Ask HN: Startup I work at is failing -precedent for VC backed hostile takeovers?

I work at a startup where I am also a minority investor, but it is currently failing. The CEO's attitude is alienating both employees and customers. There are unpaid bills, broken promises, and potential fraud. Our financial runway is nearly depleted.

However, a key customer and several employees have expressed their confidence in me personally.

Given the company’s valuable technology and talented staff, I am exploring ways to save it. Since there seems to be confidence in my leadership, I am thinking of securing venture capital to fund a hostile takeover. Are there precedents for similar hostile takeover attempts? Am I risking an Anthony Levandowski-like situation?"

9 points | by notcarlicahn 10 days ago

9 comments

  • jt2190 9 days ago
    What would have to happen is an injection of capital to fund continuing operations. Investors would have to believe that there’s a big payoff given the substantial risks. VC money might be completely off the table at this point as there’s no 20x exit dream to sell, just a turnaround and steady recovery. Selling the company outright would be priced relative the company’s post-bankruptcy value: Buyers could just wait for the company to die. The most generous investors would have something to loose, perhaps a key customer has come critical operation that would be disrupted. You might be better off going in post bankruptcy as well.
  • mchannon 8 days ago
    If it were me, I'd lock down what relationships and tech I could, and let it fail.

    Then reboot with a new entity featuring similar business model, keeping the talent and customers and leaving the chaff (including CEO) from the old firm to fend for themselves.

    Even investing your own money in this fatally flawed business is throwing good money after bad. That's a much tougher ask for investors than a reboot.

    As you let company A fail, use your spare time to get company B lined up and ready to launch so it's turnkey.

  • FlyingAvatar 10 days ago
    Have you explored the non-hostile possibility first?

    Giving a failing CEO a face-saving out (even if all they end up with is a firm handshake) might be easier to accomplish and also be more palatable for potential investors.

    [-]
    • romerocarlos 9 days ago
      I agree with your comment. In fact, when companies mishandle a CEO's departure, his successors and the company itself suffer. For many CEOs, the idea of handing over their position to someone else, who could start changing things, makes them anxious and overprotective, which is why it should be treated with care. In that sense, I strongly recommend making a clean exit without conflicts.
  • c_o_n_v_e_x 8 days ago
    I've been in a similar situation working for a startup in Asia. CEO was great at fundraising (although it relied on very "creative" marketing), but literally nothing else. Unfortunately, the board was weak so nothing was ever done.

    Allowing people to save face is important, both for CEO and investors (VC funds have LPs to answer to). Also, seeing a company in a news-making hostile turnover / CEO blowup may be a big turn off for existing and prospective customers.

    Where's the board been and what's their take on the situation? How much equity does the CEO own?

  • andreacavagna 9 days ago
    I'm just right now in a slightly similar position. We have more than 20 companies ready to sign big contracts, but it is impossible to raise any money for company structure.

    Several customers and employees have expressed their confidence in me personally.

    But with this company's attitude, it is impossible to go any further. After more than a month of struggles on what needed to be the next step, I decided to move on from the project: too many risks for the company composition.

    So think twice about it. I know it is a tough situation.

    If you want to chat about it personally I would be happy to chat and support you!

  • jonsantillan 9 days ago
    just move on! see if you can start something new and ask those people to join you.
  • debuggerpk 9 days ago
    CEO is not able to handle the pressure well! Maybe he needs some coaching as well. What are the things he is good at? Maybe you can leverage those?

    Plan an intervention with the CEO. Take him our to dinner or drinks. Talk to him. Find a peaceful situation, otherwise explain the situation to him.

    // ysf

  • idw 9 days ago
    Some thoughts, worth what you paid...

    You can't share enough information here to get really good advice. If you do this you will need someone whose advice you trust, who understands your weaknesses as well as your strengths. Could be a friend, could be a coach.

    As someone else said, if you can make this a win for everyone involved, that's the best and most likely to succeed approach. To do that starts with asking good open ended questions and listening to what those with the power to make this decision want for themselves, especially the CEO, and showing them respect.

    People may express confidence in you now when you're not in charge. Inevitably if you do end up in charge you'll end up less popular. If part of what motivates you is what other people think of you, be careful.

    Know your plan b, and c.

    Good luck to you and everyone involved.

  • lulznews 9 days ago
    No chance just move on