He spoke with all the employees and told them exactly what was going on. He made found other jobs for many of them. And paid everyone full compensation plus some extra benefits (like health insurance.) The employees did a thank you barbecue for him, completely on their own. The price was splitting with the other founder, to sell everything up to his car and some personal assets, and go back to basics in his personal life. His wife left him.
Not many years later, after the recession, he decided to set up another very similar company. Getting credit was trivial. Setting up a workforce swift as several key former employees joined in even without discussing salary. Within months the new company almost wiped out the competition. "His word means a lot to us." By then he had a much happier and younger girlfriend.
I've seen it with my own eyes as I was a small partner.
The competition was hated by knowledgeable people in the trade as they didn't pay salaries for months and then either went bankrupt or just fired most people anyway after many broken promises. They defaulted in their debts so their creditors weren't happy. And the few remaining customers during the recession had a terrible service, in particular they were left in the cold in many cases due to the chaotic situation. There were just too many competitors for only a handful of clients.
Think twice before passing forward your pain, be it by inaction or by delusion. Nobody will judge you if you can't kill a gang of Goliaths. But everybody will hate you if you lie and fail them.
DISCLAIMER: This story is not related to Silicon Valley and I don't have a company right now (was incorporating.) It is just a lesson to counter-balance some dreadful advice seen here on going on no matter what. It isn't my place to tell anybody they have a chance or not. I'm sure investors, clients, creditors, and experienced entrepreneur gurus (like PG) can advice you on that (just like my mentor was advised in the story.)