Startup stalled after the first round: close, sell or restart

The first round closed, the product launched, and then things stalled. Traction is flat, the next round isn't happening, one of the founders has moved on. The company still exists, but nothing is moving. This happens far more often than press releases suggest, and the people living through it usually have one question: should we close, sell, or try to restart?

This article lays out the practical options for a startup set up as an Italian srl (limited liability company). It is general information, not legal or tax advice: for your specific case, check with your accountant (commercialista) or lawyer.

In brief

• A stalled startup is not necessarily a dead one: it often still has code, data, customers and know-how worth something.
• There are four main routes: voluntary liquidation, a sale (of the company or of its assets), an acqui-hire, or a relaunch with a new team or operating partner.
• If the company has debts it cannot service, Italian law offers the composizione negoziata della crisi, a voluntary and confidential process led by an independent expert appointed through the Chamber of Commerce.
• Whatever you choose, you will need the same documents: an up-to-date cap table, a list of debts, proof of IP and code ownership, current contracts, and a picture of the data you hold.
• Deciding early keeps more options open. Deciding late often leaves only closure.

Signs that the startup has stalled

There is no official threshold, but the same signals keep showing up:

• cash covers only a few months and no round is in sight;
• the operating team has shrunk to the founders, or to just one of them;
• the product hasn't shipped an update in months;
• shareholders no longer meet, or decisions stay on hold;
• investors ask for updates nobody sends.

When two or three of these appear together, the risk is limbo: the company keeps paying fixed costs (accountant, Chamber of Commerce fees, cloud services, any staff) without a plan. That is the moment to choose.

Option 1: voluntary liquidation of the srl

If the project has no future, liquidation is the orderly way to close. The Italian Civil Code lists a simple shareholder decision among the grounds for dissolution (art. 2484, no. 6). The main steps are:

1. Resolution to dissolve and appointment of the liquidator. Shareholders resolve to dissolve the company and appoint one or more liquidators, with the majorities required to amend the articles of association (art. 2487). In practice this goes through a notary. The effects start when the resolution is entered in the Companies Register (Registro delle imprese).
2. Liquidation phase. The liquidator sells assets, collects receivables and pays debts. If liquidation runs past the financial year, annual accounts are still required.
3. Final accounts and distribution plan. Once liquidation is complete, the liquidator prepares the final balance sheet showing each shareholder's share and files it with the Companies Register (art. 2492). Shareholders have 90 days from registration of the filing to challenge it.
4. Removal from the register. Once the final accounts are approved, the liquidator applies to have the company struck off (art. 2495). Note that unpaid creditors can still pursue shareholders, up to what they received in the distribution, and the liquidators if non-payment was their fault.

Time and cost. Between the resolution, the work itself and the 90-day window, even a simple liquidation takes several months. If there are receivables to collect, disputes or assets to sell, it can take much longer. The main costs are the notary, the accountant or liquidator, Chamber of Commerce fees and stamp duty, plus the fixed costs that keep running while the company exists. There is no standard figure: get written quotes from your notary and accountant before you vote.

One point that often gets missed: closing the company does not make its value disappear by itself. If there is code, a brand, data or contracts someone could use, consider selling them before or during liquidation, not afterwards.

Option 2: selling the company or its assets

There are two quite different ways to sell.

• Selling the shares (quote). The buyer takes the whole company, with everything in it: assets and contracts, but also debts and contingent liabilities. That is why buyers usually ask for thorough due diligence and warranties.
• Selling assets or a business unit. You sell individual assets (code, platform, brand, customer database) or an organised set of assets as a going concern (cessione d'azienda). In that case the buyer takes over, unless agreed otherwise, the non-personal contracts used to run the business (art. 2558 Civil Code) and may be liable for debts recorded in the mandatory accounting books (art. 2560). The seller also stays liable for earlier debts unless creditors agree to release it.

For software specifically, Italian copyright law (L. 633/1941, art. 110) requires a transfer of economic exploitation rights to be proven in writing. If the startup has no clear contracts with the people who wrote the code, you need to fix the chain of rights before selling.

Option 3: acqui-hire

In an acqui-hire, a larger company is mainly interested in the people: it hires the team, or part of it, and sometimes buys the technology too. It can be quick for the founders, but investors often get little or nothing back, because the value moves to the people through employment contracts rather than to the company. If you have investors, involve them early and check what the articles of association and shareholders' agreement say.

Option 4: restarting with a new operating partner

When the problem is execution rather than the idea (a thin team, exhausted founders, missing skills), the company can be relaunched by bringing in a new team or an operating partner who takes responsibility for getting it moving again, usually in exchange for equity. This needs:

• an honest diagnosis of what worked and what didn't;
• agreement among current shareholders on the new equity split and roles;
• a realistic 6 to 12 month plan with measurable goals;
• confirmation that the code, IP and contracts actually belong to the company.

The upside is that the value already built is not lost. The downside is that everyone has to accept dilution and a change in governance.

If there are debts: negotiated crisis settlement

If the company has debts it cannot service but still sees a real chance of recovery, the Italian Business Crisis Code (D.Lgs. 14/2019, art. 12 onwards) provides the composizione negoziata. In short:

• it is voluntary, out of court and confidential;
• the business files an application with the Chamber of Commerce through the national online platform (composizionenegoziata.camcom.it), using a digital signature;
• an independent expert is appointed to facilitate negotiations with creditors and other parties, while management stays with the business;
• the expert's mandate generally runs for 180 days, extendable by up to another 180 in certain cases;
• protective measures can be requested, subject to confirmation by a court;
• the access costs listed by the Bergamo Chamber of Commerce are €252 in administrative fees plus €16 stamp duty, with the expert's fee paid by the business on top.

Innovative startups (startup innovative) have special rules on insolvency procedures (art. 31 of DL 179/2012) and, if they qualify as small businesses, mainly have access to the over-indebtedness tools. If your company has significant debts, talk to a lawyer specialised in business crisis early: deadlines matter.

How to decide

Three questions help:

1. Is there still something of value? Working code, paying customers, data, patents, a recognised brand. If the answer is no, an orderly liquidation is often the cleanest choice.
2. Is the problem the market or the execution? If there is no market, a relaunch won't help much. If the market is there but the team wasn't, restarting with an operating partner can make sense.
3. What do the shareholders want? Founders and investors often want different things. A decision made without alignment tends to get stuck at the shareholders' meeting.

What to prepare before any decision

• An up-to-date cap table, including convertible instruments, options and classes of shares.
• A list of debts: suppliers, tax, banks, staff, shareholder loans.
• IP and code ownership: who wrote the code, under which contract, where the repository is, who holds the credentials.
• Current contracts: customers, suppliers, licences, cloud, with their assignment and termination clauses.
• Data: what the databases contain and on what legal basis it was collected.
• Articles of association and shareholders' agreement, to know which majorities and consents you need.

PATAVIUM Restart

If your startup stalled after its first round and you are unsure which way to go, PATAVIUM Restart reviews it confidentially with founders and investors. When the conditions are right, we join as an operating cofounder in exchange for equity to get it moving again. See how it works at patavium.tech/en/startup-restart, or write to us confidentially from the contact page.

Sources

• Italian Civil Code, art. 2484 (grounds for dissolution), art. 2487 (appointment of liquidators), art. 2492 (final accounts), art. 2495 (removal from register), art. 2558 and art. 2560 (transfer of a business) – Brocardi.it
• Law 633/1941, art. 110 (written proof of transfer of rights) – Brocardi.it
• D.Lgs. 14/2019, Business Crisis Code, art. 12 – Brocardi.it
• Bergamo Chamber of Commerce, Composizione negoziata della crisi d'impresa (access, costs, duration, protective measures)
• National platform: composizionenegoziata.camcom.it
• Diritto.it, Start-up innovative e disciplina concorsuale dopo il Correttivo Ter al CCII