6 ms·

I'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

I'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 7y ago
Sorta the opposite of YC... probably has quite an extensive network of people to buy everything from the people to the chairs...
oafertino 7y ago
Agreed - 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 7y ago
Here'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 7y ago
  Nice! This is clearly written, and exactly what I was looking for.
jbkiv 7y ago
No, 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 7y ago
  Thanks 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 7y ago
    The 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 7y ago
      Fascinating. I had no idea this process was so formalized, but it makes a lot of sense in retrospect.
    - alexbrower 7y ago
      True, 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 7y ago
I 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 7y ago
  It'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 7y ago
  A question out of curiosity, how much did the wind-down of the company cost in comparison to its acquisition cost?
  - charrington 7y ago
    Sorry for the delay in getting back to this... The wind-down cost was very small in comparison to the price Oracle paid.
    - raverbashing 7y ago

bbunix 7y ago

Sorta the opposite of YC... probably has quite an extensive network of people to buy everything from the people to the chairs...

oafertino 7y ago

Agreed - 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 7y ago

Here'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 7y ago
Nice! This is clearly written, and exactly what I was looking for.

jbkiv 7y ago

No, 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 7y ago
Thanks 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 7y ago
  The 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 7y ago
    Fascinating. I had no idea this process was so formalized, but it makes a lot of sense in retrospect.
  - alexbrower 7y ago
    True, 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 7y ago

I 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 7y ago
It'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 7y ago
A question out of curiosity, how much did the wind-down of the company cost in comparison to its acquisition cost?
- charrington 7y ago
  Sorry for the delay in getting back to this... The wind-down cost was very small in comparison to the price Oracle paid.
  - raverbashing 7y ago