When startups fail: what happens when the cash runs out

Octy 03, 2016
The high-tech Skully motorcycle helmet, as it appeared in product photography images on the company’s website. The helmet featured a heads-up display, GPS-tracking, a rear-view camera and enhanced audio capability, all starting at about $1,500. Skully is one of several Bay Area startups that ran out of cash and shut down in recent months. Experts say these failures prove not every entrepreneur can live the Silicon Valley dream. (Courtesy of Skully)

Silicon Valley has long lured ambitious entrepreneurs into shiny co-working spaces and startup accelerators, promising them the chance to create the next Google, Facebook or Uber.

But the reality is most startups fail, a risk that some say is growing as funding that once poured into the booming tech market begins to slow. For founders and employees, the results can be devastating.

“It sounds good on paper, but that’s not really how it is,” Dr. Michael Freeman said of the Silicon Valley dream. A psychiatrist at UC San Francisco who studies and counsels entrepreneurs, Freeman likened the tech boom to the Gold Rush. “A lot of people in 1849 came to California looking for gold. And some people found it — and most didn’t.”

Those failures can be crushing for employees — and not just because they find themselves out of a job. Carlos Rodriguez, Skully’s former vice president of sales and marketing, said the company’s demise was especially painful because he was personally invested in Skully’s mission to prevent motorcycle accidents.

He worked 80 or 90 hours a week, spending some nights in a hotel to be closer to work. His children had Skully stickers on their laptops. As the company fell apart, Rodriguez pulled himself away for a preplanned trip to France with his wife for their anniversary. On the plane, he was hit hard by what happened.

“I was looking out the window, and I just started bawling,” Rodriguez said. “I was saddened for customers … I was grieving for them. I was grieving for the work I put in for the development of this product. I was grieving for the time that I was away from my family.”

Now Rodriguez works as an adviser for a few other tech companies, but they compensate him mostly in equity, forcing him to live off his savings while he hunts for another job. Despite his experiences at Skully, he’s considering signing on with another small startup.

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