Hey, everybody. Welcome to the Practical Founders Podcast, where every week we hear an amazing story from a serious founder who built a valuable software company and did it without big funding. I'm your host, Greg Head, and this week my guest is Dory Yona. the CEO of Simple Closure. Simple Closure is a software company, actually a funded software company that helps tech startups and businesses that grow in typically with some funding.
to shut down and dissolve themselves and go through that complicated, messy, and expensive process a lot more efficiently. So that's... His primary target is VC-funded companies that can't raise any more running money and don't make it any longer and have to shut down with employees and investors and all the legal and everything.
He helps bootstrap founders and software company and companies of all types out there. So we have a discussion today about what it's like to shut down your company and some of the steps and processes. and the mindset that founders go through in this painful process that's also very common in the entrepreneurial world. It's a great interview. Welcome to the Practical Founders podcast, Dori.
Thanks for having me, Greg. Excited to be here. Yeah. You're in the L.A. area. What's the report in mid-February about the fires there? Yeah. I think it's 99% contained. Yeah, that's that's the latest news that I read. So it's it's it's definitely much better than where we were at the beginning of January. I think one out of four, one out of five of my friends in our network has lost their home in the last month and a half. And so luckily, we weren't directly impacted to that extent.
Um, but yeah, it's, it's still a weird time in LA and friends are searching for homes and rebuilding Ikea furniture now for the ones that found it. Wow. Well, we don't think that these kind of things will happen, but they do. We had COVID and fires and financial disasters. And you deal with the crazy side of the startup game.
particularly with funded companies here, but the closure side of that, which people don't talk about, we don't hear about, doesn't make the news cycle, but it happens and it's the majority case, especially if you raise. a big VC funding. It's an all or nothing, shoot the moon kind of game. Why don't you introduce us to what you're doing at Simple Closure, which is a couple of years old, and then we'll talk about the whole world of what happens when you shut down, wind down, dissolve.
you know, a software company. Yeah, so exactly to your point. It's one of those unsexy topics that no one likes to talk about. We like to say a lot of the company. It's also... it's a taboo topic to be honest it's kind of a topic where you know people don't want to talk about founders are ashamed to talk about but in reality it's what the majority of companies go through um in venture back
world specifically but in general in smbs i think i saw a stat that in the world of smbs 80 of companies shut down within the first five years But if we look at venture back specifically, 93% of all startups fail. Yeah, it's definitely an overlooked and unnoticed problem. And what we do at Simple Closure is we built a platform to help streamline and automate the shutdown process for companies. So our goal is to be the easiest and most trustworthy way to shut down a company. We do it.
in a fraction of the time for a fraction of the cost. And most importantly, we make sure it gets done right to give entrepreneurs the peace of mind that they can move on to their next business, their next adventure, knowing that it was taken care of properly. So that's a bit about us. Yeah. Well, on the Practical Founder podcast, we do talk about the state of the venture game, which all VCs understand this, that out of their 20 investments, they want two to return the fund at least.
a few more to win big, and maybe 50% don't make it at all, depending on the stage of your fund. And the other ones are kind of in the middle and so forth. Is that about the... I don't know the size of it that you, I know you talked to a lot of venture type investors, you know, that see the majority of their investments not really go anywhere. Yeah.
So I think at a high level, you're right. There's a portion of them that are a few percent that's a home run. There's then a few that return capital or maybe a bit more. than the capital that was invested in them. And then there's, you know, some zombie companies that kind of stick around and never kind of return the ROI. And then there's companies that shut down. I think that the ratios of that changes depending on the stage of the fund. Yes.
And so if you go for like an early stage pre-seed seed fund, obviously, you know, maybe one out of 10, one out of 20 will hit a home run and the majority will actually shut down. Obviously, as you go to more mature funds and more later stage funds and series A and B and C and gross stage funds, the bet is a bit smaller because the companies have proven. But for the most part, you're right about, you know, the distribution.
And the odds are better for practical founders once they've hit a certain milestone, maybe a million ARR and, you know, they fix the holes in their onboarding and churning product. They're starting to get up there. It's really hard to kill a modern SaaS business that's a flywheel and people use it every day. But things happen. We've had COVID take out a whole swath of...
verticals that were directly affected and the companies couldn't survive, funded or not. And it's a really challenging time. So there's a lot of reasons that founders, funded or unfunded, would shut down a business. They started it with a hope and didn't really materialize. They didn't get to product market fit and it's better to go do something else. And what are the main reasons you see for shutting a company down? You're talking, you and your...
company uh your team is talking to founders thousands of them you know what are you hearing about why we're shutting down a lot of the companies we deal with not not solely but a lot of companies we deal with are kind of venture-backed uh tech companies we also do Anything from bootstrapped all the way to companies that have raised debt and different models of that. But I would say for the most part, there are three types of companies that.
come to us to shut down in no particular order, by the way. And it's kind of divided 30%, 33% each way. So it's kind of like a pretty evenly split. The first use case is companies that actually went through a sale. So what a lot of people don't realize is, is if you do an asset sale, which is the majority of acquisitions that are done in the ranges of single millions or tens of millions, like when you, when you hear on the news, like.
you know meta acquired a company for 200 million dollars sure that's typically like an all all stock purchase sale or a merger of some sort but the majority of sales were a company sold for a few million or tens of millions In most cases, I would say those are asset sales, which the choir is coming and buying the code base or the customer list or you're doing an acquihire of some sort.
And the business entity remains. Exactly. The entity, the liabilities, the accounts, the responsibility. So that's about a third of the company. So everything's actually fine with the company. There's no issues necessarily. They sold, but they actually still need to shut it down. So I would say that's about a third. Another third are companies that have just run out of cash.
They're venture backed. So they were they were building their business under the assumption that they could raise additional capital to fuel the growth of the business. And they keep doing that. So they couldn't raise again. Couldn't clear market. Couldn't raise again. Existing investors didn't.
believe, couldn't raise a bridge, couldn't raise a future round. So they're going and shutting down. And the reason is they're just out of capital. And I would say there's about another third that we see that are companies that have actually still money in the bank.
Sometimes hundreds of thousands, sometimes even millions. And they've proactively decided to shut down the business because they no longer think that they can reach the next milestone in terms of if they're venture backed, can be found or dispute.
It could be, you know, they tried many pivots and they just like can't find product market fit and they don't want to keep wasting their time and money. So those are all like legitimate common reasons that we see for companies deciding to shut down proactively. Sometimes if you're burning $100,000 a month and you have $500,000 in the bank and you can't raise again, you can cut costs and become a zombie company or you could, you know, you see where it's going and it might go there pretty quickly.
What percentage of those funded startups return capital saying, we tried three things, we don't see an opportunity, we'd rather give you whatever money we have left back? you know, to be polite to everybody and we'd like to move on to other things. How common is that? Yeah. So I would say probably in, from what we're seeing today, and we're not representing the entire market, but from what we've seen today in our customers.
I'd probably say between one out of five, one out of four of companies actually have capital. Now, it might not be, you know, millions of dollars, but it's to your point. Like, you know what? We have. $200,000, $300,000, $500,000 left. We've raised millions, but we only have a few hundred. We're not going to continue running the company to the ground. We're going to kind of take a proactive step and return capital.
What is interesting, though, is and we wrote a blog post about this, I think a month ago, a month and a half ago, is that when there is capital. To distribute at the end of the line, the average we're seeing is about 10% of capital raised. You've worked with hundreds of startups that have closed down and dissolved their companies, which isn't just sending an email.
or telling your lawyer to fill out one form. And there's a lot of complexities that you guys manage in there. Tell us about how your solution works. Yeah, so for those that aren't familiar, it's... actually really complicated to shut down a company. You think it's like, oh, it's easy. Don't I just click a button and it's done? Or don't I just walk away and leave the company as is?
That's what I thought, actually, when I went through the experience a few years ago. And that's what sparked the whole reason behind starting Simple Closure and building what we're building is I went through the process myself. I had been kind of pushed to the corner by our investors and saying that they would invest further money in the company. And we need to talk about a plan B of shutting down the business.
I had no experience doing that. I thought it would be easy to figure out. I went to Google. I went to look for answers. I went to founders of my network, thought they would be able to help us. They weren't helpful. Went to our lawyers, even in our accountants, and they didn't help us with the process either. Why wouldn't a lawyer or an accountant, you know, that if it's so common.
Do they just not like the, you know, the unsexy side of it and maybe they know they're not going to get paid very much? It's a great question. A combination of a few things. One, it's very unsexy. And so it's not something you enjoy. It's unsexy from the fact that it's like...
to some extent, morbid. And also to some extent, like there's a lot of bureaucratical steps that need to happen. And like lawyers don't love doing the bureaucratic stuff. It's not a good use of their times and filings and states and all that. Yeah, exactly. Second of all, they usually don't get paid their usual rates or anywhere near their usual rates because the companies are really, really low on cash. And another factor is.
lawyers are in accountants in general you know there's like such a um a lack of account you know i think i've heard this multiple times like the amount of like we're gonna have a real big issue with economy with accountants There's not enough accountants flooding the market. I think lawyers as well that there's not enough. And so if they have to be picky with their time and they have to invest their resources and effort into customers of theirs.
They obviously want to. Right. You know, they get their portfolio. They want to invest in the ones that are going to succeed, the ones that are going to grow with them and not the ones that are shutting down. That's to answer your question. Anyways, I went through the process myself. It was.
the biggest pain in the ass, excuse my language, to go through that process. It was manual. It was bureaucratic. It was emotional. No one wanted to help us. And bottom line, I ended up like saying, okay, I have to solve this. I'm an entrepreneur. I have to figure this out.
And so I started kind of rolling up my sleeves and digging into the world of shutting down and understanding the difference between just a typical shutdown and a dissolution and a bankruptcy and a wind down and an ABC and all of that. Kind of got, you know, headfirst dive into the world of shutting down. What I realized really quickly was like, this is a lot more complex than I thought. There's a lot of liability.
If I don't do this properly and there's no solution out there, like like this doesn't make sense that I'm having to deal with this. And so I went through that experience myself and to give people a sense like. a startup, technology startup, not, not, I'm not talking about like a unicorn or anything like that. If you're just, you know, maybe raised a million bucks, like that's all you did. There is an average of about 95 moving parts that you need to take care of.
to properly shut down your company. So we're talking about board resolutions, shareholder resolutions, franchise taxes, letting go of employees, separation packages, notifying payroll departments at different states, closing out vendor contracts, selling your assets. Like the list goes on in terms of things that need to get done. And that is a nightmare to navigate. It'll take you months just to learn what you need to do, let alone another.
six months to start to execute on what you need to do after you learn what you need to do. And then in most cases, odds are you're going to do it wrong because it's one of those things like where you don't know what you don't know. And you end up learning that you made a mistake months or years later when you suddenly get a fine or penalty from a state agency or a vendor or a claim of some sort. And so what we do at Simple Closure is we take all that heavy lifting.
all that mind space and bandwidth off of your shoulders and off of your plate. We come in, we've built software to ingest data points about your business, either from your financials, your HR provider. We analyze your legal documents like your partner agreement. If you're an LLC, your certificate of incorporation, if you're a corporation, we analyze all that information. In addition to that.
We also integrate into public state databases and other data sources because in almost every case we saw a company that thought they shut down ended up not shutting down properly and forgetting certain accounts and getting fines and penalties months and years later.
So we want to make sure that that doesn't happen. And so we ingest information you provide. We also integrate the public state database. We analyze all of that data and we put together a personalized shutdown plan that is tailored to your company in your unique situation. And we were able to do that like on the low end with bootstrap companies. They just incorporated. They have literally a shell company that they've done nothing all the way on the high end to like a unicorn had.
Hundreds of employees raised hundreds of millions of dollars. And we're able to build a personalized shut down plan that's tailored to you and your company. And then we have automations on top of that. that are able to streamline and automate the process. We have teams of experts, lawyers and accountants with vast experience in wind downs and dissolutions that are there to support and are kind of our front lines and customer service, customer support and account managers.
in this process and we give you ultimately peace of mind knowing that this is done properly I make a lot of angel investments, and most of them don't end up anywhere, right? So like a little VC, right? Most angel investors, it's very rare to have a win, so most of them don't make it. But I see the complications in there.
One thing that people would be surprised if they haven't been through the process before or seen it is if you get to zero money in your bank account as a company and you want to shut it down. The founder's on the hook for all the work and the cost to shut down a company and the liabilities if you do it wrong. So it's quite a bunch of liability and cost if you don't do it right.
And actually one of the biggest pieces of advice we always give entrepreneurs and founders like that reach out, you know, when they still have a few months of runway is shutting down cost money. don't yeah and what what what we mean by that is like whether you use simple closure or not i'm not talking about like the the the platform for you simple closure i'm more referring to
You owe payroll to employees in arrears after they've worked for you. There are vendors that need to get paid. You have IT bills. The states charge money.
uh to close down accounts uh there's taxes that need to be paid um and so the advice we always give it's like one of our one of our biggest pieces of advice is like don't decide to shut down when you have zero in your bank account like that is too late uh you can't you can't shut down that late in the game and you want to make sure that you uh set money aside uh for that um because ultimately to your point like you'll end up either
potentially opening up yourself to leak to liabilities and claims you'll end up option two is paying out of pocket which is really painful to see uh you have to pay out of pocket not from the business and in some cases like some some companies have you know investors that are willing to chip in and help cover those costs um but that's rare
Uh, but ultimately it's not a fun conversation to have to go back to your angels and your case. Like, I don't know. I don't know how you'd react if like a founder came to you as an angel. Can you wire us another 10 grand to help cover these fees? I don't know how you'd react as an angel. Yeah, the answer would be no. Yeah. Interesting.
Is there something fundamental? Somebody raises $2 million in angel funding past the hat and friends and family and people in the industry, you know, who backed them? $2 million from an institutional seed fund that has LPEs and such. Is there something different in the negotiations or the legal or the steps? between, let's say, a practical boost founder with some angel funding and a VC-funded founder? Honestly, not really.
It all goes back to what influences the process of a shutdown is the legal documents of the company. So the Certificate of Incorporation. The type of funding you've done, like if it's safes or notes or if you've done preferred chairs, like those things can impact. But if you did preferred chairs with a group of friends and family and angels and you did preferred chairs with a VC.
It's treated the same from that perspective. What it typically influences is there's something called waterfall calculation or a preference stack of who gets money. So if there's any money left. at the end with a company, if they have any money in their bank account, there's actually an order in which you have to distribute money back. So let's just say you decide to shut down and you have $100,000 left in your bank account and you've raised a million bucks.
uh you can't just go and say oh i want to give this person some money and this person not or i want to get there's a really organized preference stack and so i would say if you know if you're bootstrapped slash friends and family or VC, it doesn't matter. It's more of like, what is the preference stack and making sure to follow that. And the legal documents about the investment that you'll get first cut at if there's anything left, you know.
You get preference in that. Exactly. You know, the final dividing it up. Exactly. Some of those things are written in the legal documents, but some of them are not written in the legal documents. They're actually based on like laws and regulations. So for example.
In terms of preference, legal documents don't say this typically. I've never seen it, at least. But like one of the first people to get money if there's anything left over is employees and payroll. That's like the top, top, top, top of the preference stack. Before anyone gets any cut or any investor gets any sent back, first of all, like payroll needs to be taken care of. Then usually it's like payroll taxes and other things related to wages and payroll.
After that, usually there's a class which is called like secured creditors. So secured creditors are typically if you've ever, if you took a loan from a bank, venture debt or any type of loan, typically that's a secured. a creditor and so they would be next in line typically and then it goes to unsecured creditors an unsecured creditor is literally anyone that you owe money to like a vendor so your AWS bill your
Facebook marketing invoice, like those are actually unsecured. Does a safe come into that one? Like it's a little bit of a convertible debt kind of thing? Vendors come in first, actually. Okay, yeah. Again, unless they crafted some... convertible note debt that has secured priority over you know in in terms of preferences but typically no and then is are the investors within the investors there's also a preference stack
Like sometimes the notes get before save sometimes and then only the preferred stockholder. Sometimes they convert. And so those are things that are maybe different between the types of companies. But in general, the one thing that. all investors care about when a company shuts down, whether it was angel funded or VC funded, they want to be able to write off that loss.
So you as an angel invested to get a statement that says, like, as we do as angel investors, you could write it off next year against your gains. Exactly. Give me the paperwork. Exactly. And so that's something that regardless of.
type of investment whether it was a large VC fund or a small angel everyone wants to be able to write off that loss and so being able to receive that paperwork will help your investors and you know they invested in you they invested money like the least you can give them back is actually this paperwork because it actually helps them. Yeah. What else is there besides the investors and the accounting and the legal? Do you prescribe some best practices for communicating with?
employees, your community, customers, shutting down, turning off things, getting to all of your, you know, SaaS vendors, AWS, and I don't know. all that ip and you know i guess those are all the things that those are all those are all you each one of them is is a world in itself to unpack but you mentioned a lot of them which is true is like
What do you do? I'll give you an example of things that people don't think about. What happens if you had a SaaS business or you had a consumer business where someone paid an annual subscription? for your consumer business what happens a month like they paid in january for their year and in march you decide to shut down what do you do do you refund do you not like those are some of the complexities of shutting down where you're you're suddenly like starting to you know battle with
How do I tell this to investors? What do I tell them? Who do I tell? How do I tell to employees? How do I let them go? How do I let contractors go? How do I let full-time employees go? So there are so many different... types of complexities and things that you need to think through um and plan for in order to shut what do you do with your let's say you had a social media handle
You had a LinkedIn account, you had an Instagram, you had a Facebook. What do you do with those things? You had IP, you had a patent. What do you do with the patent, right? So that's where our average of 95 moving parts to a shutdown comes in play. Like there are so many, like, it's one of those things where you, you don't think about those things. You don't know what you don't know. And that's why there's.
a lot of complexity that we're trying to simplify. And just so we understand your business, there's a lot of software involved. You're intaking these documents, financials and otherwise. You've got a software platform with automation and presumably some AI in there that... does this kind of intelligent workflow around a specific task in a business, including legal. And there's people on top that help supervise and help with the exceptions of.
I'm sure there's really interesting questions that come up with every single company. Software does a lot of the heavy lifting, but you've also got people to help the... You know, for the exceptions, right? Yeah, look, the way we think about the business is we're building a software business. We're venture backed.
We're a venture-backed company, and I don't think we could build a venture-backed, scalable business as a service business. So at our core, we're building a software business. And so some of the unique things we're doing to automate the processes are... you know, contracts analysis. We're generating contracts automatically based off of different data points that we collect. We're creating board resolutions, shareholder resolutions.
We're automatically filing and integrating with different state databases to file the solutions and processes. Like one of the unique things we do is like we can literally something that typically takes. If you were a company and you went to your lawyer and say, hey, I want to dissolve in Delaware next week, they would say, OK, we'll have this ready for you with the board resolutions, the shareholder resolutions, the filing, the taxes, probably in the next month or two.
Yeah, that's the first part. That's just the first part on our platform. You're done in minutes. And like and I think that's part of the uniqueness of what we're building. But in order to support that, we have teams of experts, lawyers and accountants with. you know, vast experience in wine nouns and dissolutions. They help us in two ways. One is a lot of them are to some extent, like, you know, it's a role that's pretty common in some legal tech companies like product counsel.
So they are matter expert. Yes, they're in a sense working side by side with our product and operations teams and help us know what to build and how to build it the right way. So they help us inform how we should be building our product. so that they mimic legal processes and the different legislations. But we also have customers on our platform. They have dedicated account managers.
that are there to support them throughout the process, to answer specific questions, to guide them through the process. And so I think, like, it's really unique. Yeah. It's just... A uniquely American phenomenon with our high churn in entrepreneurialism and risk capital and startup culture and so forth. Do you see it on the continent and Europe or other parts of the world that you could?
that there's a similar kind of churn that needs to be assisted? Yeah, it's a great question. I have not benchmarked the U.S. to other countries. I do think there's... a few countries that definitely stand out with like the entrepreneurship and the recycling of talent in turn. I think Israel, which I'm originally from, but Israel is like, you know, considered startup nation. I think the amount of startups per capita is the highest in the world.
assume that there's like numbers there. But in the US, I think what's what is really interesting, like when we looked at the US numbers, if you look at the last 20 years and the data that the SBA puts out. um the sba is a small business association in the united states which they keep track of kind of all the you know uh data around businesses uh it's it's actually really interesting that
Every year in the U.S. on average, there's about 700,000 to a million companies that shut down. And then what we did is we looked at the amount of companies that start or incorporate every year. And on average, the last 20 years. It's been about 800,000 or so companies that incorporate every year. So if you actually look at the overall SMB ecosystem or the economy of the US in terms of businesses, it's almost flat.
at 30 something million companies a year for the last, uh, you know, multiple decades. Um, and so that actually was like really eyeopening to me that, um, there's, that's the exact, like. entrepreneurial cycle and process of entrepreneurship and the repeat cycle. And so I had always thought like, you know, I'm sure a lot more businesses open up than shut down. And actually, in reality.
there's almost equal. And that's what's actually really unique. And so I'd be interested to look at that data in other countries to see if they have where the ratios are higher or lower. But I've not looked at it to date. And your customers are, let's say, they're not a restaurant that's been around for 20 years so that, you know, they can't hand it off to their kids and they, you know, slowly shut it down. Maybe that's quite simple.
You're doing more venture-backed and, you know, more complicated tech-style companies that shoot up and shoot down and get really complicated. So we started there actually, but we're not solely focused anymore on that. We're heavily focused on that, but I would say. uh since uh you know being out and out of stealth for about a year and a half we've had more and more companies come to us that are not like your traditional venture-backed companies okay and so we are there to support them as well
And we've continued to kind of expand our product feature set and our capabilities and the amount of states we cover. But we've seen, I would say, starting to see more of those companies as well, just as we start to. a grower footprint. Well, and I don't perceive you as ambulance chasing in this, you know, the dark side of the economy, right? Everybody's leaning towards startup and funding and so forth.
Healthy part of entrepreneurialism is we give things a try. If it doesn't work, we move on to the next thing. Kind of the VC mentality, which is let's, you know, shoot the moon. And if it doesn't work, you know, we'll all do different things pretty quickly. Is that how you see it? I don't know, you're helping grease the wheels of the entrepreneurial flywheel here in the United States? Yeah, that's a great question. I will say one thing that comes to mind when you were saying that is...
In theory, there's a difference between our mission. I don't want to say if there's a difference necessarily, but the fact that you're saying, oh, if it doesn't work out, we'll jump to the next company, things like that. The founders and entrepreneurs that are going through the shutdown process are going through a very, very emotional, dreadful, painful process. We talk to founders on the verge, not on the verge, many times in tears.
and tears like they've put their blood sweat and tears into this they've given their all a lot of founders tie their identity to the company and so You know, I don't want it to come across that it's like, oh, we'll just do the next thing. No, this is like when founders get to the point where they need to shut down, it is a very, very difficult, challenging, emotional decision that is very.
painful regardless like whether it's right or wrong it's painful so uh that's something that we see very we're very close to and the pain and the and the struggle for founders to go through this and even after they decided they shut down Like they're not engaged because they're just sad and they're frustrated and it's emotional. But I think like one of the things that we talk a lot about the company and I really believe in is like.
we as a company, we don't get excited necessarily. And the team's not driven by like, oh, how many companies can we shut down this week or this morning? Like that doesn't drive us.
um as a company honestly and we don't get excited you'll never see like the company get excited about something like that or talk in in that sense what excites us and what drives us uh and by the way that's why like a lot of the team members are former founders themselves and like and part of that is if we do a really good job at what we do, we can help founders get on their feet and entrepreneurs as quick as possible.
and be that backbone of the economy and be that driving force of entrepreneurship and start their next company. And so if we can shave nine to 12 months off of the, by the way, I'm saying nine to 12 months because that's usually the time that a company spends shutting down. after they decide to shut down. Usually it takes about a year, right? Yeah. If we can shave that off, get them in the workforce faster.
do it with a smile relatively with a smile again but do it in a way where they're not drained they're not just went through this really like long and frustrating process and start their next company
That's what drives us. Like we get excited when we hear founders that are on simple closure, shutting down their company while in parallel already working on their next company. And some of them even fundraised already for their next company while shutting down their existing company. I think those types of. cases are what excite us and what drives us and what we see as valuable. Do venture investors value a well-managed shutdown?
the right decision process, the right communication, the right process, speeding it up, the right preference stack, you know, being efficient. Does that get... A funded founder, any points with investors to come back at the next time? I don't know that it's the case, but. It's a great question. It actually does.
It actually has, from what we've seen, has proven to when you're able to end your relationship with your investors on a relatively organized, good note, when you're able to do right by your investors by. getting them their paperwork in time by distributing properly any funds that are left over. We typically see founders and investor relationships that are a lot better, a lot healthier, a lot more engaged. And in most cases.
When that happens, we actually see. And again, this is anecdotal from having quite a few conversations with founders that they end up raising money for their next company from the same investors. And so that to me is a testament to like. If you're able to wrap things up properly and leave a good taste in the mouth of your investors, I think you definitely increase the odds that they'll want to support you again. And investors know, look, it's a matter of...
it's a numbers game. Like, you know, right. As you described also for founders, I think it's a matter of numbers game. Like when you look at the founders that, that end up succeeding and building, you know, large successful companies.
whether they're like, you know, privately held a hundred million dollar companies or they're publicly public unicorns, you'll typically look at the history of those founders. And they're for the most part, not first time founders. They're second, third time, four time founders. Yeah. Yeah.
Yeah, that's amazing. We don't really hear about shutdowns other than a few conspicuous ones. They had big funding and big spending, and the funding was there, and they drove it right into a wall. I could think of Bench. recently that went through, hit the wall, kind of shut down. Can you think of others that are out there? I mean, it's just, even though it's very common, I guess, is starting a company.
We don't hear about them that much, but are there a few that are conspicuous? Maybe Bench is the one we hear about in. Yeah. Bench, I think then they were last minute were able to get to sell to someone. I think they were going to shut down. Yeah. And they were able to pull out an asset sale. I forget by who, but I.
I saw that one come through. Look, shutting down, like I said, from the get-go is a sensitive topic and taboo topic. We're trying to build the stigma and the negative stigma around that and actually show that it's part of the entrepreneurial journey.
So the honest truth is we have, there's very limited founders that are willing to talk about uh their journey and the fact even admit that they shut down it's it's one of those things i even i even had a founder come to me and say like listen we're shutting down but i kind of told everyone we found a a soft landing for the company even though it's not entirely true
But so can we keep it at that? Like, you know, and it just goes to show how sensitive people are about that. There's actually a lot more than you think. If you literally were to write in Google. list of companies that shut down this year or Google search and write like tech crunch companies that shut down, you'll be surprised actually at the amount of content that surfaces about it. It just.
Doesn't always make the top line, the headline news, but there's actually a lot of content about that. And another thing, if you want to, there's some founders that are actually more open to talk about their experience and they'll write postmortems. And there's really nice, thoughtful ones of like, what did we do wrong? Why did we not succeed? What could we have done differently? They really open up. And I think that those, by the way, are really, really, really helpful, powerful lessons.
to learn around building and running a business. Like those are typically a lot more helpful. And you know, there's the saying that you learn a lot more from your losses than your wins. Very much resonate with that. And I think there's a lot of good content. You just need to search for like those postmortems.
online. Yeah. And that's, you know, some people say, oh, especially in funding world, second time founders have an advantage because, you know, they have more experience that I'm just a first time founder. Well, there's a lot of brutal lessons learned. In any adventure, whether you succeeded or failed, it's still brutal. And if you can avoid maybe half of those the second time around, it's a way different odds equation there. Do you think that's true, by the way?
About second time founders? I don't think so. Sometimes they're just delusional forever, but I've been through it. When you win or lose, it's still brutal and you learn lessons. And at some point you learn so many lessons, you don't want to start another one again. So you have to be somewhat naive to jump in and do that.
As a whole, I would say second, third-time founders have advantages over first-time founders, just having a little bit more wisdom. Not perfect wisdom, but a little bit more. So I'll tell you a story about that.
If we have a second. Sure. I remember from my my first company, we're out there raising capital and there was a VC. I really loved it. I appreciate it. I felt like we hit it off and like I was like, sure, like, you know, they'd want to invest and we'd eventually get like a term sheet from them. And then.
They called us and let us know that they're going to pass. And I was surprised and asked like, what can I learn? What can I do differently? Like, why did you decide to pass? And he said, you know. Our thesis is that we really don't want to invest in first-time founders. We really want to focus on investing in second-time founders.
And at that moment in time, I remember being so upset. I'm like, how can they judge a person based on if they're a first-time founder, second-time founder? What does a second-time founder have that I don't have at that moment in time? Today, in retrospect, I wholeheartedly believe in that. And like, I would not back or very low, low, low, low chance I would back a first time founder. Yeah.
And so, yeah. A third-time founder, when they say, I see this, I've thought about this, we've tested this, I believe this, there's an opportunity here. It's a different process than a first-time founder who's never been through the gauntlet, right? And never been through. A downturn in the economy and a crisis in the economy and all the brutal realities that happen. At some point, there's a converse of that, that people get so wise and savvy that.
You know, they get tunnel vision. And if you've been super successful, you believe your own stories too much and so forth. So I think there's a place for first-time founders. But every practical founder knows out there that. The more you do it, the wiser you get through the process. So totally get it. Any other thoughts here for practical founders out there who are building?
or thinking about building their companies, maybe not even about the eventual shutdown, but about how they should be thinking about the life cycle of their startup idea and the potential for... Maybe making it big or it doesn't really work and I try something else. Yeah, look, I think the world of like entrepreneurship is is like a lot around character and like deciding that you want to go and build a company.
A lot of times I will speak to someone that's like, hey, I'm thinking of starting a company or being a founder. And my first question is like, do you enjoy suffering? That's literally my first question. And it's like, if you don't like pain, if you don't enjoy suffering, don't do this. Like, this is not sexy. This is not fun. Obviously, you know, you need to find the ways to enjoy the process. Startup was sexy. Startups are cool. Congratulations on your startup. Yeah, exactly.
It's all glamorous from the outside. No, but look, obviously, it's not that, like, it's not that that's... it's not fun it's more of like do you enjoy the ambiguity do you enjoy the pressure do you enjoy like if you enjoy that great go for it like go and do it and so i think like in general if you're if someone's like thinking about going and starting a business that's kind of
The first thing, are you OK with not knowing what's going to happen tomorrow? Are you OK with not knowing if you can make payroll? Are you OK with, you know, not taking a salary for a month if that's what requires you? Right. So I think it's like, are you are you thrive on the unknown?
Uh, and including the chance that it doesn't work and you shut it down and move on. Like you get the painful process of that. Yeah. Yeah. But the question is, did you enjoy the journey? Like it's, it's, it's a matter of the journey, like, you know, and so. That's kind of one thing I would say. And the other thing that in general around building my experience around building businesses and startups and companies in general is like move fast. And it's the most important thing. Like your.
time is your biggest resource in life as an entrepreneur whether you're a venture back you're not venture back like you're spending your time you're spending your energy you're spending your best years of your career um um and like
move fast learn fast test fast iterate quickly grow fast fail fast um all those things are like so true because ultimately like when you're building your own business you're sacrificing an easy convenient cushy job anywhere else uh for taking this risk and the faster you can grow learn build fail um
I think it's ultimately in your advantage and, you know, you want to make sure you make the best of your time. I think it's the most, the most expensive resource we have is our time. So it's almost like your subtitle is, you know, build fast, build something big if it doesn't work.
Move on fast. Yes. With simple closure. Move on fast. All right. Great, Dory. Thank you for being on the Practical Founders podcast and sharing your view of what's happening in the startup ecosystem. Thanks for helping out all those crazy founders out there. Of course. Thanks for having me. Thanks for listening to the Practical Founders podcast. I hope you found this interview interesting and, well, practical and useful.
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