When your startup is facing insolvency, with bills stacking up, cash runway disappearing, and pressure coming from all sides, it’s easy to feel like the options are limited.
But here’s the truth: even in tough financial moments, how you handle liquidation can make a real difference.
Whether you’re preparing to shut down completely or simply looking to meet obligations and exit responsibly, liquidation is where a lot of value is either recovered or lost. Office equipment, software licenses, trademarks, customer data, proprietary tools — these assets still carry weight.
The question is: will you extract that value effectively or leave money on the table?
This stage is not just about damage control. It is about strategy. The decisions you make now, including how you value your assets, who you sell to, and what terms you negotiate, directly impact your ability to pay creditors, fulfill investor obligations, and walk away with your reputation intact.
In this guide, we break down the liquidation process with a founder’s lens. It is practical, clear, and focused on results. Whether you are staring down insolvency or planning a structured wind-down, these tactics will help you move forward with more confidence and more control.
What Are Liquidation Proceeds?
Liquidation proceeds refer to the total amount recovered from selling a company’s assets during a wind-down. This includes both tangible and intangible assets.
These proceeds are used to:
- Pay off secured and unsecured creditors
- Satisfy outstanding tax obligations
- Close vendor contracts and service agreements
- Distribute any remaining value to shareholders, based on the terms of your cap table and legal agreements
In cases of insolvency, liquidation proceeds become essential for minimizing damage, avoiding legal exposure, and executing a responsible and legally compliant shutdown.
Understanding Liquidation Preference
Liquidation preference determines the order in which stakeholders are paid from available proceeds. It is typically defined in funding agreements and structured by priority.
The usual order is as follows:
- Secured creditors such as banks, lenders, and lessors
- Unsecured creditors including vendors and service providers
- Investors with liquidation preference, typically preferred shareholders
- Common shareholders, such as founders and employees with equity
Failing to honor liquidation preference can expose you to personal liability or lawsuits. This is especially important in venture-backed startups, where investors have specific rights and expectations outlined in SAFEs, convertible notes, or Series A agreements.
Step 1: Identify and Value Your Assets
The liquidation process begins with understanding what you own and what it is worth. Many founders overlook valuable assets simply because they are intangible or poorly tracked.
Tangible Assets
- Office furniture and equipment
- Laptops, monitors, and servers
- Manufacturing or lab equipment
- Company vehicles and leased assets
Intangible Assets
- Proprietary software or internal tools
- SaaS products with existing user bases
- Trademarks, patents, copyrights
- Customer databases and service contracts
- Domain names and brand assets
- Trade secrets and internal documentation
How to Value Your Assets
You have two options: hire a professional appraiser or do it in-house.
Professional Appraisal
Best for high-value or complex assets, such as intellectual property or specialized equipment. This ensures an objective, market-based valuation that can withstand legal scrutiny.
DIY Valuation
Your finance team or accountant can estimate value using:
- Book value, based on original purchase price minus depreciation
- Market valuation, by comparing similar assets sold on public platforms or auction sites
Keep all documentation of how valuations were calculated. This will be important for transparency and to defend pricing if challenged by creditors or investors.
Let’s talk about how Ravix experts can help you wind down your startup the right way.
Step 2: Choose the Right Sales Channels
The way you sell your assets is just as important as what you are selling. Different channels yield different results depending on the asset type, market demand, and urgency of sale.
Selling Physical Assets
Online Marketplaces
- Best for common office equipment, electronics, and furniture
- Platforms like eBay, Craigslist, Facebook Marketplace, and OfferUp allow for quick listings and broad exposure
Direct Sales
- Best for proprietary tools, bulk office supplies, or valuable equipment
- Selling directly to competitors, partners, or local businesses can result in higher prices and quicker deals
Auction Houses
- Best for specialized or high-value physical assets
- Auction houses can attract qualified buyers and competitive bids, but they often charge commissions that reduce net proceeds
Selling Intangible Assets
IP Brokers and Marketplaces
- Best for patents, proprietary software, and trademarks
- Specialized brokers can connect you with buyers actively looking for technology or brand assets in your industry
Industry Buyers and Competitors
Best for SaaS platforms, internal tools, or customer lists
Other companies in your space may be willing to pay for assets they can quickly integrate into their own operations
Data Marketplaces
Best for customer data, usage metrics, or long-term contracts
You must be fully compliant with data privacy regulations like GDPR and CCPA. Legal review is essential
Step 3: Negotiate to Maximize Proceeds
Once your assets are listed, the final lever to pull is negotiation. This is where positioning, timing, and buyer education all come into play.
For Physical Assets
Emphasize value
Highlight quality, maintenance history, and functionality. Even used equipment can command strong prices if well cared for
Bundle strategically
Combine related items to encourage larger purchases. For example, pairing laptops with docking stations or furniture sets with décor
Create urgency
Use time-based offers or limited availability to push buyers toward quicker decisions
For Intangible Assets
Show strategic fit
Help buyers understand how your assets give them an advantage. This could mean faster product development, market expansion, or cost savings
Provide professional documentation
Include data sheets, usage metrics, historical performance, and any existing revenue. The more clarity you provide, the easier it is to close the deal
Ensure legal clarity
Clean IP ownership and data compliance builds buyer trust. Provide supporting documentation and address risk concerns early in the conversation
Final Thoughts
Liquidation is not just about closing down. It is about extracting value with intention, fulfilling responsibilities, and walking away on solid footing.
For founders facing insolvency or an unavoidable shutdown, knowing how to navigate liquidation strategically can reduce stress, protect credibility, and unlock financial outcomes that might otherwise go unrealized.
The process can be complex, but with the right approach, it becomes a clear and manageable part of your founder journey.
Ready to close the right way? Ravix helps founders navigate startup shutdowns with structure, strategy, and confidence. From asset liquidation to compliance and final filings, we help you exit clean—and smart. Connect with a Ravix expert!