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Every Startup Needs to Prepare for Its Downfall

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Every Startup Needs to Prepare for Its Downfall


Last year, Jibo—“the world’s first social robot for the home”—began to lose its mind. First came memory problems. The bot started to spend less time swiveling its head like the animated Pixar lamp and more time staring blankly at the wall. Its cognitive demise was slow, then fast. At one point, Jibo itself delivered the fatal diagnosis: “The servers out there that let me do what I do will be turned off soon,” it said in its computerized voice. “Once that happens, our interactions with each other are going to be limited.” Jibo the robot was dying, because Jibo the company was going out of business.

Jibo’s sudden plunge into digital dementia brought on an outpouring of grief and consternation. People had shelled out $900 for this thing; could the company really just shut off its servers after a few years? (Well, yes. The $70 million in venture funding had run out.) People had kept Jibo on their kitchen counters, where it had listened in on all kinds of intimate conversations. What would happen to all that voice data now? Would the company delete it or sell it off to another company? And what were you supposed to do with the thing after its blue ring, like a giant digital eyeball, blinked shut for the very last time? This wasn’t a mere hunk of e-waste. Jibo was, in the company’s parlance, “a member of the family.”

Surely no one expected the robot to live forever. And yet, somehow, it seems no one had fully considered that it wouldn’t.

Silicon Valley is obsessed with beginnings and growth. It has a million words to describe them: Launch! Bootstrap! Startup! Scale! But the industry lives in embarrassed denial about endings. Companies “sunset” their unsuccessful ideas, as if sending them off on a Hawaiian vacation. Meanwhile, behind the scenes, founders may devolve into a last-minute fight over the scraps. And customers may be left wondering what happened—like the users of Picturelife, a photo storage service, who in 2016 temporarily lost all of their images when the company couldn’t afford to keep paying for server space as it was collapsing.

Tech leaders know that their businesses must grow or die. But given that 70 percent of new startups go out of business within five years, you might think that more of them would have plans in place for the “die” scenario. When they inevitably do fade to black, employees and even managers are often left totally unprepared; customers have to figure out how to extricate themselves and their data from the wreckage; and society at large is often stuck with a load of garbage—both literal and figurative—to clean up. Consider the piles of yellow bikes strewn across sidewalks and railroad tracks in cities like London, where three dockless bike companies shut down operations this year.

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And it’s not just fledgling startups that are caught by surprise when they begin to falter. This fall, after being valued at $47 billion, WeWork slid toward bankruptcy in a span of six weeks. Analysts had raised their eyebrows at the company’s business model for years—WeWork takes on huge liabilities with its long-term leases on commercial buildings, which leaves it vulnerable to fluctuations in market demand—and yet the implosion came as a violent, sudden shock. In Seattle, WeWork and a real estate partner abruptly pulled out of WeWork’s multiyear lease on a 36-story tower, just as the building neared completion. Then, in October, the company announced it would lay off thousands of employees, many of whom had recently been expecting it to go public. Who knows whether WeWork will pull its act together, but the brush with death came a bit too much out of the blue.

Even the largest companies will go away someday, or at least fade into a ghost of themselves. (Remember Kodak?) It’s hard to imagine a world without Facebook or Google, but it’s arguably important that Facebook and Google imagine precisely that. “Every consumer experience will have an ending,” says Joe Macleod. “It seems bonkers how I have to argue that point sometimes.”


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