We often discuss what the first early indicators are that a start-up is not performing as well as expected.
Of course, if sales are not coming in or project development milestones are not being reached, it is obvious that the controlling lights will switch from green to yellow or even straight to red.
But what are the first subtle signs of autumn depression from start-ups to business angels or VCs?
We have learned to look particularly closely at two situations:
1. The monthly reports are coming in later and later, and sometimes content is missing.
2. Suddenly, communication with the founders breaks down.
Why are these alarm signals for us? When the standard reports suddenly stop coming in on time, it often means that the founders are pondering how to explain them in a meaningful way or, if necessary, sell them in a more euphemistic manner. That wouldn’t be necessary if the news were good.
A VC partner at a large fund explained the other case—the breakdown in communication — to me as follows: “When students get great grades, they burst with pride and tell their parents before they even walk in the door; when they get bad grades, the picture changes.” There are definitely similarities here with founders.
