How to fold a failing startup

There are several ways to wind down a faltering startup. We've seen examples of the facesaver, and a method I call the Schumpeterian, which I'll explain after the jump. Greg Linden's spin on the winding down of Findory, the online news recommendation site, is original enough to warrant its very own entry.

1. The facesaver. By which a company such as Rojo, which sold to Six Apart, trades in its main remaining asset, its engineering staff, for a press release which allows the founders to say they secured an exit. In the case of a company such as Jotspot, the headline price may even be inflated enough to present the deal as a financial success.

2. The Schumpeterian. Some failures are presented as sacrifices to the gods of the creative destruction of capitalism lauded by Joseph Schumpeter. In Silicon Valley's high-turnover capitalism, some startups must die in order for others to live. The founders' own talents are released for more productive use. The most recent example: the Guba CEO's explanation for the exodus of from the online video company. This method also has the benefit of flattering the founders: they were too good for such a lame idea, putting aside the fact that they were the ones that picked the idea in the first place.

3. The Gaia. Let's pretend the tech industry is one giant intellectual ecosystem, in which the ideas of a startup can spread and replicate, even if the host is stillborn. If that's so, then there is no such thing as death, or failure. A bold technique, only to be attempted by entrepreneurs with blogging friends to protect them from public ridicule.

At some point, I have to declare victory and move on... Findory will eventually fade away, but I believe it has touched immortality through the impact it had. [Greg Linden, founder of Findory, announcing his departure from the company]

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