What Should VCs Do With Zombie Companies?
Read time: 2 min
Let them go.
Don't save a zombie.
Just run.
Some of a VC’s portfolio companies are bound to become zombies.
Not dead.
But not growing.
They've got something—some tech, some revenue.
But the energy? The belief? It's gone.
The CEO is dropping hints. Wants out. Maybe a cushy VC gig, or at least a soft landing. Finding a buyer? Good luck. The company isn't exciting to anyone, not even the founders.
So what do you do?
You can only lose 100% of your investment.
But in VC, your winners make you multiples on that capital.
So why waste time, energy, or hope on companies that look like losers?
Every VC has that moment—the "line of despair"—where you lose faith and pull back. You know you're there when you find yourself thinking, “I'm just done.”
I've seen corporate VCs sell their stake in these companies for a single dollar.
Literally.
Get it off the books. Walk away.
It’s not an easy call, and it’s impossible to predict exactly when that moment will come.
Every situation’s different. Every investor’s different.
But there’s one big red flag: when the management team, especially those with a lot of equity, starts checking out.
When they stop believing?
Your investors sure as hell won’t believe either.
Now, can zombies come back from the dead? Sometimes.
We’ve seen it. A turnaround, a pivot.
Apple did it. IBM too. Those stories are legendary now.
But legends are rare for a reason.
So, be careful. Watch for the signs. Know when it’s time to stop trying to save the undead.
And just run.
VC is an exponential game. Only the outlier wins count.
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