Dalton Caldwell, the principal founder of App.net, wrote a blog post on Friday in a bid to guide startups that have "less than one year of runway", which seems to be how Venture Capitalists refer to money in the bank to cover operational expenses. The piece walks us through the necessary questions a business owner must ask themselves and the traps to avoid, as well as reiterates the age-old truth that you can always raise money when you don't need it but can't find two pennies to rub together when it counts. Managers are told to think about the welfare of their employees, the legal obligations to pay taxes before becoming insolvent, and also returning any remaining money to investors alongside a great big apology. There was just one important element missing: what to tell the rest of us.
As many people know, Mr. Caldwell decided to close-up shop of his own startup, App.net, back in May of 2014. The announcement was almost expected as there were a number of failures from within the organisation. What was not expected, however, was that the servers that powered the network would continue to run despite the fact that there were no longer any full-time employees to maintain or further develop the platform. In the words of Mr. Caldwell himself:
The good news is that the renewal rate was high enough for App.net to be profitable and self-sustaining on a forward basis. Operational and hosting costs are sufficiently covered by revenue for us to feel confident in the continued viability of the service. No one should notice any change in the way the App.net API/service operates. To repeat, App.net will continue to operate normally on an indefinite basis.
Dalton Caldwell made good on his promise to wind down the company as the runway became too short to make for a viable landing, and his staff were able to find employment elsewhere before "going down with the ship", as it were. As the people who paid for an ADN subscription were the ones who funded the business, he also followed up (more or less) by returning the money (more or less) to the investors in the form of a promise to keep the lights on ... though we have no idea how long those lights might stay on or an easy way to know who to call if there are problems1.
So, while the blog post on The Macro to business owners who are facing a potential financial crunch does cover everything Dalton did when App.net was left to run idle, it doesn't really go far enough. If a company is going to shut down, it needs to be a little more transparent with its customers. In the case of App.net, this means knowing how many years, months, weeks, or days of funding remains in the bank to keep the service running. We don't need to know the exact dollar figure, though that would make crowd-sourcing another year's operations costs much easier to coordinate, but we do need to know when things are going to start happening. Being told "App.net will continue to operate normally on an indefinite basis" is just too vague for the average person. As a result, people have naturally left the network to focus their attentions elsewhere ... using social tools that are the complete antithesis of what App.net was supposed to be.
The customers should be kept in the know.
But maybe this isn't how things work in Sunny California. Maybe, because people have come to expect online companies to ignore them, this is just par for the course. It doesn't have to be, though.
Lots of companies fail. Online companies tend to fail faster than most. It's a sad reality. Failing gracefully, however, might just help the people who ran those failed companies succeed faster the next time around. Communicate with your customers. Apologise if you must. Shut systems down if you must. But communicate. Let the world remember your name with a smile rather than a frown.
- People "in the know" can provide pointers on who to contact and how when something happens, but there won't be any rapid responses anymore.↩