Lessons from the Trenches: The Tale of Two Startups’ Shutdowns in 2023

2023 was a rough year for startups. Fuzzy pet health, GoFetch, HelloRalphie were just a few of the companies that had to shut down this past year. Although the net result was the same, not all shutdowns are created equally. For example, Fuzzy’s abrupt shutdown was a shock to just about everyone in the organization, whereas GoFetch’s shutdown was a wind down that took place over months and included communication with employees, stakeholders, and the public, as we can see from co-founder Adam Little’s post on LinkedIn, Saying goodbye to GoFetch.

Let’s dig into each of these shutdowns in a little more detail and see what we can learn from the two approaches, starting with Fuzzy’s rapid shuttering. First, a bit of background.

Fuzzy Pet Health, a San Francisco-based telehealth startup, experienced a sudden shutdown in June 2023. Founded in 2016, Fuzzy had raised a significant $80.5 million in funding. The company offered a subscription-based service, providing 24/7 live vet chat support, ship-to-home prescriptions, and educational content, along with a marketplace for vet-curated items. Despite these offerings, the company faced a challenging situation leading to its abrupt closure.

During COVID, telehealth companies and valuations soared. As clinics scrambled to meet the new demands of curbside appointments and virtual visits, telehealth companies saw a surge in companies coming on board. Fast forward a couple of years, and it would be easy to see that those companies who pivoted towards primarily providing telehealth services would become distressed as clinics returned to in-person visits. One could readily see Fuzzy as a victim of changing market demands, but the fact remains that the reason(s) for the shutdown remain ambiguous at best.

Key points about Fuzzy Pet Health’s shutdown include:

  • Fuzzy’s business model included telehealth services for pets at $15/month, aimed at saving pet parents significant healthcare costs.
  • There were allegations of mismanagement within the company, including claims of unpaid debts to creditors, vendors, and employees.
  • The company faced legal issues, including a lawsuit settled out of court for $250,000, related to allegations against the CEO for creating a hostile work environment.
  • The shutdown left employees and customers without prior notice, causing considerable disruption. Even the Chief Medical Officer, Dr. Cherice Roth wasn’t informed of the shutdown. It’s worth noting how Cherice handled the situation: as soon as she learned about what was happening, she immediately started promoting a list of excellent employees from her company who were starting to look for a job. Putting the needs of others ahead of her own showed the kind of integrity that we should all pay attention to. More on that later.

Let’s take a look at another shutdown: GoFetch.

GoFetch was a veterinary technology company focused on enhancing veterinary care through innovative software solutions. Founded in 2015, around the same time as Fuzzy, it aimed to improve the veterinary-client-patient relationship, initially through a product for appointment intake and later expanding into pet owner-facing solutions. GoFetch developed a loyalty program, a subscription plan platform, and GoFetch Pay, a payment app for insured pet parents. Despite early successes, challenges in integration, customer concentration risk, and a significant partnership dissolution led to its eventual shutdown. For more details, you can read Adam’s article on LinkedIn.

Contrary to Fuzzy, Adam was very transparent about the reasons for the shutdown:

During a recent conversation with Adam, he expanded on the lessons that he learned during the shutdown. Here is a summary of the key learnings:

  1. Before you’re ever faced with a necessary shutdown, engage in a hypothetical exercise wherein you actually do shut down your company. Going through the exercise of unwinding your company will reveal all sorts of entanglements, areas of risk, implications of your cap table, contract requirements, and more. Each of these gives an indication of how complex your business is and provides some direction for how to simplify that business. For example, you might become aware of the degree to which your business relies on another business for your existence. That level of risk might be manageable for you and your co-founders, but it will also show you the level of exposure that your business faces. As a result, you might think about diversifying your partnerships so that you have backup engagements that will keep your business afloat if something unexpected happens with that single partnership.
  2. Maintain a level of humanity throughout the process: for anyone who is invested in the company, either as a shareholder, employee, customer, or otherwise, it’s easy to make accusations and lay blame. That doesn’t do anyone any good. There are questions about how and why this has happened, and those need to be answered, but they shouldn’t come at the cost of all potential future relationships. Veterinary medicine is a small industry and how you handle a situation like this will resonate throughout the industry – are you a founder who maintains integrity, accepts fault, and looks to make the most of the situation, or are you pointing fingers or ghosting those people who are most important to your company and the success of any future business activities that you might hope to engage with? In Adam’s experience, by maintaining integrity throughout the process, you’ll find pockets of support that are unexpected and can help you through a very challenging situation.
  3. Communicate consistently across your channels: communicating differently with employees and the public might seem like a good idea at the time because, for example, you might think that your employees are entitled to know everything that happened. That sounds like a good idea, but based on what we’ve seen in the past, anything that is communicated with employees eventually becomes public and, if there are any discrepancies between those channels, then it eventually comes back to hurt the people that matter most. It’s exactly those kinds of inconsistencies that make for a great story about how things aren’t exactly as they appear – that’s not the kind of narrative that you want about your company. Instead, make sure that you are documenting communications so that you can refer back to a ground truth of information when you need to.
  4. Your job as a founder doesn’t end when the company does; it actually becomes amplified. Shutting down a company draws a lot of attention and people focus on how the spokespeople for that organization handle themselves (see Cherice’s response above).

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