I’ve had a couple of situations lately where a portfolio company founder or CEO went dark on me. They just stopped communicating.
Sometimes it takes me a while to notice it. When I do, I usually check in with the person and just ask something like “Hey – I haven’t heard from you in a while, how’s it going?”
Sometimes the response is benign, and all is more or less ok with the company and people in question. Perhaps they’ve just forgotten to update their investors for a while, or it’s been a particularly busy time for some other reason. In those cases, my checkin serves as a gentle reminder.
Other times, as you might expect, it’s more of a doomsday scenario. They went dark because stuff wasn’t working. There was nothing good to tell their investors about, so they just said nothing. It’s been a long time. Now the company is out of money, out of options, and the person just doesn’t know what to do next. “Any ideas?” they ask.
“Not at this point” I think to myself. With no runway left they’re out of cash already and living off the founders credits cards. All the employees are gone. They forgot to update investors along the way, so there’s no way to help at this point except coach them on how to shut down gracefully.
Don’t let this happen to you! Communicate bad news early – you might be surprised at how your investors can jump in and help.
As an example, Techstars now has a large full-time team just working on corporate development and M&A. We’ve completed over 100 M&A transactions, and we probably could have helped create some kind of positive outcome if we only knew you were in trouble earlier.
At Techstars, we’ve put systems in place now to see who we’re not hearing from regularly so that we can be proactive. But most angel and seed investors don’t have systems like this.
When stuff goes badly, don’t go dark. It’s a huge mistake for so many reasons.
This was originally published on David’s blog.