If things are dire enough to close up shop now, they probably were dire enough to close up shop 2 months ago, and you can use the cash to give your employees some runway for finding new employment.
>If things are dire enough to close up shop now, they probably were dire enough to close up shop 2 months ago, and you can use the cash to give your employees some runway for finding new employment.
This might be true, but personally I'd rather the company try to remain a going concern.
Not just alerting, but offering severance. No one at Convoy was offered severance - now or in the past month. I edited my earlier comment to reflect my meaning.
Separate questions. You said the company knew it was "doomed in a month or 2 and [did] not [alert] employees." I've seen them messaging pain since their multiple rounds of layoffs last year and this [1], as well as in August [2]. Moreover, I haven't seen claims of employees being blindsided (as Yellow drivers were).
In the limit this means go insolvent/bankrupt and not pay out to creditors such as lease, caterers, cloud services. Finish with unpaid taxes and wages.
I'd always rather see employees get payouts on shutdown compared to companies, especially things like billion/trillion-dollar cloud companies and commercial real estate.
That being said if you're burning $30M+ every month in the current financial market I really hope you cancelled all your catering contracts a long time ago.
Depends: food can dupe people into working extra hours for free.
They think they are having a lunch break as they talk shop while chewing on their ciabatta.
Of course they will. What is the magic that separates success from failure that apparently only magically appears within the last 4 weeks with operating capital in the bank? Move your time tables up by 4-8 weeks, including funding raises and closing operations, and none of this is an issue.
According to what’s been said, they were chasing opportunities that they thought would finalize within that timeframe. 4-6 weeks ago they had good leads for closing a deal in 4-6 weeks. None of those happened to pan out this time, but every startup has been at a point like this where runway is coming up short. This is normal and expected operating conditions.
No, when you are in the fog of war/fundraising, it can be very difficult to decide between 100% let everyone go, verse some other percent where everyone keeps their jobs. Very much depends on the circumstances.
If no one was picking up their calls and it was obvious, then sure.
Not much is really that clear though.
In my tiny case a while back, I wiped my liquid savings to get me employees some time. Can't do that with over a thousand employees though!
> What is the magic that separates success from failure that apparently only magically appears within the last 4 weeks with operating capital in the bank?
I've heard it said that every boss of a failed company will tell you that they almost got a last minute investment, or almost made a big sale, or almost got acquired, if they'd only had an extra week or two it'd have all been different.
Of course that could be wishful thinking - or a sign that in the final days they were offering fire sale prices.
If you can still operate the business for another 8 weeks, there's a chance that things will still work out, and it's pretty pessimistic to preemptively shut it down because you assume you're going to fail. Pessimists don't generally find themselves in the role of founder/CEO of a startup in the first place.
Actually good founders and CEOs do tend to be realists. They know when to hold and when to fold, and they place a high value the well being of the people especially when things go poorly.
Manic founders who insist that a rescue will come right up until the last second often leave people feeling burned and don't get as many second chances when things don't go well.
> there's a chance that things will still work out,
There is a big difference between a less than 1% chance and an 80% chance here. Part of the job is knowing that difference, and how to handle/communicate it.
What about 2 months before that? 2 months earlier still? Another 6? They raised $260M a year ago and it sounds like an extraordinarily capital-intensive business.
It's pretty easy to say "oh you should have done this differently" with almost zero actual knowledge of the situation or experience.
Tesla wouldn't exist if Elon had shut down at the 2 month dire point. At least, I recall him saying they were at one point about 2 days away from bankruptcy.
Not surprising though, that Elon would be in the same camp as this Convoy CEO, not likely to shed too many tears over worker concerns.
> At least, I recall him saying they were at one point about 2 days away from bankruptcy.
Elon has said several variations of this have happened on several occasions.
And yet this fragility never really made it into IR reports or SEC filings or annual reports.
So either he exaggerates (shocking concept from a man whose company has on multiple occasions had to follow him around and say "his claims of Tesla doing X, or doing it by Y date, are visionary, and not statements of fact"), or there's some hinky accounting going on.
I know of two companies with >$1B exits that were running on fumes when they turned it around. One had 3 days of runway remaining; one had 16 hours to get a wire in to make payroll. Today these companies employ thousands.
FedEx famously (allegedly) came down to a hand of blackjack in Vegas to make payroll & avoid bankruptcy.
I don't dispute that they were close to running out of money, but what does "2 days" even mean in that context? It probably means that soon they would have needed to decide when to start the bankrucpty procedues or something.
He said that before he said he had "funding secured" to sell the company at $420/share and after he laid out the planned 35 minute Hyperloop from LA to San Francisco, right?
(I'm just trying to nail down the timeline of full truths/no cap from Elon.)
No a company cannot begin winding up without reaching an agreement with its creditors - the winding up process is a de-facto admission of insolvency and the company needs to declare bankruptcy and the creditors get first dibs on the assets.
It’s nothing like a layoff. For example, imagine that you are a supplier to company A and now your contract is both unpaid and cancelled and you’re going to have to lay off some of your own staff. Do you recover the contract money from company A, to give your staff severance? Or can company A stiff you and use it to give their own staff severance? (No, they can’t.)
This might be true, but personally I'd rather the company try to remain a going concern.