It is interesting how they provided the identical functionality as new Facebook Groups - they ripped-off Facebook's interface, then Facebook ripped-off their feature. It seems they were also inspired by Paul Adams' circles. I simply don't like that approach as anybody from the group can invite new people and anybody can add me to a group without my approval. Google circles will win.
I'd never even heard of this company, but IMO they really should provide a much longer wind-down period.
Similarly to Ron Conway's "if you have to shut down your company, that's fine, but do it properly -- pay your bills, pay your employees in full, do it in an orderly fashion -- if you do, I'll invest in you again, otherwise I won't."
There should be a "responsible startup code of practice" for winding down operations where customers might depend on it. Especially in the summer, when people could be on vacation, providing 3-6mo of notice for a shutdown would be good. Exceptions if it is really arterial bleeding of cash, or some legal problems which expose you to ongoing civil or criminal liability, but if it's just the cost of a few EC2 instances, there is no excuse for not keeping it running until users have all comfortably migrated away. Otherwise, people will be less likely to trust cloud services in the future, which pisses in the pool for everyone.
Because they announced a 1mo (er, 4 day actually! I forgot it was July) period until the service shuts down and all data is deleted, as per the blog post which is the link in this article.
"if you have to shut down your company, that's fine, but do it properly -- pay your bills, pay your employees in full, do it in an orderly fashion -- if you do, I'll invest in you again, otherwise I won't." => sometimes you don't have this luxury; this is easy if you are bought out and the new company wants to kill (a part of) your bought business, but if the bank is just pulling the rug from under you, you usually don't have the luxury to pay your bills, pay your employees in full etc, let alone do stuff orderly.
Right, that is why you plan ahead and keep a buffer. You shut down when there is enough cash left to meet obligations, not after you've spent every last cent.
This is for externally funded startups, not bootstrapped. If it is bootstrapped, I think it is ok to dig deeper (but not actually committing major crimes or putting your health or safety St risk), but for a funded company, you should probably either wind things down in an orderly way, or at least fire everyone and pay all all salaries, pay vendors, and then switch back to bootstrap mode.
> Right, that is why you plan ahead and keep a buffer.
If every company planned ahead and kept a buffer, then no companies would go bankrupt. They would simply terminate services, and everyone would get paid what they were owed.
In most of the companies you've heard of going bankrupt, the company made payroll. Obviously, they then laid off a crap-ton of people. But what we're talking about here --- in a huge digression from what's happening with The Fridge, by the way --- is the notion of startups that run past their ability to meet payroll obligations, say "oh well we tried, good thing the valley is so tolerant of failure", and bounce checks to employees.
You can make your payroll obligation, then declare bankruptcy in the face of creditors. That's usually what happens--people take on short term debt to keep afloat, and use it to pay off their employees as they wait for the "big contract" to clear. The contract doesn't clear in time, and everything collapses.
At this point, they're bankrupt and though some creditors might get paid from the sale of office furniture and computers----not all of them will see all of their money.
The Op suggested that even these companies should never be given a second chance.
It's more important that the founders (or executives) conduct an orderly shutdown (vs. just locking the doors and not responding to email), than that every possible creditor be paid in full.
There should be an explicit seniority in debt or other liabilities. Even when there isn't, I think there is some clear standard of fairness (individuals get paid first, including refunding prepaid customer funds, and convertible notes get paid last. Vendors who have already provided service should probably get paid before continuing to pay on things like the balance of long-term leases; there are legal standards and best practice for all of this, although it probably varies by jurisdiction).
The only really bad thing is burning unknowing employees, especially after misleading them about finances.
you usually don't have the luxury to pay your bills, pay your employees in full etc, let alone do stuff orderly.
Make not mistake about it: paying your bills and paying your employees in full are not luxuries, they are requirements.
Grandparent didn't say you have to do it now, just that you have to do it.
Anyone who hides behind "market conditions", "the bank", "unrecoverable errors in judgment", or old faithful "bankruptcy" in order to escape their obligations doesn't deserve a second chance from the same investor.
OTOH, someone who finds a way to do the right thing, not matter how difficult, probably moves right to the top of that investor's list.
BKs happen and are factored into the price for a lot of business-to-business services. But no, I wouldn't invest in anyone who stiffed their employees. Ed is exactly right about that.
And you wouldn't want to anyways. The kind of person who keeps employees on staff after they stop being certain they can make the next payroll isn't a good investment anyways.
I see your point, but you have a lot of real-life experience? In Europe bankruptcy is a much bigger stigma than it is in the US; it haunts you forever and it's noted as one of the biggest reasons EU startups are less gutsy than US ones; if you go broke, you are screwed for life here. But it goes very very fast; I know a few product companies at least that went from going well to complete misery in a few months. Those are trains going to the wall with necessary burn rates of $1M+ / month; what I mean by that is, the only way to have a chance at survival is actually servicing the few clients (we're talking big contracts) you have left and during that trying to reinvent your business. This is a win or lose fight; sometimes you win, but if you lose, you have a good chance to be millions in debt in no time. We are still talking startups here, so no $15M war chest in the bank. Probably some of that money was investor or bank money as well. Other reasons can include a business partner screwing you or just both events at the same time :)
For the same token I have seen companies get out of this predicament and they are doing extremely well now. So should they have thought; 'I'm not taking the risk, i'm paying everyone and closing the doors'? There was no in-between here; it's all or nothing in these cases. Sure you can say the growth rate was too high; doesn't that go for most invested startup companies in SV? I'm not sure it's as clear cut as you make it out to be especially if you make good on your employees with your next venture; i've seen cases were this was actually better for the employees as well.
I feel that stiffing your employees is deliberately going for BK to not have to pay wages etc; standing with your arms up high, he yeah sucks, but we're BK and fuck you very much for your support! At least here that's an official crime and you will pay the price if the curator can prove you 'went for bankruptcy' for reasons of not paying employees and other (notably tax) bills. But I can see enough reasons where this can happen outside your control as well.
Back to back startups, all funded except my current one, since 1996. Pay your employees. There is no way around this. You should be RIF'ing well in advance of payroll looking dubious.
The terrible thing about this thread is that it's conflating 3 separate obligations:
* Payroll, which is inviolate
* Contracts
* Free users
There are different judgement calls to be made on all three of these (for instance, your office lease or a telco contract might have been set up for a year or more, and can't be dialed back on no notice).
But the judgement call on paying your employees is crystal clear. It is so clear that there are large US states where payroll obligations can pierce the corporate liability shield and attach to officers. Don't fuck around with this. If you're not sure you make your next two payroll cycles, you lay people off (ideally, you lay people off well in advance of that).
Well, I guess that's also kind of different in the US than here in EU; you cannot 'lay off' people here like that. You need to give them 2-3 months of pay. And yes, there are economical reasons to be able to lay-off people, but those are really strict; you are really almost broke before you can fire people for those reasons here.
But no, I wouldn't invest in anyone who stiffed their employees.
Dunno. In an early-stage start-up, I would rather be an employee who takes on a little risk in exchange for not distracting the founders with bean counting. Frankly the financial and lifestyle costs are already so great that two week's is just rounding error on my losses.
The companies we are alluding to aren't giving you that option; they're shoving the risk down your throat by not making it clear, when you receive your last full paycheck, that there may not be a next one.
I've known folks who were told, "things are looking bad, and absent a miracle we will not be able to pay you after X date. If you want to leave, we understand; or you
can stay and help us try to pull off the miracle but you might not get paid."
I personally would not stick around in a scenario like that, but some people do and very occasionally it does work out. However this all needs to be very open and above board.
If you can't see the writing on the wall early enough to wind down then you really have no business running a business. Yeah, I could come up with some pretty out there exceptions to that statement but they are pretty out there exceptions.
Let's take an example. Your current revenue/expense ratio has you running out of cash in two-three months and short of a miracle or users all of a sudden finding your product indispensable you are toast. At this point a responsible business manager would say "we're not viable" and begin discussions with vendors, investors, banks and progress to talking to employees and customers.
Now, the opposite of waking up one Monday and saying "@#$# I don't have enough money for next payroll - we gotta shutdown" is pretty lame and not the mark of someone I would want to invest in.
Yes, that's possible in some cases. I did forget to think about the fact that in EU (where I live) it is hard to fire people, even if you are facing problems in '2-3 months'.
Also you say "and short of a miracle or users all of a sudden finding your product indispensable you are toast" ; that happens, but it also happens quite a lot that it's not a miracle; it's just hard and smart work and you'll make it; you pivot your marketing, your start running a bit harder, you hire different kind of sales people or all of the above. So it's not always based on luck and miracles; often it is not. I think you are seeing it oversimplified; The Last Stand of a company can really be very tense and even sudden and can actually make the come back bigger and healthier than before. If you quit (fire your employees, you can no longer deliver anything, so you die) you might actually be much worse of than if you continued with the risk of not being able to pay. Of course, as I said before, I do believe you need to do the correct thing for your employees, even over the event (bankrupt) horizon; they stuck in there even when you told it's not going well. But I, as much as I loathe him, like Bob Parson's first rule; 'security is for cadavers'. It is. And I don't want that from my employees either.
perhaps fridge will go into stasis and come back in freak super-human form, complete with anime-style avatars with bulbous heads which bop along as you post. :P
I never really used the service, so it's not a big deal for me, but the email subject could also have been a bit more descriptive than "Fridge Updates and Save your Data!".
I saw it about 30min ago and glossed over it since I interpreted that as "Fridge updates w/ new features, one of which is called 'Save Your Data!'".
I got the email too. This is the strangest product shutting down (non)-announcement I've seen from a startup. I think most startups could do with a crash course in how to communicate with their users.
Given all that's been written about the importance of user feedback, most founders are very responsive now when they start - what with stalking visitors with Olark accounts, replying to emails and tweets within seconds, answering questions on social news sites. All is great when they want to benefit from the users' comments. But as soon as that's no longer the case, they treat users like a commodity and don't seem to care about telling them what's going on or what to expect next.
i especially enjoy when shutdown notices are written to sound as though they are delivering really great and exciting news - "we've decided to shut down the website you've invested time in, but it's your lucky day because our team of ninjas is super stoked about a new big idea we're working on. It's so exciting! we can't wait to tell you about it! We can't tell you now. But there are more updates to come soon!! Promise!! :) :) :) !!!" which I always take as code for "our product didn't work. we're out of money. we're now sitting around depressed trying to think of a new website to build. you'll probably never hear from us again."
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Path is also doing really poorly. Another site based on sharing information privately with a smaller group of people. Has anyone shown traction with a product that is explicitly anti-viral?
Sounds like email, IM and SMS. All fairly successful product categories. The problem is to make sure your private sharing product is better than them to succeed.
It seems likely that they were talent acquired by one of the big tech companies. I have seen similar things in the past (etacts sent a cryptic message like this when salesforce bought them).
Fans of The Fridge might want to consider Minigroup (https://minigroup.com). It's less about the social and more about communication and collaboration, but we share their idea of private, defined groups.
Sorry everyone for the sudden notice. This has been wrecking us for some time and we went back and forth about how to handle this timeframe. Having a long graceful transition period for our users would have been great but for reasons that we could not control Fridge as it currently stands had to be shut down quickly.
Unfortunately there are tough decisions (especially in startups) to make and tougher consequences to live with even if they come with a silver lining at the end.
We remain dedicated to building great products and hopefully things will become more clear after the dust settles.
There are definitely legitimate reasons for doing this quickly, and having the policy in place to delete sensitive customer data (vs. turn it over to other companies) is definitely a good thing (and a lot better than a lot of companies in the past).
Probably the best time to think about continuity for users is when the service has just been set up. I think it matters a lot more for things like Geocities, Vox, etc. than for a more realtime communications service.
Its a shame to see the company go, but this email is another reminder of the danger of trusting your data to a company. A four day wind-down period after which user data is deleted is very short.
It especially odd as their Privacy Policy doesn't seem to specify that this is required. In fact, the Privacy Policy actually states that personal data may be preserved beyond the timeframe a user would expect.
TechCrunch on them in 2010: http://techcrunch.com/2010/08/23/the-fridge-facebook-sharing...
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