How a VC-Backed Software Company in $18m of Debt Liquidated and Paid Back Creditors

October 25, 2023by Mike Cronin

From the Desk of Dr. Doom, Chief Restructuring Officer:

Trigger Warnings: Uncontrollable engineer spend

A Chief Restructuring Officer responds to a startups urgent problem

In a world where startups rise and fall at the drop of a hat, my reputation preceded me. They called me Dr. Doom, not because I brought the end, but because I could discern when it was inevitable and how to manage it. One could say I had a knack for telling whether a company was a phoenix waiting to rise or simply ashes blowing in the wind.

Silicon Valley in 2016 was a cauldron of innovation, but for every gem, there were countless stones. An email from a familiar name, Jordan, the analytical board member of many a venture, caught my attention. The subject line simply read: “Need Your Expertise.”

I clicked.

Joseph and Samuel, two co-founders who were as different as night and day, had managed to raise a commendable $12 million for their video processing venture. However, ambition had turned to desperation, and they found themselves drowning in a sea of debt.

A startup engineer designs are burning cash

The conversation I had with Joseph was a familiar one. Driven, direct, and always wanting to be in control, he laid out the facts for me. Their revolutionary tech had hit a brick wall, and with liabilities touching $18 million, their venture was hanging by a thread.

My next call was with Samuel, the more affable and people-oriented of the two. His upbeat demeanor did little to hide his stress, but his belief in their product was unwavering.

I took a look at my notes:

  • Too much debt
  • The product still not finished
  • Uncontrollable burn rate

Turnaround or Wind-down? 

The first order of business was the Assignment for the Benefit of Creditors or ABC, a course of action that would give me control of the company’s assets to get the maximum value in liquidation. It was a bitter pill for the brothers to swallow, but it was their best shot.

The following weeks were a whirlwind. In-depth assessments, auctions, negotiations. My experience and methodical approach had us navigating the treacherous waters. The software assets caught the attention of a leading tech giant, who eventually bought them for $2.8 million. It wasn’t the billion-dollar exit Joseph and Samuel had dreamt of, but it was far from the abyss they were staring into.

Startup assets are liquidated at auction

The physical assets followed. Desks, chairs, servers – all sold to the highest bidder. Every dollar counted.

Yet, even as the physical reminders of the company were sold off, my job wasn’t done. I had to manage a myriad of conversations, ensuring that debts were paid, and obligations met. Over two years, I made sure every creditor, employee, and stakeholder was taken care of.

In the end, while the company may have dissolved, its legacy lived on in its tech and the many lessons learned. As for me, Dr. Doom, I moved onto the next challenge, leaving behind a trail of structured resolutions.

Facing startup wind-down, bankruptcy, or debt? Ravix Group is your expert in startup liquidation, finance, & accounting. Manage your VC-backed startup journey right with industry professionals from Ravix Group.

Need to speak to a wind-down expert immediately? Contact us for a free hour consult:

Mike Cronin

Michael leads the Advisory Services practice of Ravix Group. He has been handling the wind-down and liquidation of Silicon Valley companies for the last 25 years. Prior to joining Ravix Group, Michael spent 17 years with Diablo Management Group, Inc., where as a Senior Consultant, he managed orderly wind-downs, liquidations, and Assignments for the Benefit of Creditors (ABCs). Additionally, Michael has served as Bankruptcy Plan Agent and Finance Manager for distressed companies and deal-related escrow accounts. His industry experience is broad and diverse, from high-tech manufacturers, online service-providers, and software companies to event-planning start-ups and grocery chains. Michael is forthright and works with all deal constituencies, whether investors, shareholders, creditors or ex-employees with a consistently high degree respect and concern. Michael’s ability to address both big-picture issues as well as a deal’s fine details serve him well in addressing the needs of the Silicon Valley’s varied start-ups. Michael graduated from the University of California Davis with a Bachelor of Science Degree in Managerial Economics. He began his professional career with Andersen Consulting (now Accenture), where he spent four years designing and implementing management information systems for a diverse client base of Fortune 500 Companies. Michael remains proud of his early experiences interning with the Oakland A’s and Senator Pete Wilson, as well as his first childhood job selling found golf balls back to the hacks that lost them.
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