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The 'Undertaker of Silicon Valley' Stays Busy as Startups Lay Off Thousands
- jamestimmins 6y agoI'm disappointed that this article is more about job loss in tech at large, rather than a look at what Sherwood Partners actually does. How does one wind down or sell off the assets of a technology company? What percentage of tech companies even have assets in the traditional sense? I can see the value of selling off inventory, machinery, owned facilities, and IP, but I'm guessing that a small percentage of Silicon Valley companies have any of these things in meaningful quantities. Does Sherwood Partners buyout the company for cheap and then make a profit by selling individual pieces? I'm very curious. If anyone knows some of the answers, I'd love to hear!
- bbunix 6y agoSorta the opposite of YC... probably has quite an extensive network of people to buy everything from the people to the chairs...
- oafertino 6y agoAgreed - the article does exceptionally little to describe what he actually does. Apparently the secrecy is why he is hired so I suppose that's why this article is so light on specifics.
- ageyfman 6y agoHere's a great overview of their process! https://www.shrwood.com/Assignments-Liquidations/Assignment-for-the-Benefit-of-Creditors https://www.shrwood.com/Assignments-Liquidations/Assignment-...
- pjscott 6y agoNice! This is clearly written, and exactly what I was looking for.
- jbkiv 6y agoNo, typically there is nothing to sell. The "assets" are worthless (code, website, customer lists). Maybe furniture they sell to liquidators at 5% of price. The liquidators will then put that in storage and will sell the assets at 40-50% of price. Unwinding a company is quite complex and he works with a skeleton accounting staff to close the corporation, pay state, federal, sales taxes (you can never escape that), closing the DE corp and all foreign companies as well. Lot of admin work.
- jamestimmins 6y agoThanks for sharing! Who pays for this? Also, naive question, what happens if you don't do these things? If the company has no assets, it's not like you can get sued? I'm not arguing that this should be done, I'm just curious what the specific reason is that it happens.
- redis_mlc 6y agoThe equipment and furniture are either auctioned or liquidated. If there's a corporation or formal payroll involved, then it's important to wind those down carefully for various legal reasons. So either the remaining assets or owners will have to pay for the paperwork wind down. Typically with a small company of 50-60 employees, the office manager and 1-2 accountants wll stay on for a few months to wrap all that up. I was the last eng. employee to leave Novafora/Transmeta, and attended the auction and bought some of the computer equipment. The most expensive hardware items were the almost new espresso machine, the 3 Ghz scope and the bed of nails tester. Intel bought most of the IP for a little more than peanuts.
- jamestimmins 6y agoFascinating. I had no idea this process was so formalized, but it makes a lot of sense in retrospect.
- alexbrower 6y agoTrue, there are liquidations of physical assets. But the biggest benefit to the last remaining employees and board members (particularly those who are Directors or Officers) is reduction in liability around the details of shutting down a business. It's not about the thousands of dollars you get for the office furniture. By the point a company does an ABC, payroll obligations are likely the only category of liabilities to impact any employee still involved. A firm like Sherwood will in fact readily offload that stuff to the most reputable firm who can haul it away, whatever is most efficient. It's the forgotten obligation that Sherwood helps protects you from (e.g., rent payment, tons of small bills). When that bill shows up after you have had the hard conversations with stakeholders, that's yet another reminder to your investors that things went south. (Sherwood gets the missed bill and pays it out from a carefully planned escrow and based on a wind-down agreement that your investors signed off on). Much preferable to all of your investors notifying _you_ of an outstanding obligation. Firms like Sherwood play an important role in allowing all of us to move on with life. There are several details here I'm skimming over that someone at Sherwood would correct me on, but hopefully this is helpful. Sherwood=good guys who help startup people move on. Hopefully you have your business well-organized. Sherwood has the process down to a science. [EDIT]: 'who pays for this?' There's typically a negotiation between the remaining creditors with voting rights (your board members at time of wind-down), but the cost of a firm like Sherwood is small compared to the risk of you trying to shut down your startup in your spare time. (Don't do that.)
- charrington 6y agoI was a Sherwood Partners client in 2010. Oracle bought our startup, DataScaler. However, they bought the core assets of the company, not the corporate entity. That's a fairly common strategy for acquiring early-stage companies. The buyer gets the parts they want (in our case: the team, code, and patents) without any of the hassle or liabilities of the corporate entity or any assets that they don't want or need. That left us needing to wind down the DataScaler corporate entity. This is a fairly technical process and not something you do casually. We hired Sherwood Partners to do the wind down. They filed the appropriate paperwork with Delaware and California, since we were a Delaware C corp based in Cupertino. They stored our corporate files (lots of paper back then) in their warehouse for 7 years in case of any litigation, tax disputes, etc. The offered to connect us with a liquidator to sell off our desks, chairs, phones, etc. They don't actually do the liquidation themselves. Perhaps most importantly, they were legally the "Stockholder Representative" and ensured that the stockholders were properly taken care of, etc. We used Sherwood exclusively for the corporate wind-down part, as we already had a buyer. They also can help companies find buyers and they have lots of contacts in the valley. I am happy to answer questions if anyone has any.
- khazhoux 6y agoIt's interesting how his moniker is "Undertaker of Silicon Valley", and the process you describe really does have the calm, comforting, and efficient feel of a funeral.
- raverbashing 6y agoA question out of curiosity, how much did the wind-down of the company cost in comparison to its acquisition cost?
- charrington 6y agoSorry for the delay in getting back to this... The wind-down cost was very small in comparison to the price Oracle paid.
- raverbashing 6y ago
- cbanek 6y agoI totally hoped this would be about whoever the real person that "The Carver" from HBO's Silicon Valley is based on: https://silicon-valley.fandom.com/wiki/The_Carver https://silicon-valley.fandom.com/wiki/The_Carver "The Carver" takes bankrupt startups and "moves the carcass to the cloud." Sadly disappointed.
- neilv 6y agoI think the initial "The Carver" mystique set up the comedy of introducing a kid, but that the character might've actually been a stealth critique of a much more common dotcom stereotype: * Mechanically grinding out large amounts of formulaic code. * Routinely abusing medication for performance enhancement. * Smug, strutting, arrogant, and rude. * Demands very high compensation. * "Laidback". * Secretly a massive fudge-up in their work, but there's mutual interest in not calling that out.
- throwanem 6y ago'Stealth'? Seemed pretty overt to me. Making the character everything you describe and also a spoiled brat of a teenager with an overinflated sense of his own importance doesn't seem like something that happens in that show by accident, you know?
- cbanek 6y agoTotally agree and just to add to the list: complete inability to communicate or work with others.
- strken 6y agoWhat does "laidback" mean?
- neilv 6y agoI wasn't ready to say that it's genuine laidback, when combined with such aggressive other traits. It might be affectation or sociopathy. In any case, it seemed funny to me (and the show did some similar things with some other characters, like Keenan Feldspar).
- japanaway 6y agoAny FAANG workers here worried about the possibility of layoffs?
- gt2 6y agoHard enough to retain/hire talent, they will weather the storm for a while. They regularly fire low performers though.
- rrggrr 6y agoWe do this as well. Many companies do.
- arthurjj 6y agoIt's interesting (although morbid) to speculate about which types of companies will be hit the hardest. 1 Anything focusing on AI/ML that isn't directly revenue generating such as sales leads/conversion optimization 2 Blockchain 3 Consumer non-essentials. Think Tesla and Subscription boxes Industries that should be ok. 1 Gov/DoD contractors 2 Consumer 'essentials' (Netflix, online commerce, food delivery 3 Biotech? (I don't have a good insight into this sector)
- dx87 6y agoCurrently a government contractor, can confirm everything is fine so far. I work at a mid sized company, and not a single person was furloughed or laid off. I'm sure it doesn't hurt that 90% of the company had the option to work from home, but AFAIK, everything has been business as usual for all the other contractors as well, minus the mandatory WFH part.
- paxys 6y agoAnecdotally, a lot of startups in recruiting/HR and real estate have announced mass layoffs in the last few weeks.
- griffinkelly 6y agoWorking for a company that is tangentially related to consumer essentials--we make a self-checkout of sort--our customers have been hounding us to move faster. The crisis has been the catalyst for our slow moving customers to push their legal teams faster than normal.
- seibelj 6y agoI work in blockchain (exchange) and the business is fine. BTC is holding up, and we make our money on volatility. Not sure why crypto would fall when the stock market tanks? We exist in a parallel financial system, that’s the whole point. If we need money, we can print our own!
- ganstyles 6y agoRE: AI/ML, we've accelerated R&D, and it's not even stuff that's super direct to customers (though makes it to customers eventually). Absolutely business as usual for a growing startup.
- Hydraulix989 6y agoThis guy just uses these puff pieces to get himself more limelight/business. As a self-professed former pop-music manager, he certainly knows how to market himself. I've seen articles with him as the subject before topping HN in years past, foreboding all sorts of doom and gloom which, of course, never happened.
- throwanem 6y agoNeither has a moment like the present one, at any time in living memory. Jokes about accurately predicting 200 of the last 2 recessions aside, it seems like it might legitimately be that dude's time to shine.
- randycupertino 6y ago> This guy just uses these puff pieces to get himself more limelight/business. As a self-professed former pop-music manager, he certainly knows how to market himself. I used to work with this nurse who wasn't very good at his job and most people didn't like working with him. He hired a PR agency and suddenly was being highlighted in all these news articles as a medical expert/color commentary and getting listed on "Top Emergency Nurse" lists. He flew to various environmental disasters to help out but they were mainly just ego trips to get in the news. For example when there was an avalanche on Everest and many people died, he took a month off work and flew there to basically screw around "volunteering." He would come back and post the articles about himself on our bulletin board in the breakroom. He got let go after having a third affair with a coworker and during a messy breakup she complained that he played porn on his computer during a work meeting.
- ApolloRising 6y agoHow does a nurse afford a PR agency?
- randycupertino 6y agoOur nurses start at $180k, it varies by hospital and unit.
- fouc 6y agoAnother article about Sherwood Partners https://www.theguardian.com/technology/2018/aug/21/the-undertakers-of-silicon-valley-how-failure-became-big-business https://www.theguardian.com/technology/2018/aug/21/the-under...
- ww520 6y agoAny asset fire sales? Could use another aeron chair or large monitor.
- madengr 6y agoI’m looking forward to picking up some test equipment. The problem is hardware is no longer built here. Back in the 2000 dot-com bust, there was plenty of RF and optical equipment going for cheap. As another poster mentioned though, these companies have no assets.
- matheweis 6y agoThere is a little bit. Happened to come across this auction just by accident (A headphone manufacturer), with oscilloscopes and more: https://murphyauction.hibid.com/catalog/209050/human-inc----online-only/?ipp=10 https://murphyauction.hibid.com/catalog/209050/human-inc----...
- zootboy 6y agoThey're going on all the time. https://svdisposition.hibid.com/ https://svdisposition.hibid.com/
- Thorentis 6y ago> "Well, we used to do two, three to four a week," Uh, shit. I expected the rate before COVID to be way less. No wonder COVID is causing so much havoc. COVID has simply been the pin that popped the bubble. 4 startups a week that just this one firm are shutting down due to no revenue or investment? And not just 4 companies closing a week, but 4 that have enough assets that need a law firm to clean up the mess. What a disaster the start-up economy has turned out to be.
- throwanem 6y agoAgain.
- adventured 6y ago> What a disaster the start-up economy has turned out to be. It's not going anywhere for very long, if the Fed's rates remain so low and money remains so cheap. Thinking otherwise is nothing more than revenge fantasy style wishful thinking (people lusting for a comeuppance scenario because it makes them feel good). In two years funding will be back in normal swing. In three to four years people will be back to speculating about the sustainability of bubble funding again and getting angry about the so called start-up economy. The giant pile of capital sitting on the sidelines desperate for a return, is still there and will continue to probe for opportunities. It's not going anywhere short of the US collapsing rapidly near-term (which isn't going to happen). What you're going to witness is an immense surge in funding activity about two years out, as an economic recovery gets underway. The only thing that would drain that sideline money, is a true financial collapse, taking down all banks, all short-term treasuries, and the stock market seeing a total wipeout (a minimum of ~%50-65% further down from here). None of that is going to happen. To accomplish that you'd have to hit the Federal Reserve with a nuclear bomb (they're all over the economy now, directly funding it, good luck fighting that) or keep the US economy locked down for years. Check out the Bloomberg billionaire list. You'll notice something interesting. Jeff Bezos, +$28 billion in 2020, $144 billion net worth. Bill Gates, $104 billion. Mark Zuckerberg, $68 billion. Steve Ballmer, $63 billion. Larry Page & Sergey Brin, ~$60 billion. Larry Ellison $60 billion. etc The hyper rich (and the giant corporations in tech) aren't going to drown. The giant tech companies will emerge stronger, and will continue to deploy large sums of money into venture activity and acquisitions. The assets of the hyper rich will continue to be directly propped up by the Fed. It's the very wealthy that fund venture capitalists, providing much of the institutional money that feeds the VC firms. It isn't going anywhere and it will go right back to work, with a short break during this economic disaster. The sole reason there is a break at all, is they're pausing until the dust clears (wait & see, then pounce), they could largely afford to keep funding at close to the same old levels, the money is still there to do it. VC firms get better deals for their institutional investors by waiting until the unicorn blood is saturating the street, this presents an opportunity for them to squeeze the start-up ecosystem and reset valuations lower. Their investment dollars go a lot further if they wait a bit for the lower quality unicorn bodies to pile up.
- 3fe9a03ccd14ca5 6y ago> *”We don't know what's happening, but we do know everything we believed in is changing. Everything we thought to be true may not be true."” This is 2020 America in a nutshell.
- coolswan 6y agoSherwood is not very good. But they are the only real choice you have if you're a tech startup. There is definitely a startup to be built in just helping businesses close properly.
- kevin_thibedeau 6y agoThis can be the pivot for the remnants of Atrium.
- wrs 6y agoI am tired of this pandemic being described as a “black swan”. Scenarios with decades of warning, billions spent on plans and agencies to react to them, and several real-world near-misses are not black swans!
- 55555 6y agoRelative to all the other stuff that happens, this is pretty close to a black swan. Most business contracts did not explicitly account for this risk, but rather mostly just covered it in a force majeure clause.
- krmmalik 6y agoNassim Nicholas Taken echoed your point in an interview recently. He said this is actually a White swan event because it was inevitable.
- justforfunhere 6y agoHi, Could you share the link please? Thanks.
- will_pseudonym 6y agoNot sure this is the exact interview mentioned above, but this is an interview on Bloomberg with Taleb on 3/31/2020 that seems to line up with the description: https://www.bloomberg.com/news/videos/2020-03-31/nassim-taleb-says-white-swan-coronavirus-pandemic-was-preventable-video https://www.bloomberg.com/news/videos/2020-03-31/nassim-tale...
- ComodoHacker 6y agoNassim Nicholas Taleb
- Hydraulix989 6y agoProbably iOS autocorrect.
- 55555 6y agoSo what does this company actually do?
- therealdrag0 6y agohttps://www.shrwood.com/Assignments-Liquidations/Assignment-for-the-Benefit-of-Creditors https://www.shrwood.com/Assignments-Liquidations/Assignment-...
- m12k 6y ago"He hopes it catches the attention of companies like Google, Amazon and Facebook. Because while the startup world is being shaken, some tech giants are still hiring." Can't help but think of the giant sequoia trees, that are much more fire-resistant than the underbrush beneath them, and whose seeds flourish in a recently-burned forest floor.
- ipsum2 6y agoDoes anyone know if they sell chairs, desks, and other equipment to individuals? Would love to get an Aeron chair at a discount.
- ccozan 6y agoSo if I am reading correctly the article, this is just affecting 1% of the total ( 21k from 2.2M ). I would assume such fluctuation is normal?
- birdyrooster 6y ago"Everything has been hit. I never in my life thought I'd see a black swan," Pichinson said. "This is a black swan." He must be pretty young if he can't remember 9/11.
- xtracto 6y agoBut 9/11 as ugly as it was, was US only. It did not have any financial repercussions in my circles outside of USA. This thing is impacting worldwide
- birdyrooster 6y agoIt had global repercussions. https://en.m.wikipedia.org/wiki/Economic_effects_of_the_September_11_attacks https://en.m.wikipedia.org/wiki/Economic_effects_of_the_Sept...
- TeMPOraL 6y agoThe main repercussion of 9/11 was the US collectively going crazy, starting wars and taking away civil liberties. And western fiction getting so dark and dystopian ever since. But outside the US, Iraq and Afghanistan, nothing substantially changed for anyone. 9/11 is nothing compared to this pandemic. It hit swiftly and brought the entire world to its knees. There's no hiding from repercussions for anyone, and we're not even through the worst of them.
- CydeWeys 6y agoHe's 73 per the article. And, economically, this is going to be a lot worse than 9/11.
- RickJWagner 6y agoWow. How much can half-written software be worth? I bet this guy offers some very deep discounts.
- JackFr 6y ago> Silicon Valley has developed a reputation for building up companies at hyperspeed, propelled by mega-financed investment that can result in overnight fortunes or colossal failures. > That zero-sum approach is now being reimagined as the coronavirus pandemic, which has spared no industry, rips across the technology sector. Those are just nonsense words strung together. It doesn’t seem like author understands what “zero sum” means.
- TomMarius 6y agoRight? Sounds just like an episode of Star Trek, placed in business sector instead of in space.
- jl2718 6y agoI think they mean the competition strategy in a zero-sum game, which focuses on speed as to acquire territory ahead of the competition rather than growth at risk-minimization pace without regard to competition.
- v77 6y agoYou shut your mega-financed zero-sum mouth.
- deleted 6y ago[deleted]
- dredmorbius 6y agoBecoming a cyclical milestone. From 2004: https://www.npr.org/templates/story/story.php?storyId=1666494 https://www.npr.org/templates/story/story.php?storyId=166649...