You know things have got to be bad when your CEO and CFO/COO suddenly quit, two-thirds of your employees are laid off, and then those same execs are arrested. That's exactly what happened at CRM company Entellium over the last few weeks.Though this case was entirely avoidable, a company failure may simply be among the risks of betting on a small private vendor, even if it is well-funded by venture capital and endorsed by companies like Microsoft. In this market, it's possible we might just see more start-ups with money troubles simply shut shop: Sequoia reportedly held an emergency meeting with its portfolio companies telling them to be prepared for major body blows from a down economy.

As for Entellium? The company's out of money. The top execs resigned. And half the U.S. staff was slashed. Soon after, the former CEO and CFO/COO were arrested for cooking the company's books, after having admitted it in an e-mail to company directors.

The writing was on the wall that something was wrong. According to the Seattle Times, there already had been two rounds of layoffs. But even as recently as last month, Entellium was announcing new sales and marketing plans.

But that just makes the sudden downfall all the more sudden, and will likely make it all the more painful for Entellium's customers, which are mostly SMBs. Many have come to rely on Entellium to help run their businesses, and now the company's future is in doubt unless it is bought out, and even then, it's up in the air whether any buyer would keep the software alive. The lesson: Keep your vendors close, and make sure to know what they're up to and how they're doing.