Some months ago when I arrived in Austin I wrote about the importance of the Formula 1 venue to this city.  The Circuit of the Americas (COTA) was then commencing construction on a massive facility to accommodate F1, MotoGP, and V8 Supercar races.  And, its buildings and spectator areas could be easily adapted for all manner of other large gatherings as well.  Now comes word that the contract for the F1 race was held by promoter Tavo Hellmund and not by the principal backers Bobby Epstein and Red McCombs.  This group now appears not to be in synch.  F1 supreme chief Bernie Ecclestone reportedly has cancelled the contract, although there is some chance of reconciliation before the 2012 schedule is set on December 7.   Meanwhile, plans for a street race across the Hudson from NYC in 2013 and consideration of a race in Mexico City have created new competition for COTA.  Recall that this sport petered out in Indianapolis in 2007 after an 8 year run, all but one attended by yours truly, so there is some reason to doubt it marketability in North America beyond the well established annual date at Montreal.

Pivot is an overused word in the startup world, but Circuit of the Americas is facing this problem in spades.  From the picture above you can see the massive amount of earth moving that has already taken place, and that work is a feature landmark when you have a window seat headed east out of ABIA.  The major building construction has yet to commence, so if you had to make the call on this project, what would you do from here?  There’s no other racing circuit than can draw enough fans to justify completion of the track – NASCAR has a home in Fort Worth and IndyCar is teetering.  Do you leave the dirt where it is and have it serve as a perpetual reminder of this misadventure?  Do you sculpt it into some sort of iconic art, like a cowboy hat, and make it part of Texas legend?

At any rate, one nice thing about working in tech startups is that your creation doesn’t become a permanent part of the landscape.   I’m working with some companies that have pivoted multiple times from the PPT stage, where no real money has been spent and no backtracking is required.   Several others on my plate are being redirected by serendipitous opportunities and are adapting quickly to those.

Often there comes the point where one has to accept the fact that the original concept just is not going to work as planned.   You will be lucky if you determine that early enough to avoid getting yourself chained to a zombie company that has just enough customers to keep you from shutting down but not enough to offer you an exit.  What else then can you do?  If you have some cash on hand from a big financing round, perhaps you can buy something that is undercapitalized but is working.  If you have no cash, perhaps you can find someone in a similar business to buy what you have and create some scale.

If you’re stymied by lack of financing but still believe in your concept and yourself, what then?  My recent post “We Are What We Can Finance” dealt with that topic.   The Valley investors are particularly adept at supporting entrepreneurs by matchmaking faltering startups with others that can use the customers, the IP, or the team.   They are blessed with so many deals in their collective geographically compact networks that the odds of matchmaking success are much greater than anywhere else in the country.

One undergraduate student in the 1SS class asked a VC presenter a good question:  “What happens if you just shut down?”  Usually at an early stage that means just stopping, divvying up what’s left to creditors, if you have any, selling your Aeron chairs on eBay (sorry that’s a 90’s joke) and telling your investors they have a write-off.   The legal costs of any formal dissolution, bankruptcy, etc. generally far outweigh any recovery to be made, so startups just quietly become shutdowns.   Their entrepreneurs gain something from the experience, and in the leading tech communities generally get to play the game again.  I had one person tell me he favors investing in people who have some failures under their belt and have shown how they deal with adversity. 

I suppose COTA will not be in the category of just quietly going away.  All those millions of yards of dirt can’t be allowed to sit there and erode.   And, there’s a lot of money at stake and a fair amount of civic pride as well.   Here’s hoping there will be some positive resolution before December 7.  Maybe you have an idea to submit…

<photo from COTA>