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Summary:

Some are expecting the cleantech graveyard of startups to start filling up. But how companies wind down, sell off their assets, or morph into slimmer versions of their former selves, is a personal choice for the companies and investors. Here’s 10 ways you can do it:

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Some are expecting the cleantech graveyard of startups to start filling up, particularly in the second quarter of 2012. But how companies wind down, sell off their assets, or morph into new much slimmer versions of their former selves, is a personal choice for the companies and investors. Here’s 10 ways you can do it:

1. Make a firesale look like a lucrative acquisition: If you’re selling off your company for pennies to a competitor or larger firm, there’s no reason you have to let the world know. Make the terms of the deal undisclosed, so no one never knows you didn’t have the exit of your dreams. This doesn’t work so well if the acquirer is a public company, as the terms could come out in SEC filings.

2. Hire an expert: Sherwood Partners, and other firms like it, are focused on shuttering your company as quickly as possible, as efficiently as possible, and as quietly as possible.

3. Cold turkey: This approach only really works if your company hasn’t raised much money from outside investors, and could be a good choice for startup teams made up of developers. Just stop doing what you’re doing. Hug Energy shut down its energy software product before it was able to raise funding. Unfortunately a lot of capital-intensive cleantech firms won’t meet this bill.

4. File for bankruptcy: If creditors are knocking on your door, there’s always the traditional approach of filing for Chapter 11. While startups don’t normally do this, large public companies like Evergreen Solar do, and, well did, this week.

5. Sell off piece by piece: Whether you hire an expert or find acquirers yourself, you can sometimes sell off pieces of your businesses for more than the whole, from your various intellectual property to your assets to your software to your domain name. This is another way for your innovations to live on with a new owner.

6. Use your project as a resume: Here’s another one that’s meant for a small, pre-funding, venture. Use your impressive project to get a job at your competitors or peers. Yes, your innovation wasn’t a commercial success, but perhaps it’s cool enough to live on as your personal project in a bigger company, and can score you a high-paid job.

7. Blog it out: There’s something refreshing when it comes to companies being transparent, thorough and instructive when it comes to what went wrong and what they plan to do with their services and companies on the way out. Most companies give a final explanation for their decisions — the Valley is small and company life cycles are short — and communication can also help you find potential buyers or partners for your assets.

8. The carbonite freeze: However, a lot of companies choose to act like Hans Solo on his way to Jabba the Hutt: the slow freeze. Often times this occurs because of lack of funding, and the company is just stuck in a holding pattern, waiting for more funding, but unwilling to completely wind down. Range Fuels comes to mind here. Eventually these companies will dethaw and sell off assets or revive. But will claim that nothing is wrong (nothing here to see folks!) the whole way.

9. Reborn, but not really: Some companies try to keep going by “pivoting” (everyone’s favorite word) into a new company with a less capital-intensive or alternative business model. Say, instead of selling hardware, you’re going to sell services now instead. But sometimes these pivots are more half-hearted pirouettes into oblivion. The new plan often times isn’t different enough from the old plan, which wasn’t working.

10. Throw a party: Be happy, you just made a decision to end something that wasn’t really working. You had a good run, and in a few months you’ll be off running with another idea, business or venture. Time to relax and give yourself props for making it this far.

Image courtesy of conskeptical.

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  1. Katie @ Women Magazine Wednesday, August 17, 2011

    Nice way of mocking some start-up strategies.

  2. Hemendra Kumar Saini Wednesday, August 17, 2011

    Your 10th reason just remind me about News of The World Good Bye Party! Though it was successful.

  3. Katie Fehrenbacher Wednesday, August 17, 2011

    @Katie @ Women Magazine. Anyone that’s run one or more startups knows that ending a company can be a major part of the journey.

  4. I find your framing very limited and disappointing. It is an easy extension to apply your rationale “the Valley is small and company life cycles are short” to cleantech in general, not just companies, as in, “well, cleantech was a bad idea, now let’s take our IT tools and work on something else”

    The actual context for cleantech is climate change couple with enormous demand growth, which KP’s John Doerr understood when he spoke about his grandchildren but the industry media seems not to.

    For a look at this context, see Why Cleantech Should Join The Fight Against Tar Sands, by Bill McKibben, the voice of climate activism, at Joe Romm’s climateprogress.org.

  5. Katie Fehrenbacher Wednesday, August 17, 2011

    @L.D. Gussin, I do understand and continuously write about the potential large markets for cleantech. That’s a different issue than whether a bunch of cleantech startups will make the decision to fold in the next year. See my recent interview with Kleiner’s Ray Lane for more on people that aren’t abandoning cleantech:
    Ray Lane: Kleiner is not moving away from greentech
    http://gigaom.com/cleantech/ray-lane-kleiner-is-not-moving-away-from-greentech/

    1. Katie, I read you every day, and your fine interview with Ray Lane is what lit me up about what you leave out in your coverage of cleantech. To me Facebook and iPod were people figuring out first what the evolving toolkit would do, with few or any external market drivers. Cleantech is all about external drivers and surrounding political and cultural issues. These matter: see the Climateprogress.org piece today: Koch Brothers Fund Bogus Study Bashing Offshore Wind in New Jersey

      http://thinkprogress.org/romm/2011/08/17/297394/koch-brothers-fund-bogus-study-bashing-offshore-wind-in-new-jersey/

      http://thinkprogress.org/romm/2011/08/05/289367/bill-mckibben-why-cleantech-should-join-the-fight-against-tar-sands/

  6. If anything at all, I suppose your article means you like paying your electric bill because think of it this way. With 2 solar panels 4×6 in size on the roof, you can (in general) generate enough power in 6-8 hours to power your house for three days.

    If your electric company allows it, you can actually power two other houses using that excess electricity.

    Then, if you bought a Tesla Motorcar, you don’t have to pay a gas bill. There’s three bills gone right there! And I don’t know about you, but a measly $7-10,000 to possibly get rid of three bills, well, that’s green energy. As in real green, in my wallet! :-)

    1. Two solar panels can’t generate enough electricity to power an average home. An average residential utility customer uses about 11,000 kWh of electricity per year (http://www.eia.gov/tools/faqs/faq.cfm?id=97&t=3). A 2.5KW system from SunPower, which makes highly efficient solar panels, can generate 3,000 kWh per year. That system already uses more than two solar panels.

  7. Katie Fehrenbacher Wednesday, August 17, 2011

    @David, I am envious of you if you can afford a Tesla car.

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