021

How to stop

July 2025

We don’t talk often about how to stop or exit a startup, even if this happens to ~90% of the founders. Maybe because it seems in contrast with the founders’ DNA and hustle culture. Or because we prefer the optimism of our hero founders. But knowing when to stop is critical as knowing when to start. And, knowing how to exit is as important as knowing how to invest.

Despite endless Excel models and assumptions, this is an emotional decision. It is well said that a founder’s emotional runway matters more than a company’s financial runway. Initially, revenue in the millions and fresh funding feel like good validation. But if growth stalls below ~2x YoY or need to force profitability too early, then morale drops. Things feel impossibly hard, and no one is winning easily as before. This is also when the founder’s dilemma hits. On one side, founders are wired to push through pain and uncertainties with inspiring optimism and conviction. “Bring it on! How hard can it be this time?”, “Every good company almost died several times before taking off,” and “We are almost there” inspire and motivate. On the other side, there are deep fears. The possibility that this superpower is a double-edged sword leading to survival biases that might drag everyone into a graveyard for years. And the fear that the problems solved are not that urgent and vital for the users. And, that past revenues were made fast but not with quality. Suddenly, all the sunk costs, high expectations, and the cost of time hit, all at once.

If those fears are true and venture growth is not possible, then the company needs a drastic change. Consider a new PMF, a new SAM. Become a profitable and respectable business for a “PE path”. If not, find a new home for the team and customers. An acquirer might help to unlock a new great story and outcome.

For an M&A, remember: companies are bought, not sold. But if you need to sell, then runway gives more leverage than revenue. And, sell the value not the price. Sell the future story post-merger, not the great quality/price (or cheap price) of acquiring your company today.

Having gone through this myself, I realized time is the most critical asset. It will help to find clarity, execute the plan, and avoid settling for the quicker option or suboptimal M&A offer. Getting clarity is a delicate step. I respect two friends who faced the truth early without being forced by a short runway. But it felt off when another talented founder stopped after just a year and a half. Ultimately, founders are insiders and sense the truth before the data does. Trust your intuition and focus on the right leading indicators about your PMF and SAM. Ask yourself: Are we solving the single most urgent and important problem, or just many good ones? Is this a must-have or a nice-to-have solution? Is the solution 10x better, different, transformational? And defensible over time?

One common and crucial mistake founders make is delaying decisions and losing time. This is often due to founders’ optimism (“we are almost there”), the tendency to postpone painful questions (“People are willing to tolerate any level of chronic pain in order to avoid acute pain. So, people would rather lose slowly than have a dramatic change today.” – Pmarca), or partial prolonged burnouts, that can lead to decision paralysis. Other mistakes or risks I have seen are: (1) misreading PMF by ignoring key signals – not an easy quest. (2) Confusing motion with progress. Hoping more inputs will necessarily drive more outputs. Or when (3) the CEO turns into a super-operator. Being busy with a specific function and neglecting the critical company decisions. (4) Failing to assess whether profitability will lead to a bright future or just a zombie company. And (5) not realizing that the venture race for endless growth is not suitable for every business and individual.

Ideally, you have enough time to think through the right decision. One interesting way to do this is to re-underwrite your own startup regularly. Measure the quality of your revenue. And, if possible, don’t raise larger rounds until you feel good about your path to PMF and SAM. Less funding helps. It reduces the pressure for quick, low-quality growth. The scarcity will force clarity about what matters the most. And, it will decrease the required valuation for an exit. Then, when facing the Rubicon, ask yourself: Will working harder and spending more money move the needle? Are you still having fun and have hope in the business? We asked ourselves those questions and realized we had lost hope. In the end, customers’ demand relied mainly on subsidies, with no real interest in better software with its benefits. Our SAM was smaller than forecasted. And we realized that an insurance company requires PE-style growth, not a VC one. Joining a larger company seemed the right choice to use our strengths and help create a bigger story.

Something we noticed, as we got older while building our startup, is how a founder’s age affects this decision. Young founders can endure longer if the project is cool and full of learning. Older founders become more demanding in generating outputs. They have fewer second chances and higher opportunity costs. Suddenly, the cost of time seems to have grown exponentially. 

In the end, a journey for outlier outcomes rarely follows the path imagined. So, a strength is knowing which projects start, double down on, and stop. It is well said that “Success comes from doubling down on the stuff that is working and quitting the rest.” Ultimately, no one wants to get stuck in a journey going nowhere. Also, investors and senior employees. Have the time, clarity, and courage to act before it’s too late. On the other side, we should all support founders who continue when no one believed they should. They will be our heroes and will inspire new founders to start. What is not acceptable is losing time and the courage to take risks, today or in the future. In this journey, I wish you to stay as inspired and all-in as Masa does for each of his newer and bolder expeditions.