How do you gracefully wind down a VC-backed startup?

Shutting down is a taboo topic. Founders are typically ashamed of talking about it. 60 to 70% of founders that are shutting down on our platform are actually already working on their next company. Did you know shutting down your company could cost you hundreds of thousands of dollars and leave you and your investors on the hook for a ton of liability years down the road, even if you sold the business? I brought on Doriana on the show today, serial founder and now founder of simpleclosure.com to help founders understand the cost, the risk, and the processes of winding down your company. It's never a fun topic to go into, but you don't want to be left in the dark on this topic in particular. Especially because about 90% of you will probably go through this process at some point in your business, and it's not a mistake you want to make. I found myself at probably one of the lowest points in my career in the company. Do you like suffering? Are you cool with like suffering and pain? What makes shutting down so difficult for for founders to kind of understand and realize is Hey everyone, welcome back to Fundraising Demystified. Today we have Doriana with us, founder and CEO of Simple Closure. Welcome to the show. Thanks Jason. Appreciate being here. No, I'm I'm excited to have you. You have a very unique business that you know, founders probably don't want to use your service, but in the reality of the situation, they might have to. So, let's talk a little bit about your background. You've built and sold the companies, you're exited successful founder. But you've also shut down companies. Tell us a little bit about why you started Simple Closure. Sure. So, I'll start with a bit of background on my experience with what you alluded to. I've been an entrepreneur for the majority of the last decade. Simple Closure is actually the third company I started. The first company I started was actually a dating app, social networking dating app. This was back in 2014. I think Tinder was not even popular then. So, that's kind of one of the first companies I started. And most recently before Simple Closure, I spent the majority of the last decade building a company called Earny. We were in consumer fintech. What we did is we automated a process called price protection. So, it's actually a policy that most major retailers and credit card companies offer. If you shop online, you buy an item, the price drops after you buy it, you're actually owed a refund for the difference. The problem is no one knows about it, no one takes the time to search for a better price, and no one has the energy or time to go and submit a claim. So, we automated that entire process and scaled the business to 3 and 1/2 million users. We ended up selling the business about 2 and 1/2 3 years ago. So, that was that was a a a fun exit and a fun journey. But during that time frame, you know, which kind of leads to how I even got into the world of Simple Closure. But during that time frame, there was a point in time where things weren't going so well. I was actually in a board meeting presenting financials to the board, you know, pumped about what we're doing, what we're building. And one of our board members looks at the financials and operating plan that I'm presenting, and he says, "Hey Dory, numbers don't look so so good. I think we need to talk about a plan B. I think we need to talk about the option potentially shutting down the business. We're not going to fund the company any further, and we don't think that you guys can raise another round right now. And the runway doesn't look good, and I think we need to talk about that option." So, obviously I was caught really off guard. Not what I was expecting to chat about in a board meeting. And so, I asked the investor what specifically would they like to talk about, and they said, "Hey, I'd like you to put together a shutdown analysis for the business. I'd like to understand what are the timelines, what are the costs, what are the liabilities? Are do we owe Are there open contracts to vendors? What's the D-day? That That day is the last day where we have to like decide what's happening with the business by that day. Are there separation packages that we need to set money aside for? WARN Act?" Honestly, he flooded me with quite quite a few questions. Um And the honest truth is I didn't have an answer to any of those questions. And so, I told the board, "Hey, let me go and do some homework and get back to you guys." I went home that evening from the board meeting. The first thing I did is I I rushed to Google, and I literally Googled like, "How do you shut down a startup?" I was hoping to find a platform or a service or anything that can kind of help guide me through the process of shutting down the company or preparing the company for shutdown. I couldn't find anything substantial. The closest thing I found was a blog post from some boutique law firm that was probably like 20 years old. Nothing that I could really rely on or or use to guide me through the process. So, the next thing I did naturally as a founder, which most founders do, is they say, "Okay, let's go ask other founders." You know, it's one of those things when you fundraise, you get advice from other founders. When you go through these processes, you typically go to the community and ask for help. So, I said, "Let's let's go and and go through my network on LinkedIn and look for founders in my network that have shut down their company and ask for advice. Who do they use? How What were the do's and don'ts? You know, how should I think about this process?" So, I So, I went to my LinkedIn and I started searching for founders that have shut down their businesses. And after quite a bit of time going through my my connections, I couldn't find anyone. And it was weird to me until I actually realized that it wasn't that people aren't shutting down, it's that people don't like writing about it on their LinkedIn. Shutting down is a taboo topic. Founders are typically ashamed about talking talking about it. Even though it's it's mind-boggling to me because the majority of startups fail, and a lot of times even when you read when you read about the very successful founders and entrepreneurs that sell their business, that IPO, they've typically failed one or two companies before they got to that stage. But no one really likes talking about it. So, that didn't help. And so, the next thing I naturally did was like, "Okay, let's pay our lawyers a bunch of money to help us do this." So, I actually reached out to our law firm. We're using top Silicon Valley law firm at the time. We had been using them for years prior that helped us with their fundraising and all, you know, their corporate governance and everything. And so, I reached out to the partner and I'm like, "Hey, we we need help putting a shutdown analysis for the business." And I thought they'd be excited, jump on it, you know, more billable hours. And instead, their reaction was, "Oh, yeah. You know, we're really sorry to hear that you're considering this option. It's not really our bread and butter at our firm. We're happy to refer you elsewhere. I think I have a friend of a friend. He might be able to help you, but it's not really kind of our sweet spot." So, I was shocked by that. And actually our CPA said the exact same thing. Said, "Sorry to hear that you're shutting down and dissolving. This is not something that we can support or help with. We're happy to refer you elsewhere." So, at that moment in time, I found myself at probably one of the lowest points in my career in the company. Obviously stressed out of my mind, looking for a solution as a founder. And so, I kind of knew I still had to get back to the board with answers and put a plan together. So, I kind of rolled up my sleeves and said, "Okay, I'm going to dive into the world of shutting down myself." I started speaking to industry experts, understanding the differences between an ABC of bankruptcy, a wind-down, a dissolution, Chapter 7, 11, 9, all the different term terms out there. And I ended up putting a playbook together of my own for the business, presented to the board a few weeks later, and the board kind of signed off and said looked good. But that was kind of the initial experience that I had where I'm like, "This sucks. Like, this is like the worst moment in my life." Like, why doesn't why doesn't anyone want to help me, right? And And let's let's let's like, you know, like your investors are already kind of like thinking about their next company, they've kind of wrote it off and and moving forward, and you're kind of you're kind of alone in the situation. And I remember multiple times I went through went went through my head was I asked myself like, "Am I the first founder in America shut" Like, it started with like, "Am I the first founder at this fund that's shutting down?" Then it's like, "Am I the first founder in in in the startup land that's shutting down?" And I almost got to the point where I'm like, "Am I the first founder in America shutting down?" Like, it doesn't make sense that this is so, you know, bureaucratic and there's nothing out there. And so, that was kind of like the experience that I went through and the pain that I went through that had been bubbling me ever since that experience, which eventually, you know, few years down the line ended up starting Simple Closure. There there are so many fascinating points about this. One, the fact that your board put you down this rabbit hole. When you came in like chest up high, present the, you know, this future of the business, and they're like, "No, we disagree." Put put together the wind-down plan. You're like, "What the hell's that?" And then you Yeah. Ironically, never ended up shutting down, ended up selling the company, you know, creating an outcome. But then, you know, having gone through that incredibly stressful and onerous process, you realize that there was this opportunity. So, I think that's you know, quite the journey to to kind of be forced upon you you leaving the company, but So, I I kind of want to unpack this a little bit more. So, when it came to Earny, like just out of curiosity, like how did you go from plan B to, you know, let's call it plan A, and you end up, you know, having you know, selling the business? Yeah. So, look, first of all, as a founder to your point, like as a founder, you have to live and operate under like like go big or go home. Like, this is like especially in venture-backed startups. Like, you're not thinking about you're trained not to think about like the the the shutdown scenario. And so, I actually think that that's like the that's the will, that's the the guts you need to be an entrepreneur. And so I actually think that if you're as a founder constantly like especially early on hesitating and you know don't have the confidence then you know maybe entrepreneurship especially venture back companies you know are not necessarily the right call for you the right role for you. But in general like we weren't even thinking about it you know we're thinking about okay we're going to raise in the next thing and we're going to launch this new feature and that's going to spike our revenue and and and kind of that was the mentality that we were going with and and in a sense you know our VC our board member put a mirror in front of us and said hey it doesn't always work the way you think we need to be ready for this plan B. And so specifically to your question like how we went from there. So we presented the plan but for my perspective like this was the plan B if not C or D right like to to the investor that was probably the the plan A because they thought you know from their perspective how the company was going and they weren't going to fund the company any longer but from my perspective you know we put the plan together we we we did in a responsible manner but we're still believing the company we're still pushing forward we still understand like the potential of what we're building at the time. And so I presented the plan and and and in parallel I'm fundraising right? And so we ended up getting a bridge um from from from external investors and so they didn't kind of invest in in that in that bridge we ended up getting a small bridge from external investors. What we actually did is we launched we had been for years a B2C consumer business at our core and what we started doing is we started as we grew and grew we actually grew to 3.5 million customers and so we had a very big um demographic of customers and what we actually started to do is we started to build a B2B data business. Um and so that was actually a business that started to evolve around this time and we started to build it out and it was actually around the time when COVID hit and that B2B data business that we built really picked up. Um and it was actually the largest hockey stick growth in the history of our company for the you know for the five six years of operating that B2B data business was like the fastest growing revenue growth that we had and and so about a year into launching that business I would say actually one of our customers acquired us. Um so we continued to operate the business. Yes we had this like you know plan B in an envelope in a confidential envelope there ready if needed but we were still fired up we were still pushing forward we still believe in what we were building and actually that you know that kind of I wouldn't say pivot but that additional business line that we built out actually started to be one of the biggest drivers of the business and eventually got acquired by by a customer. So that's you know great to hear and I from a path of going from that deep dark miserable research project to you know being able to get the outside capital being that this show is about fundraising and I do want to get more to simple closure but I do want to kind of talk about this fundraising journey because I think you ended up raising over 11 million for Ernie correct? Yeah I think we it was almost 13 million total in that range. Yeah 12.5. So what was your process for for raising the funds and you know going out and getting that capital? Sure are you talking about the extension that we did then or in general the 12 million that we raised? the high level in the the original rounds when everything was probably clean and easy but when it gets to the I don't know if it's easy. Uh but when it gets to bridge round I would really like to hear kind of like how did you think about that cuz that's usually where it's very difficult and a lot of founders maybe struggle to to pull in that capital. Yeah. So look with with our overall fundraising for the business we ended up raising a seed round I think it was in early 2015 2016. I think our seed round was about two-ish million dollars one and a half two and then in 20 I would want to say 2017 2018-ish we raised an A round 9 million led by Mayfield and in between the seed and the A we had a few strategics come in. Look our seed round we were relatively young entrepreneurs we probably you know it might sound cliche we probably heard 30 40 50 no's until we heard the yes and we actually had great fund out of the UK actually Sweet Capital. They are the founders the LPs there and like the partners there the previous founders of of the King Candy Crush company. Um so they once they exited for a billion each they started a fund called Sweet Capital which was heavily investing into consumer and gaming and given we were a consumer fintech product they led our seed round. The moment they led our seed round it was very quick to kind of fill the rest of the round that's that's my experience how it's typically been once you have kind of a lead everything else falls in very very quickly. So they led our lead round our seed round excuse me and then fast forward about probably a year and a half or two later we went out to raise our A round we had really strong growth metrics and I think we we did it like a two-week road show mainly in Silicon Valley and we had Mayfield come in with a term sheet and great terms and they ended up leading our round. We had other strategics I think Comcast Ventures at the time was was investing heavily in these types of businesses. And and a few and a few other strategics I don't know if you know there's a there's a great team out in LA called Science which is also they did like Dollar Shave Club and Dog Vacay and they do Liquid Death. So they also invested in in in were part of it. So overall I mean we had you know a relatively smooth fundraising journey and then specifically around the bridge look I I think it's it's going back to it's it's a really challenging time to raise like in general as a founder um when you're at when you're at such a dire situation right? Because on the one hand you start to understand or start to think that like holy this might shut down and I might not be able to build what I think I may what I want to build and on other hand you need to raise money from your investors and you can't tell your investors that you're thinking of shutting down or that it might not be going where where you want to go but you need money from them and so you're really like conflicted I think as an entrepreneur at this moment in time and if you tell your investors that like this might shut down then why should they invest more money in the company right? It also it doesn't make any sense. And you also on other hand you're very close with your investors and you want to share with them. So I think I think it's a it's a very very challenging point in time in general when founders are kind of with their back against the wall. I think that we were lucky that you know we were we strongly believed in what we were doing and what we were building you know we felt like we could get great returns for investors given like the vision and the the new traction we had around the B2B data business and so we ended up you know I think it was another million or so ish raised a bridge kind of at that point to kind of help fund the company and keep it going. This is also a time where like COVID is going crazy and there were QBS or I forget the SBA loans like everyone was getting cash like crazy. So we ended up not taking that loan although that that was a like at that moment in time when there was a lot of cash being distributed so we were lucky cuz I think now raising a bridge is a lot harder than what raising a bridge in you know 2020 2021 was when when cash was a lot cheaper. And so yeah we were fortunate to get that injection and that ultimately like what held us and when we sold the company we still had cash in the bank and like we didn't have to sell at that point in time but we got a good offer that we were excited about and so yeah that was kind of our journey then. Yeah I I just appreciate the fact that you kind of walk us through what was really like the the psychology of a founder dealing with you know what you can and cannot say to who and when and how and then still having to run a process and you know bring fresh capital in it's it's I always like to joke it's you know founders are you know riding a unicycle juggling balls of fire you know on top of a house of cards. It's just like anything can go at any point in time. 100% that that that but it's awesome I I don't know I think like a lot of people it's funny you say that that that's like that that's the explanation like the founder journey or the founder life. A lot of people that come to me and say hey I'm thinking of starting a startup like what do you like here's my idea what do you think right? And I ask them do you like suffering? And they're like they look at me like what are you talking about? Like no do you do you do you like are you cool with like suffering and pain? And and they're like I don't know why do you ask? I'm like well being a founder is like you're going to suffer like you have to be the sense someone that's like okay with suffering and okay with it being painful and doing it with a smile. So it reminds me of kind of like what you're saying of like can you do all these things like you know yeah. Do do you enjoy self-inflicted pain? Exactly. It is it is a thousand percent self-inflicted pain but but like I think like founders and entrepreneurs are addicted to it to some extent. Especially repeat. Yeah like you're addicted to it. It's it's hard it's hard it's hard not like if you if you if if you live it and you have that mentality it's hard to like give it up like yeah. Yeah just you know make sure to have a good partner in life to that knows that you know what you're going to put you both of you through. Fortunately I'm not a winner. Um So all right so you you have this exit. Was there like an earn out period did you kind of have to stay around for a little bit or were you already kind of like eyeing the the next phase simple closure? Yeah so um we actually without getting too much into details of the like deal itself we had a portion of the proceeds that were up front at closing and then we had a portion of the proceeds that were over time. Uh luckily, we were able to negotiate a pretty good deal. We actually had two term sheets at the time of sales. We had like able to negotiate competing offers and we're able to negotiate uh relatively a much heavier uh uh uh distribution of the proceeds upon closing versus over time. Um and so that worked out uh in in in the founder's favor and in the team's favor in this case. Um and so um I ended up staying there probably for about 6 months or so post-acquisition. Uh so help with like all the post-merger acquisition stuff, make sure the teams got integrated, brought everything up to speed, like you know, transfer of knowledge. Um but but I was pretty ready like after those 6 months to take a break. Um so took a break. Um did about probably like 6 to 9 months of traveling, backpacking a bit with my wife and our two kids at the time. Um some consulting, like just, you know, like kind of keep myself busy. Um so that's what I was doing for a for a bit of time. And I got bored. Um and and um that's kind of what I'm I'm saying like the bug that's is just like I couldn't I couldn't sit still. Like it I got bored. And I said to myself, "Okay, I'm going to start another company. Like I'm ready." Um and then my wife is like, "No, you're not. You're not ready. You need to stay You need to You need to stay home. You need to chill. You need to uh um uh take it easy. Be with us a bit more." Um and she's like, "You know, what are your thoughts of like go work at a big company. Like just take it easy and go go like, you know, go go spend some time at a big company. Uh you'll you'll work less. You'll be home more. Like we'll we'll be able to, you know, spend more time with you." Cuz I I just couldn't sit still. Um and I and you know, I I I like at first like I I don't think it's a good fit kind of thing, but then she's like, "Just try it out. You have nothing to lose." And actually, um interesting enough, like you know, Ernie at our peak, we grew to like 30, 40 employees, right? Like when we sold at our peak. Um I said to myself, "The next company I build, I want it to be like a generational company, company that lasts for decades, a company that we build like really massive company." And I'm talking about companies, you know, with hundreds, if not thousands, of employees, right? And I don't know how a company at that scale operates. I've been entrepreneur pretty much from day one. I've, you know, built small teams. I've built from zero to one, but I've not seen how a company uh like that operates. Um and so I said to myself, um "How about I go to a company that scale and see how they operate, uh see how they work, the the pace, the how departments between sales and marketing and and product and engineering at that kind of scale operate?" And so I actually got a really as I was thinking of building the next company and my wife had really pressured me not to do it yet. Um I got a really interesting opportunity to join a company called TripActions. Um they're now called Navan. They're corporate travel and expense. I got an opportunity to join as like GM of growth and build out their whole SMB PLG motion. So it was a role that kind of ticked a lot of boxes. One, the company was 3,000 people when I joined. So seeing how company that scale operates and how they think, uh I got to work very closely and reporting to the Ariel, the CEO of the company. Um and so on that front, I got to see how a CEO at that scale operates, his executive team operates, the board and manages the board. I thought that was something that was like, you know, invaluable to see a company that's like pre-IPO growth stage. Um I ended up spending um about a year and a half there, build out the whole SMB PLG motion. We actually ended up building out the team in Palo Alto, but then transferring it to Tel Aviv. And so uh eventually that that that entire department moved out to Tel Aviv. Um and I had kind of come to uh uh uh uh uh two things. Peace with myself that I'm ready to start the next company. And my wife saw that even if I have a call it a corporate job, I still work like crazy and it didn't make a difference that it was either, you know, my company or not my company. I was still, you know, working, you know, whatever, 14-hour days or what what whatever that was. Uh it didn't really make a difference. So she's like, "Well, if you're going to work like this anyways, you might as well do your own thing and and and and have your own company." Um So uh I I I I kind of parted ways uh with Navan, had an awesome experience there. And I'm like, "Okay, I'm ready to go build." Um and I had Maybe I'm sharing too much info, but I'll I'll go go with it anyways. Okay. Uh but but I'm like, "Okay, I'm ready to go back to building. Like I'm I I want to do it. I miss it. Like I feel like I can uh I feel like I can, you know, build something really big and build the, you know, scale the company. But what do I want to build?" Right? Like it's it's kind of coming back to what do I want to build? And so I've I actually have a draft that I keep uh in my notes from the moment I started Ernie for the full like 6-year journey, every time I had an idea, I wrote it there. And that list got longer and longer. And by the since I started Simple Closure, I have a draft of like, you know, the next thing, right? Um and so um I said to myself, "Okay, I need to go spend some time uh deciding like what am I excited about? What do I think could be a really big, you know, opportunity?" Um obviously, one of the things on that list was the experience I had around preparing company for shut shutting down and saying like that was one of the most painful things I've ever done as a like painful. And so that was one of the things on the list. So I actually told my wife after uh uh uh after leaving TripActions, "I need to go do a retreat for myself and think what I'm going to do next." Um so speaking of supportive wives, uh she was very supportive. I I I took a flight to uh Mexico. I went for 4 days. Um and had a whiteboard and myself. And I just started like pulling out the list of like, you know, 50 to 100 ideas and started going through them and re-prioritizing and deleting ones that are dumb and deleting others that already grew into unicorns and the market saturated. And and started kind of like drilling that, you know, that 50 to 100 down to 30, that 30 down to 10, that 10 down to five, that five down to like two or three. And then spending more and more time like uh researching those two two or three uh a lot deeper. And obviously, you know, you you know the ending, but you know, the idea for Simple Closure was top of the list. It kept staying top of the list. It kept bubbling in me. It was something that I felt was, you know, very I was very passionate about. So I kind of ended um my uh my my first company offsite, which was just me, uh with with uh the idea of of building a platform or company to help company shut down. Um I came home from that. I'm like, "Okay, I got to do two things. One, I got to validate I I need to validate the idea and understand like is there a market for this? Uh are other people feeling the same pain that I went through? Was I a one-off experience and everyone has great solutions and I'm just exaggerating?" So kind of understanding the customer pain point. Um and the second thing I said to myself was um I need to see how big is this market? Like what is the TAM? How big can this really be? Um and so, you know, I'm I'm happy to double-click and dive into those things. But in general, I spent my time doing those two things uh and coming out of that research and and being so much more convinced how big of an opportunity this is, how big the TAM is, what a pain point this is. I just I just ended those conversations like very, very convinced that I'm on to something and there's a really big opportunity. And so that kind of what is what um tipped it tipped me over the scale and I said, "We're we're building Simple Closure." Um so um that was kind of the journey. Now, I think that's one of the fantastic journey. One, you have a great wife, uh it sounds like, uh who provides you the flexibility to go disappear when you have three kids. Uh I don't think I would have let off. Um Uh and and let's kind of get to the, you know, so you made the choice. This is This is the company. You feel it's validated. You're ready to go. You raised 5 and 1/2 million for for Simple Closure. Walk us through when you decided that you needed money. And how did you get to that conclusion? Uh and what was your, you know, having raised money previously, you what did you maybe change in this fund raise? Quick plug for founders looking for an edge raising capital. Companies on thunder.vc have gone on to raise over a billion dollars since joining our network. It's absolutely free. Just go to join.thunder.vc to get started. And if you leave a comment on this video down below with your company's name and the problem you're trying to solve, you'll be entered to win a free coaching session with me. Okay, that's it. Just comment down below. Now let's get back to the show. Yeah. So I I think like I'll share you one thing about fundraising and in general about building repeat being a repeat founder. I remember when we were raising money for Ernie, there was one specific VC that I walked into their office. We pitched them. We were excited. They were excited. They did a bunch of diligence. And they passed. Mhm. And I and I left that meeting and I'm like, "I need to know why they passed." And so I I I I I reached out to the to the department. I said, "Hey, I would love to know like what can we do different? Like what did you you know, what did you not like?" And they're like, "Listen, we really believe in what you're doing. We really love what you're doing. We believe in the market. We believe in the vision. But we don't invest in first-time founders." And I remember like I'm very competitive and I remember like leaving that meeting or that call and I'm like, "What does a second-time founder have that I don't have?" Like I don't get it. Like that makes no sense to me. Like why am I not being judged on like my merit, on the idea, on the team? Why would like that investor like think that a second-time founder has something that I don't. Um and you know, I I my my dad always says the sentence like you you learn your whole life and you still die dumb. Um and so um I today like I thought I was smart then and I knew everything then. I today would say the exact same thing if I had to write a check as a VC to to an entrepreneur. Like I'm not going to invest in a first-time founder, right? Like like I actually think that what we went through earning that journey, that is the MBA of life. That was the MBA of an entrepreneurship. That was like the life skills, the professional skills that I gained there to make my chances of and our team's chance of succeeding not 2x higher, 10x higher. I really believe that. And I actually stand behind that saying that like I would not, you know, if I were to go into VC, I probably would stick to that pretty thesis like that. We don't do first-time founders. Um and so asking of like what's different, everything is different. Everything. Like there's not one thing that could say was the same. Everything was different. The the level of experience you go through of you know, building company, building a product, taking it to market. Like at Earny, we had such a roller coaster. Like we raised multiple rounds of funding. We got sued by Chase. Uh bank. Like we dealt with uh we we had one point in time. Again, I I don't know how much I should be sharing this, but we had a point that we were we were doing scraping of all the top merchants of the retailers we were doing price protection. We had a point in time where our Google Cloud provider called us. Okay? And said listen the top four number four merchant in America retailer called us, Google and asked us to shut they're getting all this traffic from this IP that's related to Google servers and they asked us to shut it down because it's their number one uh uh uh volume of of traffic on their website and it's flooding their systems. Like those are the types of things we dealt with. We we went through a process of like Gmail shutting off email access and Wall Street Journal investigative reporting and fundraises and bridges and things like that. So like the level of knowledge and experience that you go through as a founder is insane, is immense. And so I I think like first of all, there's nothing similar between company one and company two. I I don't really like count the the first, you know, social networking dating company. It was a company we raised $200,000 and went on for about a year. Like we pivoted very quickly into Earny. Um but like that was an MBA to life. Uh it's to to to to turn entrepreneurial life. Um So so nothing was similar. Uh specifically like what we did is Look, I was telling you we're going through the process. I was as I was validating the idea I was speaking to customers founders that have gone through the process of shutting down, were thinking of shutting down to like pick their brain. I told you I was trying to validate like did I what I went through, was this what everyone was going through? So I started getting on calls with them and like you know, picking their brain and speaking to founder after founder of founder and every call actually got me more and more convinced of how big the pain point is and how much they need the solution. It got to a certain point by like call 15 with with customers like, you know, customer number 15, the customer would be like, "Listen, Dory, it sounds like you have a bunch of knowledge in the space. Can I just pay you as a consultant to help me shut down the business? Like I'm like lit and I was like, "Hey, listen, like we don't I don't have a product. I don't have anything. I'm just doing user research." They're like, "I know, but you have more knowledge than 99% of everyone I spoke to about this and I need help now. Here's my credit card. Charge me. Just help me." Right? And so that by the way convinced me of like how real the pain was. When when you're on a call with a customer validating idea, if they're willing to take out their credit card and pay you now I think that's like a pretty validating uh uh uh metric. Um and so the first one that told me, I said, "No, you're crazy." The second one told me, I said, "No, I don't have a product." The third one that that told me it, I said, "Sure, no problem. Our MVP will be live next week." And so um and so actually selling the first customer uh then um they were like I I went to work. I built our initial version in an air table in a week. Uh first customer paid. They were delightfully happy with the with air table I built in a week. Um and so we actually start like kind of like from day one started having revenue. Um and then true story like this all happened like around March, April last year. Um but I ended up going to I got a free ticket to Fintech Meetup because like we still not incorporate, it's not really done anything. Got a free ticket to the Fintech conference in Vegas. I went to the conference. Um I ran into someone that I hadn't seen for quite a few years. He was a VC at a growth stage fund. He's like, "What are you up to?" I told him I'm working on this thing that helps founders shut down. Uh called Simple Closure. He's like, "Brilliant. I think I have a friend of a I have a friend here at the conference. He's at a VC at a at a pre he's a VC at a uh pre-seed stage pre-seed seed stage fund. He's going to love this. You have to meet him." So he we go to like an event at the conference. I meet him. I tell him the pitch. He actually says "Brilliant. I love it. But I have a friend. He's a VC at a later stage Fintech fund. And he shoots down every idea I bring to him. So I use him as like a filter. He's here, too. I want you to pitch him. And if he likes it then like I'm really excited." I'm like, "Sure." So he takes me over this all like at a happy hour thing. I pitch it to him on the spot. He start like he starts thinking like like, you know, like, you know, rubbing his beard and saying "Interesting." When he said interesting, the the the other pre-seed investor was like, "Okay, he didn't shoot it down. I think we're on to something. Okay, I want you to meet my other partner." I ended up like literally in that evening plus the next morning meeting like two other people on their team. Uh I boarded that evening the flight from Vegas to LA. When I landed, I had a text saying, "Hey, we're we want to lead your pre-seed round. Here are the terms." Um and so uh pretty much got a term sheet in less than 24 hours. Um and and and had that offer. I was actually not fundraising and not considering fundraising at that moment in time. Um I felt like I could, you know, bring some more traction and then go raise at better terms. Um and given it like I said, we had the luxury where we were making revenue kind of from day one. Um but I actually uh started thinking long and hard about it and I kind of saw where the market was and there was a lot of early talk about like we're in a recession and companies are going to shut down and all these things. And I started thinking to myself, "Well, do I want to bootstrap it for now, raise later and grow slower? Or do I want to take advantage of like the ecosystem and a lot of the things that are happening uh in the space right now and be in market faster, build product faster, be ready scale faster?" And actually ultimately made a decision and said, "Um I think that I prefer to take money now um and grow um much quicker uh and be ready for that moment in time when like there's, you know, a lot more companies shutting down, which was kind of the assumption that I had around uh early 2023. Um so that was kind of how the term sheet came for our pre-seed. Uh it came together. We had another fund join, which was awesome, Cambrian Ventures. Uh Rex that leads that fund, Vera was the one that gave us the term sheet. And we had a awesome angels join, but that came together in like, you know, a few days and we ended up closing the the million and a half. Um which was kind of our first raise. A serendipitous dream come true for most founders to be able to close their round that quickly uh over a cocktail party. Uh you know, not not too bad. Uh so you know, appreciate you you diving into that and and sharing that at narrative because I'm sure a lot of founders are probably very jealous uh hearing that. But uh yeah, it's a culmination of your credibility, your track record, and other things that ultimately amount to that. And working out something interesting that I think a lot of uh VCs are very familiar with. Um So let's talk about how to actually close a business and shut down a business. Um yeah, I think if you can kind of give, you know, founders an idea of what this process looks like from what it's like without Simple Closure and what it's like with Simple Closure. Yeah, sounds good. So look, I'll talk in in in in this example, I'll just talk about like a venture-backed startup as like the prime Obviously it differs if you're in real estate or if you're in media and entertainment or in uh in startup land, but let's talk about startups and venture-backed. Um What makes shutting down so difficult for for founders to kind of understand realize is that there are so many moving parts that you need to orchestrate and quarterback in order to properly shut down a company. I'll give an example. Like it's not only where you need your legal team or lawyer to shut down. You need your lawyer and you need your accountant and you need severance packages and you need uh to interact with investors and employees and vendors and customers uh and IRS accounts and payroll providers. And like if you kind of map uh what shutting down entails, it actually entails you orchestrating and quarterbacking all these moving parts in order to uh uh properly uh um wind down and dissolve a company. And I think that what makes this even harder is that first of all, there's no universal process. Uh every entity, every state agency every service provider has a different process from fax faxes and phone calls and emails and and and and and and and and paper mail even. Uh they have different processes. I'll even give you an example. A lot of founders so so in tech, almost all companies are incorporated in Delaware. Like that's where most companies are incorporated. And then a lot of times they'll have foreign state entities in California because their headquarters are in California or in New York. And they'll have, you know, other representations in other states because they have employees in those states. A lot of founders what they don't realize is when you go to shut down your company, you think that by telling Delaware, you're done. You notify your state of incorporating Delaware, you tell Delaware, you're done. Actually, you've not even scratched the surface of what needs to to to be done um in order to shut down a company. Um so if you tell Delaware, Delaware doesn't communicate with the IRS, so you're still registered with the IRS and you still have an EIN and you still owe them a bunch of reporting and things like that. Delaware doesn't, you know, uh uh interact with the state of California because if you're headquartered in California, then you have a a foreign entity there. Even within California, if you tell the Secretary of State which where your company's registered in that you're shutting down, they don't interact with the different payroll accounts. So, if you got an employee in California as well, they don't interact. So, you have to separately do the process shut down the payroll accounts in California. And even within the world of payroll, there's sub accounts because you have the Department of Labor and you have the Unemployment Department. And even they don't communicate themselves. So, actually the structure of shutting down a company is is is very complex in the US given the fact that there's so many states. I think the fact that more companies have gone remote in recent years have complicated the corporate structure because now like I'll give you an example at Ernie, we were LA-based, headquartered in California. All 30 employees were in, you know, California. We had one office, one Secretary of State. Today at Simple Closure, we have less employees than we had at Ernie, but we were registered I think in like 13 states, right? And I think that's an example of like any company that's working remote. So, I think that that that's something really important to understand for founders is that like it's complex. It's very time-consuming. The traditional time of a founder, like we did a, you know, a ton of user research. It takes on average 9 to 12 months from start to finish for a for for a startup to shut down. And in most cases, it ends up costing tens of thousands and sometimes even hundreds of thousands of dollars in fees to properly shut down. And I think that the thing that founders don't realize the most that's we've seen is the most painful part around shutting down. So, even if you do it yourself and you quarterback it and you work with it with your lawyer and you do your work with the accountant and you drive TriNet and Rippling crazy and you do all these other things and you spend a year of your life doing it, when we did the user research in every single case where we interviewed a customer about this, they were continuing to get fines and penalties months and years after shutting down because they didn't shut down things properly. And the reason is it's because it's so complex and there's all these moving parts. And so, I think that is one of the, you know, and so you think about it, oh I shut down my company. We literally spoke to founders that shut down 3 years ago and are still dealing with the state taxes and fines. And the problem is they have no more money in the bank and they returned money to investors and now they're on the hook for it. And then sometimes there's personal liability depending on what's not paid. And so, in general, that is a very, very painful process and that at our at its core is what we're looking to solve. Yeah, and minus the anxiety attack I just had from everything you just shared. And I imagine other founders having that same feeling. Yeah, it's you're already at your lowest moment as a founder when you come to the conclusion that your baby doesn't make it to then deal with the monstrous headache of the logistics. And you know, the bigger you were, the harder and more complex it becomes. And I remember bigger you were, probably the more emotional it is because you're One of the hardest things we talked to founders is like the hardest thing for them to do is other than actually shutting down is letting part of it, but is letting go of employees. Like that is a hard thing to do as a founder. You are now sending people like that have families, that have kids, that have mortgages, that like they're losing their job, right? And so, that that's a that's a level of strain and emotion, you know, burden that's that's hard to overcome. And you know, another issue that doesn't come up often is like I see founders do this where they they hesitate. Um and you know, they raise a bunch of money, they had money, they have they have cash, they have runway, but clearly the business is not going in the right direction. And you know, I walk through founders of like the option of just, like you can raise, but you got to do a bunch of stuff which usually they're not capable of doing or the business is just not going to get there to get to that point. And what they do is they just bleed out. They basically just delay cuz, you know, ethically or unethically, they're getting a salary, it's investor money, they, you know, start to just let it wind itself down. Um but they realize you know, what they don't realize is like pulling the trigger faster, sooner with a plan and a strategy and giving everyone notice and like having a and doing it all properly is actually one, it takes work and effort. And rather than kind of sitting on your hands and letting the demise ultimately come very slowly, you being proactive and trying to return capital back to investors cuz when albeit it hurts, it sucks, but if you show that you are mature enough as a founder to make that decision as early as possible and return as much capital back to investors and close everything nice and clean and you know, with no issues and no strings attached, those investors might reconsider reinvesting you in your next business. Whereas if you string it out and let it just continue to, you know, milk the remaining cash reserves and you don't close properly or you don't leave enough funds in reserve, one, those investors don't like you anymore and won't write you a check in the future. They'll tell other investors that, you know, you're probably not the person to back. And then the worst part is you might be on as you said, on the hook for whatever fines and fees are left for the business to resolve after closure because it wasn't properly planned. So, part of the reason why I wanted you on the show was to educate founders of this option cuz I've talked to too many that are on that path, that are on that kind of bleed until they're dead, you know, you know, completely bled out and there's nothing left to really do the right process and then these worst-case scenarios happen when they thought it couldn't get any worse. Yeah. No, I I agree with you. Look, I'll talk about something really interesting you brought up. I'll double click on it. First of all, like just so you know, like at our company and our team, like we don't get excited about shutting down a company. It's not like we wake up in the morning and she's like, oh, we're so excited to shut down a company for a founder. What ultimately what we're trying to help with is giving founders the peace of mind to move on to what's next. That's what we want. We want to take the, you know, the the burden off their shoulders, off them, the board, the team. We want to give them the peace of mind to go and do whatever's next, start that next company, get their next job, you know, whatever that may be. That ultimately is like what what gives us happiness and what drives the team. And so, what's really interesting at that point was like actually from on our platform, I would say probably 60 to 70% of founders that are shutting down on our platform are actually already working on their next company. And that to me was like mind-boggling cuz I said to myself like, well, as a founder, like you're so emotionally drained, you're so burnt out, like you're never going to you're going to want a few you you just want a job, right? Or like you just want a vacation. But it's actually super interesting to see that the majority of the founders on our platform are actually already working on their next thing. And so, when you're already thinking about that working on your next thing, to your point, one, the relationship in which you end with your investors is so critical because we see a lot of like founders that end on really good terms with their investors where they, you know, they have an amicable like ending. They they try their best. Like look, investors are in the game of betting. Like investors know that 90% of their bets will fail, right? And I think that if you've proven to your investors who you are, your, you know, ethics and how you operate, then it's actually increases the likelihood by the way, it goes back to the thing we talked about earlier where you're a second-time founder, you're actually probably like you have a higher likelihood to hit a home run with this founder than probably a first-time founder, right? Especially if you had a good experience with them. So, so I I totally agree there. I think that founders don't realize how much investors Now again, I don't want to come across where it's like, well, if you have a million dollars and like you could still build something, you're like, ah, I'll just give up and like no, you still need as a founder the mentality of like push and fight and like build impossible. Like if you woke up and it was easy, then you might be doing some like, you know, you wouldn't be doing this job, right? Other people would be founders. Everyone would be a founder. And so, I think you have to balance between when am I giving up or By the way, we don't call it giving up. We just like you've changed lanes. Like you're changing lanes. Um and trying your next thing, right? And so, I think ultimately like true entrepreneurs, like every failure is one step closer to that success. That's I ultimately believe in that. But so, so anyways, I don't want to come across like, oh, you have any type of million dollars and things are really hard, just give up. No, but if you understand that you've, you know, product market fit's not there, you've built this stack and it's not where it is and you don't have, you know, the the conviction that this can really go somewhere. To your point, don't don't drain it to the end because that exact money that you might hand back will be your next check potentially the investor that that that invest next check. And the second thing, you're right, like what founders don't understand is like you cannot shut down a company with zero dollars in the bank. It doesn't work that way. Like you from your personal bank account. It's It's going to come from your personal like and and it's tough. And so, what we try to like educate founders that reach out to us, you know, when they're trying to go out for like a Hail Mary bridge or like they're 6 months out of runway is like regardless if you use Simple Closure or not, the biggest advice I can give like the two big pieces of advice I always give founders is one, don't try to do this yourself. It's one of those things where you don't know what you don't know. And if you try to do yourself, in every case we've seen that, you end up dealing with this for years. And the question is do you really want to deal with this for years or do you want to focus on your next thing? Um and the second thing we say is like it costs money to shut down. Taxes, separation packages, vendor invoices, other things that are state fees. And so, the last thing we want is it to come out of pocket for for founders or, you know, needing to ask their investors for more money just to shut down. Um so, that that that's a that's a really important point. Yeah. I think this has been, you know, a great topic to cover for for founders that just don't really know what to expect as they are, as you said, trained not to think about this and to keep going all in and you know, put every ounce of effort they have, but there are some points that you said 90% of these companies just don't work out. And what's ultimately that plan? So I think you did a great job really, you know, hitting the the key points there. For for those that are listening, what would be the best way for founders to either, you know, learn more about Simple Closure or connect to you? Sure. So I'm I'm very available on all mediums. I mean, my LinkedIn, Doriana, Twitter as well. You can also email me. It's dori@simpleclosure.com. We're here to support founders. I love having There's nothing I love more than like getting on a call, helping founders through this journey, making sure that they they can go to sleep at night knowing that things are taken care of. So still speak to founders all the time and and and happily help guide them in in and by the way, just like for advice and bouncing ideas off of me in different scenarios, always happy to help. And then if anyone, you know, unfortunately is thinking through this process or considering their options, they can go to simpleclosure.com. It's exactly as it sounds, simpleclosureoneword.com and click get started and we ask you a few questions and we get you routed to the right team to start helping you out and handling and sharing, you know, the different scenarios and what your options are. So we're we're always here to support and always here to help the community. And again, like if you if you have to go through it, this process, it is painful, obviously, and it's an emotional process, but there is light on the other side. The amount of founders we see that jump right back in and go and build and and like we've had founders that shut down a company and have already raised their next round for their for their next company. But like those are the stories that we love, right? And we help out with. So if you're either needing to shut down cuz you're out of cash or you're shutting down and returning funds to investors or even if you've done an asset sale, about a third of our customers are companies that have gone through asset sales, you still need to wind down the shell entity. So we take that on as well. I'd say that's probably a third of the the type of companies we we see. We're here, we're available, we're here to support. Yeah, and that's kind of the best way. I appreciate you sharing your journey, sharing your experience, and ultimately sharing a solution which, you know, provides a a better outcome in a tough situation. So Dori, it's been an absolute pleasure having you on the show and I look forward to our uh to our audience being able to learn more about Simple Closure. Thanks for having me. Thank you for watching today's episode. As a reminder, I'm your host, Jason Kirby. I have built and sold multiple companies with over 135 million in transactions as either a founder, operator, investor across multiple industries. I'm currently the managing director and founder of thunder.vc where we help companies and founders at all stages navigate what capital to raise and who to raise it from and help improve companies' odds of raising capital. If you need help, reach out to us at help.thunder.vc. If you liked today's show, please share with your friends, give us a like or a comment down below. As a reminder, this show is published weekly. To get notified of new episodes and our newsletter, be sure to go to our website at join.thunder.vc. If you sign up today, I'll send you a few freebies on how to negotiate a term sheet, how to get a free list of relevant VCs, and much more. That's it. No more shameless plugs. Thank you and see you next week.