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Out of curiosity, how much drawdown do the VCs typically deal with during these liquidations? They get whatever's left based on their liquidation preference an
by gammateam 8y ago
Out of curiosity, how much drawdown do the VCs typically deal with during these liquidations?
They get whatever's left based on their liquidation preference and preferred stockholder preference, leaving nothing for common stock holders including the founders themselves.
Whats a typical drawdown look like?
- jgh 8y agoi guess it depends on if they have anything to sell...i bet most software startups would have a pretty significant drawdown unless they've made some unique ip that's worth something.
- jedberg 8y agoIf they have an office they have stuff like chairs and desks and computers that are at least worth a little bit. But it’s true most of the money went to employees.
- captain_perl 8y agoOffice liquidators typically offer 2% to 5% of retail on office furniture, although an office manager can try to direct sell the Aerons or new modular units.
- acjohnson55 8y agoWow. That's way less value than I'd expect. I guess no one really wants to work at a dead company's used desk.
- bmurray7jhu 8y agoWhen VC backed companies shutdown, the logistics are typically outsourced to specialist firms like Sherwood Partners [1]. Instead of a formal bankruptcy in federal court, an alternative process called "assignment for the benefit of creditors" is used to distribute assets to creditors under state law. Patents are usually sold to patent trolls or companies seeking a defensive portfolio. An attempt is usually made to sell tangible assets as a lot, but if there are no buyers, individual assets are auctioned. Silicon Valley Disposition[2] is frequently selected to manage asset disposition auctions. [1] https://www.shrwood.com/ https://www.shrwood.com/ [2] https://www.svdisposition.com/ https://www.svdisposition.com/
- gammateam 8y agoyes, I've heard of California's ABC liquidation process, which also blocks creditors. whats the drawdown look like? how much money do VCs lose, percentage wise given their liquidity preference? there is no scatterplot or case study or statistics at all? maybe an obscure SSRN article? Publication from a VC itself?
- harryh 8y agoTypically companies don't shut down until they are out of money or almost out of money so VCs lose basically everything. Common shares go to zero (as they should).
- moritzplassnig 8y agoAnd those companies usually took on debt additionally which is more senior than the equity investors.
- bmurray7jhu 8y agoJunior creditors frequently receive more under an ABC than they would under a bankruptcy. The reason is that any creditor can preempt an ABC filing by petitioning for an involuntary bankruptcy in federal court. To avoid an involuntary bankruptcy, the senior creditors are usually willing to let the trustee make compromises when settling with junior creditors.