Stage 4. The Crash

We continue the cheerful start-of-the-year theme by moving on to the next step in the life of a Capitaholic: the crash.

I’ve been there. It’s not fun. But it leads to things.
If you want to be a bit spiritual about it, things happen for a reason. Let that be our shared consolation for not acting proactively and starting rehab long before the crash forced us to.

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If The Hangover is the phase where reality slowly creeps in — seeping into your awareness — then The Crash is a clear event in time.
An event with a distinct before and after.

An email.
A phone call.
A meeting.

Unfortunately, this is when most people finally act.
Because now they are forced to.

In my own journey, I experienced three such crashes. The first initiated a reactive rehab. But that rehab consisted of two additional crashes before the final one made the full collapse undeniable. Each event triggered rehab-like activities. But when rehab starts reactively, motivation tends to come from the wrong place (Let’s dive into that in depth next week).

For startups, the crash is most often directly tied to one thing: that external capital is no longer an option. That realization reshapes the company’s self-image entirely and changes the rules of the game overnight. You suddenly have to become a company you have never been before. Which, in turn, increases the risk of additional crashes — just as it did in my own journey.

There are different types of crashes. Often, they overlap. This is not a MECE list. It is likely neither exhaustive nor mutually exclusive. But it should give you a sense of what can trigger this event that forces you into rehab — the market economy’s version of a friends’ intervention of your addiction.

The most common way startups crash: a conversation where the lead investor pulls out and the round collapses. Not when the money actually runs out, but when it becomes clear that it will — which research and post-mortems repeatedly show to be the most common endpoint for startups. However - it’s usually a symptom of something else, but the crash is tied to the finances.

A sharp moment when the market says no — for example, when a long-awaited pilot fails to convert or churn suddenly crosses a threshold that makes scaling impossible, or just a lack of growth. A single data point that instantly destroys the demand assumption. Product Market Fit isn’t there.

When the same pitch that recently opened doors is now met with polite indifference — often in a board meeting where no one defends the plan anymore. The words are still there, but the story has lost its power.

A forced structural intervention, such as layoffs executed over a weekend or entire teams being frozen. The organization changes in an instant, long before the culture has time to understand why.

When the founder reaches their limit in a distinct moment — a breakdown, a doctor’s visit, or an ultimatum from family. The company may continue, but the person who carried it no longer does so in the same way.

Founder: Elizabeth Holmes

Theranos promised to revolutionize healthcare by performing hundreds of blood tests from a single drop of blood — faster, cheaper, and more accessible than traditional labs. The company was built around an extremely strong disruption narrative, and Holmes became an icon of visionary entrepreneurship.

The crash did not come gradually, but at the moment investigative journalism revealed that the core technology simply did not work. The story collapsed publicly and verifiably.

After the crash:
Theranos was shut down, Holmes was charged and convicted of fraud, and her career as a tech visionary ended abruptly. The company disappeared — but the case remains an extreme example of what happens when narrative grows larger than reality.

Founder: Adam Neumann

WeWork positioned itself as more than coworking: a global community platform meant to redefine how people live and work. With massive capital inflows, rapid expansion, and an almost messianic narrative, the company became a symbol of the hypergrowth era.

The crash occurred when the company moved toward an IPO in 2019 and was forced to face an audience that could not be pitched to. The IPO process exposed the economics, governance, and business model — and within weeks, valuation, leadership, strategy, and self-image collapsed.

After the crash:
Adam Neumann stepped down as CEO. WeWork was rescued through a major restructuring, significant layoffs, and new leadership (Rehab). The company survived, but as a fundamentally different version of itself — far removed from the original vision. Neumann moved on to new ventures, though with a dramatically altered reputation.

Founders: Jeffrey Katzenberg & Meg Whitman

Quibi launched as a premium short-form streaming service designed for mobile and for people on the move. With Hollywood content, top-tier executives, and nearly two billion dollars in funding, the ambition was to create an entirely new media format.

The crash was a decision, not a decline. After just six months, the company publicly acknowledged that users never came — that demand simply wasn’t there, despite the resources.

After the crash:
Quibi shut down, its content was sold off, and remaining capital was returned to investors. Katzenberg and Whitman moved on without legal consequences — but the project became a textbook example of how capital, celebrities, and distribution cannot manufacture demand where none exists. ($2B pre-PMF must be some kind of an infamous record.)

Theranos, WeWork, and Quibi operated in entirely different industries with very different offerings — healthcare, office space, and media. Yet their crashes look remarkably similar once you strip away the details.

In all three cases, a powerful narrative carried the company far ahead of reality: technological revolution, global community, or a new media format. During The Hangover, the story still worked — investors, media, and the surrounding ecosystem wanted to believe. The Crash occurred only when the companies were forced to face an audience that could no longer be pitched to: journalists, the public markets, or users themselves.

The difference lies in what ran out first.
For Theranos, it was the truth about the product.
For WeWork, trust in the business model.
For Quibi, demand.

But the outcome was the same: a binary shift where options disappeared simultaneously, and the companies moved instantly from future to aftermath.

That’s it for this week’s newsletter.
Next week, we’ll conclude with Rehab — the step you should ideally start with when building a company. Rehab without addiction. That’s how you leave the starting blocks with your eyes on the right prize.

Have a great weekend — and an exciting new week until we speak again.

/Jacob Kihlbaum

Capitaholic Anonymous