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During the dot com boom / crash, I worked at a profitable, VC funded startup. I don't know the legal / financial mechanism by which they did it, but our VCs shu

During the dot com boom / crash, I worked at a profitable, VC funded startup. I don't know the legal / financial mechanism by which they did it, but our VCs shut us down six months after the crash. They wanted to put all of their attention into the other company in the portfolio that survived the crash, Yahoo, because their revenue was already far higher than ours could ever be. We were profitable (100s of K per year on revenue of a few million a year - small potatoes). Those numbers were growing steadily, even after the crash, but they weren't going to explode. We were given 30 minutes to collect our things and leave the building, but I suspect our founders knew a day or two earlier. They made a lunch reservation for all the employees that same day so we could say goodbye to each other, but we had to pay for it ourselves. It was a very strange experience.

langcss 2y ago
That makes no sense to me. They could give the company to the employees instead right? Unless they wanted the code or something.
- nine_k 2y ago
  If the company was seen as a competitors to Yahoo, it looked reasonable to shut it down. The VCs invested in several companies that had a promising direction, then shut down all but one that was growing fastest and grew biggest.
  - rented_mule 2y ago
    We weren't in competition with Yahoo in the marketplace. But we were competing for the VCs' focus, and that's still competition.
    - EGreg 2y ago
      But I dont see how they can force the founders to shut down the company They maybe gave them a big carrot u didnt know about
      - rented_mule 2y ago
        I am close friends with one of the founders. That friendship predates the company by several years. He did get a payout - I was with him when he pulled it out of his mailbox. A check for 32¢ for all the stock he had. I don't know the details, but I believe they did it via a redemption rights clause in the investment agreement. https://venturecapitalcareers.com/blog/redemption-rights https://venturecapitalcareers.com/blog/redemption-rights
- actionfromafar 2y ago
  Strangely, transferring a company can be more complicated if you care about liabilities, contracts, assets, non-tangible and otherwise. That flavour of VCs don’t have time nor care. Maybe they had several more companies to close that day.
- rented_mule 2y ago
  They sold off the assets... the most valuable asset was our data. I don't know what they were paid for the data, but I'd guess a couple of million dollars given what I know they spent to migrate it to the buyer.
- refurb 2y ago
  Unless the founders own 100% of the company (which they don’t if they raised money), no, they can’t give it to employees.
  - langcss 2y ago
    To be clear I mean the investors! However it sounds from another comment like the investor instead got some money from it they didn't just drop it like a ball.
specialist 2y ago
Your experience reminds me of how Google just cancels products, instead of figuring out some way to spin them out. Like maybe pass a product over to Google Ventures. Or set up an incubator. eg I'm certain that Google Inbox could have been a decent modest company on its own. I learned from reading u/patio11 that there's a market for buying and selling small businesses. Is it weird that nothing like that has popped up for VCs/investors who want to divest from their non-unicorn companies?
- bluGill 2y ago
  Google can sell projects after or while shutting them down. Make them a large enough offer, and they might bite.
  - specialist 2y ago
    IIRC, one plausible reason for not spinning out products is their dependence on Google's infra. Which, okay, ya, sure. Grant the fledgling a year long grace period to extract itself. Business units are spun out, traded like baseball cards, all the time. Of course, I'd bet the biggest reason against is "Why bother?" Though if Google had been nurturing spinoffs all this time, maybe it could have salvaged it's brand / mindshare.

langcss 2y ago

That makes no sense to me. They could give the company to the employees instead right? Unless they wanted the code or something.

nine_k 2y ago
If the company was seen as a competitors to Yahoo, it looked reasonable to shut it down. The VCs invested in several companies that had a promising direction, then shut down all but one that was growing fastest and grew biggest.
- rented_mule 2y ago
  We weren't in competition with Yahoo in the marketplace. But we were competing for the VCs' focus, and that's still competition.
  - EGreg 2y ago
    But I dont see how they can force the founders to shut down the company They maybe gave them a big carrot u didnt know about
    - rented_mule 2y ago
      I am close friends with one of the founders. That friendship predates the company by several years. He did get a payout - I was with him when he pulled it out of his mailbox. A check for 32¢ for all the stock he had. I don't know the details, but I believe they did it via a redemption rights clause in the investment agreement. https://venturecapitalcareers.com/blog/redemption-rights https://venturecapitalcareers.com/blog/redemption-rights
actionfromafar 2y ago
Strangely, transferring a company can be more complicated if you care about liabilities, contracts, assets, non-tangible and otherwise. That flavour of VCs don’t have time nor care. Maybe they had several more companies to close that day.
rented_mule 2y ago
They sold off the assets... the most valuable asset was our data. I don't know what they were paid for the data, but I'd guess a couple of million dollars given what I know they spent to migrate it to the buyer.
refurb 2y ago
Unless the founders own 100% of the company (which they don’t if they raised money), no, they can’t give it to employees.
- langcss 2y ago
  To be clear I mean the investors! However it sounds from another comment like the investor instead got some money from it they didn't just drop it like a ball.

specialist 2y ago

Your experience reminds me of how Google just cancels products, instead of figuring out some way to spin them out. Like maybe pass a product over to Google Ventures. Or set up an incubator. eg I'm certain that Google Inbox could have been a decent modest company on its own. I learned from reading u/patio11 that there's a market for buying and selling small businesses. Is it weird that nothing like that has popped up for VCs/investors who want to divest from their non-unicorn companies?

bluGill 2y ago
Google can sell projects after or while shutting them down. Make them a large enough offer, and they might bite.
- specialist 2y ago
  IIRC, one plausible reason for not spinning out products is their dependence on Google's infra. Which, okay, ya, sure. Grant the fledgling a year long grace period to extract itself. Business units are spun out, traded like baseball cards, all the time. Of course, I'd bet the biggest reason against is "Why bother?" Though if Google had been nurturing spinoffs all this time, maybe it could have salvaged it's brand / mindshare.