old, I would have managed that shut down. I guess I sort of did by by pure desperation, right? But I would have done it more deliberately not just out of pure desperation, you know, as we get toward the last lap here, what I would say the manage shutdowns is like, maybe we come up with a couple of bullet points. I don't torture too much. But of what that management means, that's gonna mean re staffing, recapping, That's gonna mean new customers. It's going to mean no office space. It's like, it's okay to burn it all down again because we're talking about cycles. It's, it's okay to burn it all down and start it all up again and you might have to do that again. And we'll talk about like something like what it meant for searchable for searchable meant. You know, we had to kind of restart everything. We had to get all new clients all, you know, all new VHS like everything and that's actually what, what made the business incredibly healthy.

Ryan Rutan: Yeah, I think that's a great idea. Well, let's, we could probably make an entire episode out of just managing the shutdown. So maybe we try to crystallize it into into just a few pieces in terms of, you know, thinking about what, what does this really mean? Right? The shutdown and again, like you brought this up a couple of times. I think it's a really valid point is think about what the next version of the, of the business could look like, right, because that is going to dictate how you manage the shutdown and to what degree you shut down what parts of it, you shut down and look, none of this is easy, right? Because if you're talking about having to, you know, cut jobs, cut clients, cut your space, you know anything where you know, people are relying on you, it's it's gonna hurt, but it may become necessary. But I think the the important caveat here is you need to be thinking of it in the context of what that next business is. Because I've seen the converse and you you and I have both witnessed poorly managed shutdowns where it just, it's somebody just running around with a machete cutting off expenses without thinking about what happens next. And essentially that's not managing a shutdown, that's just extending an inevitable death of the business. And I think it's important to understand the distinction between those two and so being really, really clear on what that next version should look like is the first step, because if you don't have that, then what are you managing towards, right? The softest landing of the death of your business, not really worth doing. Just let it let it go if that's where you're headed. So, you know, I think that it's perhaps the hardest part is being able in that moment where this is starting to go off the rails to lean back far enough to gain perspective and to be able to invest the time and emotion to think about what does the next version of this look like? Not get so caught up in watching the business die, but thinking about what, what that rebirth could be now knowing that there will be some really painful things you go through to get there. But this is how I would approach it. I would start by saying we really need to be clear on what a better version of this business looks like and then allow that to guide our actions as we begin to manage the shutdown.

Wil Schroter: Okay, so let me build on that. One of the reasons I think we were so successful in keeping virtual going was that we basically by definition, because we were brand new to the game, I didn't have any of the old baggage with us, right. And this is exactly what I encourage founders to do when they're in this situation. I said, instead of thinking about this like, hey, I'm managing the shutdown, so to speak. Put a hard stop in it. Put a chapter Mark and say now I'm managing the next version of this business end. This is what I have to work with. Just as importantly, all this stuff that was holding me back or was dragging this thing down into bankruptcy or shut down whatever it is I'm going to just put aside for a second and here's why I say that usually about this time, the stuff that's top of mind for a founder, our relationships with our staff. Of course relationships with our investors. If we have them, relationships with our creditors, etcetera and all of those are important. So I'm not going to discount any of that. However, none of those are actually going to likely save our company. All we're talking about in that case we're managing anchors and we're looking for for ladders to move up, not anchors to drag us down. And so we kind of look at that and say, well, what are, you know, what are the things they're going to pull us up? Well, revenue is always at the top of the list Ryan when I mentioned earlier that my company has basically shut down the agency, but I just kept, I just kept selling really, all I was saying is only revenue was going to save me right now. Not every business when it shuts down has revenue. So again your mileage may vary. However, if there is some revenue to be had, the first thing I do is circle the wagons around that revenue and say if nothing else we need to do everything we can to preserve or extend that revenue and we'll manage that separately from all these liabilities which are creditors, investors, etcetera because if we can't get the revenue part working the other parts don't matter like we have to recap, you know, the cap table or anything else like that. None of that matters if we can't get the next version of this business going,

Ryan Rutan: there's no version of needing to put air in the tires. If the engine doesn't start right, who cares?

Wil Schroter: Great to put it. And, and so I think first up is, is their revenue to be had. Uh, sometimes that revenues investment, you know, if we're raising etcetera, you know, and we're recapping or restarting that way. But really if we're going to do our pie chart of what matters at that moment, all that matters is revenue in the form of customers or capital. Because the problem is that's not really what's on our mind at the time because we're letting people go because our investors are asking where their money went or you know, again, we have creditors, our landlord, everybody else coming after us. And we're thinking we'll have to solve those problems and, and, and we do, we can't ignore them entirely. But again, in the case of virtual on monday morning when that company was shutting down Their top priorities appropriately. By the way, we're, what are we gonna do with the investors? What are we gonna do with 450 people that are W2 employees so on and so forth. And those are the biggest issues when we came in. It's not that we ignored those, but those weren't our investors. So we actually just didn't have that same kind of 1 to 1 challenge those were now our employees because we owned the business, but we could look at that that more methodically and say, okay, how many of these people can we afford to keep on? How many customers can we afford to keep on, so on and so forth. And we could just come in and do a very divisive kind of approach to the business. It wasn't easy. One of them would be slept for a month, but but I think because we were able to start with such a laser focus, it's why it worked and I think for founders, they really need to get in that mindset, you know what I mean? Yeah,

Ryan Rutan: you need to figure out what that driving force is going to be, right? Like you said, mileage will vary and it may not always be revenue. Revenue is always going to be necessary, right? You're not going to continue to run a business without revenue, but in certain cases, you know, the employees may be so critical to the driving the revenue right? There may be something about that, that where that needs to be that core focus, that like we gotta make sure we can keep the team together long enough that we can get back to revenue so differently without them, there is no revenue, then then that needs to be the focus, right? And again, it needs to be understood what the re transformed version of this thing looks like is and then you start to take the most critical actions like what are the biggest cuts you can make, right if you need to trim this thing down, what are the most important cuts you're gonna make first to get you closest to that new form. Right? Well, you know, in woodworking, right? You don't start with the detail work. You start with the concrete pad, right? Then you start with the frame and you get down to all this finished details later. So you gotta figure out what's your pad, what are we gonna build from? Right. And then what's the frame that that we start to grow from? That we can start to build around. And that's absolutely true in the case of a startup as well, that you have to be good at assessing what's actually gonna drive that. Now, one of the challenges is if you're in this position where it's starting to fail, you may not have great perspective on that. And so I was thinking back to our sexual days when when, when that first happened. And I remember that we sort of lived on why. All right. We were critically questioning everything right? We didn't take anything for granted. And I think we were fortunate in that sense because we also didn't know anything like you said, we didn't know anything about the business, right? We came in and we had to learn and start to try to wrap our heads around everything, There's a danger when you're already running the business and you're the founder who's heading towards this bankruptcy or failure of some sort shutdown of some sort that you may not have it in yourself to ask all of the wise again. Right? Because sometimes we feel like we've already done that and I think that can be really, really dangerous. I think that the reason we were able to understand so clearly what we needed to do was buy, critically questioning everything. Well, this is what we do. Well, why, why are we doing it that way? Why not this way? Do we need to do that at all? And that really let us rebuild that thing. And, and you know, it was the phoenix from the ashes story where, you know, it crashed and burned and we took the important pieces, we, we decided like you said, we focused on revenue, um, which of course was inextricably linked from the employees and the clients because in the case of virtual, that is the business, that is the business model, that is where the revenue comes from. Um, so it's not that those things went by the wayside completely. Um, but they were, you know, it was, everything was predicated on how much revenue can we recapture based on how many clients can we keep, therefore maximizing the number of people that we can keep employed, which was top of mind for us at that time was like, we want to keep as many people on this team as we can and the path, that was revenue.

Wil Schroter: You know, I think the biggest thing that founders need to come to terms with when they think about, hey, I'm going through the shutdown period is I'm either committed to making a V2 of this business Or I'm not. And so I think for the founders, it starts with not, do I want to drag out V 1? It starts with, am I committed right now? That, that I want there to be a second life of this business And will I put on absolute tunnel vision as to what it will take to be successful for that next round and be able to do anything and everything. I have to, to focus on this next version of the business. Kind of putting aside the last version of the business.

Ryan Rutan: I agree completely. I want to soften that just a little bit because I don't know that it's always just the commitment piece. I think that you also need to have the vision for what that V2 should be because it doesn't always happen right? It's not always just a matter of commitment saying I'm just gonna stick this out if you can't clearly see AV two, which happens. Sometimes you just can't see past. Like I think I built the best version of this that I can, and sometimes it does happen right? Let's not forget that not all ideas are great ideas. Some of them grow to a point and then they die for a reason and maybe there isn't a V two for that particular thing or maybe it's not within you to be the one to find that V two and that's okay too right? So I just want to be real, I want to be careful about the commitment piece because I don't want people to hear us saying it didn't work because you weren't committed enough to it and I know plenty of people who overcommitted and actually spent way more time trying to keep something alive well beyond its livelihood um simply because they felt like that was what it needed. I just have to stay committed and if I do this will work, But I absolutely agree with you. Well, once you do decide on that V2, if you can see that clearly and you believe there's a better version, Stay committed to it until you get to that version. It still doesn't work. Then, like you said before, rinse and repeat. Maybe there's AV three or maybe there's not and then you just kind of keep going through this as we said, this is the process and it will repeat and that's okay. Mhm. That's a wrap for this episode of the startup therapy podcast. This is Ryan Rutan on behalf of my partner Wil schroder and all the startups dot com family thanking you for joining us and we hope you'll continue to join us. Be sure to subscribe rate and comment on ITunes or wherever you love to listen to startup therapy. You can find all of our episodes at startups dot com slash podcast. If you're looking for more amazing resources to launch or grow your startup, be sure to head to startups dot com and check out startups unlimited. It's everything we have to offer from our online university to our amazing community of experts and founders and even all the tools we've built like biz plan, fungible and launch rock. It's everything a founder needs visit startups dot com slash begin that startups dot com slash b e g I N. You'll thank me

Wil Schroter: later.

Ryan Rutan: Mhm.

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