Often the VC’s, if they have control of the company, will bring in “gray hair” managers to try to turn things around. The kids formerly running the show may or may not stick around. The first thing the gray hairs do is cut back to a skeleton staff, cut the snacks, and even coffee. They’ll try to sublet the surplus office space. One startup I worked at had a fire sale on desks and laptops and such. I got some good deals. Infosec goes out the window, as do most new features. You trim back to the barest minimum infrastructure and staff. If your books seem reasonable, then they try to sell what is left. It can be very strange being one of 5 or so essential staff left after 50 or 100 of your coworkers are gone.

I was at one for the end. Here’s how we saw it go down.

Hyperbole increased on the upper floor. Lots of "big talk " about the future and less chat about the job at hand.

There was a round of death rattle hiring where a whole bunch of people were added to the team.

Then last in first out.

Some of those new hires were there for less than 3 months before they were let go.

Then bloodletting. One or two redundancies a month. Their work being shared between the remaining staff. Told each round would be the last as the company restructured.

The worst bit, the people being fired knew they were going when they came to work in the morning to find they had been locked out of all the IT systems. They then spent the rest of the day sat around waiting to be summoned to be let go.

Meanwhile, the upper floor seem to be driving new cars and spending a lot of time outside the building. You also notice some new management faces and overhear chat about another business.

This massively increased workload and killed morale. Going to work felt like putting on your dead best buddy’s coat and doing an impression of them to yourself in the mirror whilst you had to hold down your own job, which had gone from pressured with purpose to pointless slog.

But in return you are promised a raise in the future.

And then one day… You turn up. Your team are all stood outside. The doors are locked and the paperwork is on the post. Most of us got paid most of our last paycheck.

From an employees perspective:

1. They will prohibit vacation or send everyone away.

2. Your salary will come late.

3. Various people you haven’t seen will visit the office.

4. There’s a running gag of packing up to move offices and being told you have all been fired the next day, Arrested Development style.

From a higher-level perspective:

1. Some investors will write off losses to save on their taxes.

2. Others will try to sell any tech or other properties the startup has managed to create to recoup losses.

3. Creditors and bond holders will be paid first before stock holders. Most vc funding comes in exchange for stock.

Talking about tech startups:

Depends on the startup. If they have a good team, they might get acqui-hired. If they have any patents or other IP, they might get acquired (for not much). Investors get the bulk of these types of exits, and the founders and employees get screwed.

If the startup doesn’t even have that, they may just wrap up the operation and go out of business.