The Hidden Cost of "We'll Divest This Venture Later"
Most struggling ventures are not killed by a single bad quarter. They are kept alive by a sentence that sounds responsible: “We will divest this later, once conditions improve.” The intention is sound. The arithmetic rarely is. In practice, the wait that feels prudent is often the most expensive decision on the table.
I have watched this play out across portfolios large and small, and the pattern is remarkably consistent. The delay is framed as patience. What it usually buys is a deeper hole.
Why “later” gets more expensive, not less
The instinct to hold is understandable. Nobody wants to sell at the bottom, and every founder or sponsor believes the turn is one quarter away. This does not imply poor judgment. It does highlight how our estimates drift when we are emotionally invested.
But the costs keep running while we wait:
- Cash burn compounds quietly. Each month of runway spent on a venture that is not clearing its own bar is capital unavailable to the parts of the business that are working.
- Attention is the scarcest input. Leadership hours poured into a fading venture are hours not spent on the one or two bets that could actually carry the studio.
- The asset ages faster than the market. Talent leaves, tooling falls behind, and the story you could tell a buyer gets harder to tell with each passing quarter.
- Optionality narrows. A venture sold early has several plausible homes. The same venture sold late, after the losses show, often has one buyer and no leverage.
The story we tell ourselves
There is a tidy narrative that makes waiting feel like strategy. We call it discipline. We say we are protecting the team, honouring the original thesis, avoiding a knee-jerk exit.
Frequently, though, we are simply protecting ourselves from admitting the thesis has changed. The sunk cost is not only the money already spent. It is the reputational weight of having championed the venture in the first place.
Is the decision to hold serving the portfolio, or is it serving our reluctance to be seen changing our minds?
A more honest way to hold the question
The alternative is not to sell everything at the first sign of trouble. It is to make the divestment question a standing one rather than an emergency one.
- Set the exit trigger before you need it. Decide in advance what evidence would tell you the thesis is broken, and write it down while you are calm.
- Price the wait, not just the venture. Each quarter, ask what continuing costs in cash, attention, and lost optionality, then compare that to a clean exit today.
- Separate the person from the position. The champion of a venture should not be the sole judge of its survival. Bring in a voice with no skin in the original call.
- Treat an early, orderly exit as a win. Freeing capital and focus is a result, not a retreat.
Done this way, divestment stops being a confession and becomes ordinary portfolio hygiene.
The reframe
The real question is rarely “Can this venture recover?” It is “Is this the best possible home for our next dollar and our next hour?” Those are very different questions, and only the second one respects the whole portfolio.
Waiting to divest is often not patience at all. It is a slow decision we keep declining to make, and the interest on that indecision is paid in the ventures we never got to fund instead.