There is an increasing trend in venture capital investments favoring startups that aid in the shutdown process of other startups. Almost 90% of startups are estimated to fail, making these services extremely invaluable. They help salvage assets, mitigate losses, and potentially pave the way for future ventures. Quite a paradox, given that these businesses are built around the failure of their peers in the industry.
Shutting down a startup is a complicated process involving legal, logistical, and financial hurdles that many founders struggle with. The demand for shutdown assistance services is on the rise, setting the stage for a new opportunity in the sector. Handing over tasks like settling financial obligations, terminating employee contracts, and addressing obligations to investors and stakeholders to professionals could ease the transition.
In 2021, despite a flow of capital, global funding for startups has generally decreased. Around 3,200 startups backed by US firms ceased operations last year and 28 private firms, each worth over a billion dollars, haven’t managed to raise any funding in several years. Investors are being cautious due to the unstable economic circumstances created by the pandemic.
Investors are backing companies like SimpleClosure, which assist other startups reclaim unused funds, liquidate assets, or shut down completely. SimpleClosure, which started with $1.5 million in funding six months ago, recently raised an additional $4 million.
Failure to meet necessary metrics for additional funding rounds after initial successful fundraising puts startups in challenging situations. Strategic growth planning, performance metrics tracking and efficient capital expenditure management becomes crucial to avoid devaluing worth, selling off ventures or, potentially, closure.
Sunset, co-founded by Brendan Mahony and Grant Rheingold, offers comprehensive solutions to startups planning to close. Their services include handling complex legal, accounting, and operational tasks, aiming to make the closure process efficient, quick, and straightforward. Their goal is to reduce the burden on entrepreneurs during this challenging period by making the process less tumultuous and more seamless.
