Startups Are Running Out Of Cash, And Founders Need To Know When To Quit

Megan Rose DickeyJan 30, 2013, 20:37 IST

Many startups that were able to raise a seed round are running out of cash because of the Series A crunch.

Even though quitting is never an ideal situation, serial entrepreneur and investor Howard A. Tullman recently wrote on Inc that entrepreneurs need to know when enough is enough.

"Sometimes you need to be smart enough to figure out how to quit when you're ahead--even if you're actually way behind," he writes.

Tullman says that there's no simple answer for determining when it's time to throw in the towel, but he follows what he calls The Rule of 3 Ds and 3 Fs.

"There are some things you've got to Do, Determine and Discuss," Tullman writes. "The Fs are Facts, Feelings, and Family."

The most important thing you have to do is face the facts.
You then need to determine how you feel about the situation. For example, if you frequently don't feel appreciated, it's time to go.
Discuss your situation with your family because running a business can be just as hard on them as it is on you.

"When things are really rotten and we have no place else to turn, sadly, we often don't turn to our families - we turn on them," Tullman writes. "[...] This is often the most real and devastating damage caused by a failing business. It's the most critical reason to get out when the time is right and to not prolong the agony."

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Startups Are Running Out Of Cash, And Founders Need To Know When To Quit