Union Square Ventures’ Fred Wilson recently took on answering a rather complicated question: What happens to all those start-ups that don't make it big?

He wrote that they usually face two scenarios: They “slog it out” or “hit the wall.”

The “slog it out” scenario means that a business can still be built and sustained, but it requires a lot of money and time and doesn't generate much fortune for the entrepreneurs or the VCs. These “slog it out” companies are often called “zombie companies” or “the living dead,” because they can go on for a long time without having the growth trajectories that make them into great acquisitions. In Wilson’s case, some in his portfolio are well into their second decade and heading to a third.

The second scenario, “hitting the wall,” means that the company runs out of cash and fails to raise more money from investors. In this case, two things can happen - a fire sale (aka an acqui-hire) and a shut-down, according to Wilson.

He wrote: 

The fire sale is the preferred outcome and VCs and entrepreneurs have gotten pretty good at finding homes for the teams in recent years. There is such a vacuum of talent out there that a fire sale can often be arranged just for the talent that a company has assembled. 

But if a fire sale does not happen, then an orderly shut-down must take place - this is also the responsibility of the VC.

Wilson called the “slog it out” scenario “the most painful,” because the VCs are often left holding the bag.  “When everything goes well, you really don't need that much from a VC,” Wilsons wrote. “But it’s the ones that don't work that I have left my blood, sweat, and tears on.”