What Happens When It’s Time to Dissolve a Startup
In this episode of Venture Declassified, hosts Mike Kelly, Ben Pidgeon, and Jacob Schpok dive into a reality every startup investor eventually faces: what happens when a company simply doesn’t work out. The conversation kicks off with Ben stepping off a real-time investor call dealing with a struggling portfolio company, which leads the group into an honest discussion about dissolutions, asset sales, and how investors determine “who gets what” when the outcome falls short of expectations.
The hosts break down how liquidation preferences, funding rounds, and cap table structures influence the waterfall when a company winds down. Along the way, they explore the practical side of navigating these situations—why transparency, documentation, and investor alignment matter when difficult decisions are being made quickly and under pressure.
But the discussion isn’t just about mechanics. The group also reflects on the human side of startup failures—from the emotional toll on founders who have poured years into their companies to the responsibility investors have to approach these moments with empathy and professionalism. The episode closes with a look at how experienced investors run postmortems on failed investments and what lessons can be learned for future deals.
Key Topics
• Recognizing early warning signs that a startup may be struggling
• How funding rounds and investor preferences affect payout order
• The difference between convertible notes, SAFEs, and priced rounds in downside scenarios
• Why transparency and documentation reduce investor conflict
• The role angel investors can play during difficult portfolio moments
• Product-market fit vs. management issues as causes of startup failure
• Running post-investment debriefs to improve future investment decisions
Connect
Mike Kelly
• Website
Ben Pidgeon
Jacob Schpok