How do you gracefully wind down a VC-backed startup?

Jason Kirby (00:02.075) Hey everyone, welcome back to Fundraising Demystified. Today we have Dori Yona with us, founder and CEO of Simple Closure. Welcome to the show, Dori. Dori Yona (00:13.122) Thanks, Jason. Appreciate being here. Jason Kirby (00:15.363) No, I'm excited to have you. You have a very unique business that, know, founders probably don't want to your service, but in the reality of the situation, they might have to. So let's talk a little bit about your background. You've built and sold the companies, you're an exited successful founder, but you've also shut down companies. Tell us a little bit about why you started Simple Closure. Dori Yona (00:42.946) Sure. So I'll start with a bit of background on my experience, what you alluded to. I've been an entrepreneur for the majority of the last decade. Simple Closure is actually the third company I started. The first company I started was actually a dating app, a social networking dating app. This was back in 2014. I think Tinder was not even popular then. So that's kind of one of the first companies I started. and most recently before simple closure, I spent the majority of the last decade, building a company called Ernie. we were in consumer fintech. what we did is we automated a process called price protection. So it's actually a policy that most major retailers and credit card companies offer. If you shop online, you buy an item, the price drops after you buy it, you're actually able to refund for the difference. The problem is no one knows about it. No one takes the time to search for a better price. and no one has the energy or time to go and submit a claim. So we automated that entire process and scale the business to three and a half million users. We ended up selling the business about two and a half, three years ago. So that was a fun exit and a fun journey. But during that timeframe, which kind of alludes to how I even got into the world of Simple Closure, but during that timeframe, there was a point in time where things weren't going so well. I was actually in a board meeting presenting financials to the board, know, pumped of what we're doing, what we're building. And one of our board members looks at the financials and the operating plan I'm presenting. And he says, hey, Dory, numbers don't look so good. I think we need to talk about a plan B. I think we need to talk about the option of potentially shutting down the business. We're not going to fund the company any further. And we don't think that you guys can raise another round right now. And the runway doesn't look good. And I think we need to talk about that option. So obviously I was caught really off guard, not what I was expecting to chat about in a board meeting. And so I asked the investor what specifically would they like to talk about. And they said, hey, I'd like you to put together a shutdown analysis for the business. I'd like to understand what are the timelines? What are the costs? What are the liabilities? Are there open contracts to vendors? Dori Yona (03:02.486) What's the D -Day that that day is the last day where we have to decide what's happening with the business by that day? Are there separation packages that we need to set money aside for? Warnax. Honestly, he flooded me with quite a few questions. And the honest truth is I didn't have an answer to any of those questions. And so I told the board, hey, let me go and do some homework and get back to you guys. I went home that evening from the board meeting. The first thing I did is I rushed to Google and I literally Googled like, how do you shut down a startup? I was hoping to find a platform or a service or anything that can kind of help guide me through the process of shutting down the company or preparing the company for shutdown. I couldn't find anything substantial. The closest thing I found was a blog post from some boutique law firm that was probably like 20 years old. Nothing that I could really rely on or use to guide me through the process. So the next thing I did naturally as a founder, which most founders do is they say, okay, let's go ask other founders. You know, it's one of those things when you fundraise, you get advice from other founders and you go through these processes, you typically go to the community and ask for help. So I said, let's go and go through my network on LinkedIn and look for founders in my network that have shut down their company and ask for advice. Who do they use? What were the do's and don'ts? You know, how should I think about this process? So I went to my LinkedIn, I started searching for founders that have shut down their businesses. And after quite a bit of time going through my connections, I couldn't find anyone. And it was weird to me until I actually realized that it wasn't that people aren't shutting down. It's that people don't like writing about it on their LinkedIn. Shutting down is a taboo topic. Founders are typically ashamed about talking about it, even though it's mind boggling because the majority of startups fail. And a lot of times, even when you read about the very successful founders and entrepreneurs that sell their business, that IPO, They typically failed one or two companies before they got to that stage. But no one really likes talking about it. So that didn't help. And so the next thing I naturally did, I'm like, okay, let's pay our lawyers a bunch of money to help us do this. So I actually reached out to our law firm. We're using top Silicon Valley law firm at the time. We had been using them for years prior that helped us with the fundraising and all the corporate governance and everything. And so I reached out to the partner and I'm like, hey, we need help putting the shutdown analysis for the business. And I thought they'd be excited, jump on it, more billable hours. Dori Yona (05:21.27) and instead, their reaction was, yeah. You know, we're really sorry to hear that you're considering this option. it's not really our bread and butter at our firm. we're happy to refer you elsewhere. I think I have a friend of a friend. He might be able to help you, but it's not really, kind of our sweet spot. so I was shocked by that. and actually our CPA said the exact same thing. Said, sorry to hear that you're shutting down dissolving. This is not something that we can support or help with. We're happy to refer you elsewhere. so at that moment in time, I found myself at probably one of the lowest points in my career in the company, obviously stressed out of my mind, looking for a solution as a founder. and so I kind of knew I still had to get back to the board with answers and put a plan together. so I kind of rolled up my sleeves and said, okay, I'm going to dive into the world shutting down myself. I started speaking to industry experts. understanding the differences between an ABC, a bankruptcy, a wind down, a dissolution, chapter seven, 11, nine, all the different terms out there. And I ended up putting a playbook together of my own for the business, presented to the board that a few weeks later, and the board kind of signed off and said, looked good. But that was kind of the initial experience that I had where I'm like, this sucks. Like, this is like the worst. moment in my life, like, why doesn't, why doesn't anyone want to help me? Right. And let's, let's, like, know, like your investors are ready, kind of like thinking about their next company, they've kind of wrote it off and moving forward and you're kind of, you're kind of alone in this situation. And I remember multiple times I went through, what went through my head was I asked myself, like, am I the first founder in America? Like it started with like, Am I the first founder of this fund that's shutting down? Then it's like, am I the first founder in the startup land that's shutting down? And I almost got to the point where like, am I the first founder in America shutting down? Like, it doesn't make sense that this is so, you know, bureaucratic and there's nothing out there. And so that was kind of like the experience that I went through and the pain that I went through that had been bubbling me ever since that experience, which eventually, you know, few years down the line ended up starting Simple Closure. Jason Kirby (07:32.407) There are so many fascinating points about this. One, the fact that your board puts you down this rabbit hole. When you came in, like chest up high, present the future of the business, and they're like, no, I would disagree. It's like put together the wind down plan. You're like, what the hell is that? And then you ironically never end up shutting down, end up selling the company, creating an outcome. But then, you know, Dori Yona (07:46.892) You Dori Yona (07:52.055) Yeah. Jason Kirby (08:00.301) having gone through that incredibly stressful and onerous process, you realize that there was this opportunity. So I think that's quite the journey to kind of be forced upon you leading the company. I kind of want to unpack this a little bit more. So when it came to Ernie, I just had a curiosity. How did you go from plan B to, you know, let's call it plan A and you end up you know, having, you know, selling the business. Dori Yona (08:31.062) Yeah. So look, first of all, as a fountain to your point, like as a founder, you have to live and operate under like, like go big or go home. Like this is like, especially in venture backed startups, like you're not thinking about your train, not to think about like the, the, the shutdown scenario. And so I actually think that that's like the, that's the will, that's the guts you need to be an entrepreneur. And so I actually think that if you're as a founder constantly, like especially early on hesitating and don't have the confidence, then maybe entrepreneurship, especially venture backed companies are not necessarily the right call for you or the right role for you. But in general, like we weren't even thinking about it. We're thinking about, OK, we're going to raise in the next thing and we're going to launch this new feature and that's going to spike our revenue. And kind of that was the mentality that we were going with. And in a sense, know, our VC, our board member put a mirror in front of us and said, hey, doesn't always work the way you think we need to be ready for this plan B. so specifically to your question, like how we went from there. So we presented the plan, but from my perspective, like this was the plan B, if not C or D, right? Like to the investor, that was probably the plan A because they saw, you know, from their perspective, how the company was going and they weren't going to fund the company any longer. But from my perspective, you know, we put the plan together, we did it in a responsible manner, but we're still. believe in the company, we're still pushing forward, we still understand the potential of what we're building at the time. And so I presented the plan and in parallel I'm fundraising, right? And so we ended up getting a bridge from external investors and so they didn't kind of invest in that bridge. We ended up getting a small bridge from external investors. But what we actually did is we launched, we had been for years a B2C consumer business at our core. And what we started doing is we started as we grew and grew, we actually grew to three and a half million customers. And so we had a very big demographic of customers. And what we actually started to do is we start to build a B2B data business. And so that was actually a business that started to evolve around this time. And we started to build it out. And it was actually around the time when COVID hit and that B2B data business that we built really picked up. Dori Yona (10:49.814) And it was actually the largest hockey stick growth in the history of our company for the, you know, for the five, six years we've operated that B2B data business was like the fastest growing revenue growth that we had. And so about a year into launching that business, I would say actually one of our customers required us. So we continued to operate the business. Yes, we had this like, you know, plan B in an envelope and a confidential envelope there ready if needed. But we were still fired up. We were still pushing forward. We still believe in what we were building and actually that you know that kind of I wouldn't say pivot but that additional business line that we built out actually started to be one of the biggest drivers of the business and eventually got acquired by by a customer Jason Kirby (11:33.819) So that's great to hear. from a path of going from that deep, dark, miserable research project to being able to get the outside capital, being that the show is about fundraising. And I do want to get more to simple closure, but I do want to kind of talk about this fundraising journey because I think you ended up raising over 11 million for Ernie, correct? Dori Yona (11:56.354) Yeah, I think it was almost 13 million total in that range. Yeah, 12 and a half. Jason Kirby (11:58.937) Yeah. So what was your process for raising the funds and going out and getting that capital? Dori Yona (12:07.298) Sure. Are you talking about the extension that we did then or in general, the 12 million that we raised? Jason Kirby (12:12.143) You know, maybe giving me the high level on the original rounds when everything was probably clean and easy, but when it gets to the, I don't know if it's easy, but when it gets to the bridge round, I would really like to hear kind of like, how'd you think about that? Cause that's usually where it's very difficult. A lot of founders maybe struggled to pull in that capital. Dori Yona (12:29.314) Yeah. So look, with our overall fundraising for the business, we ended up raising a seed round. I think it was in early 2015, 2016. I think our seed round was about two -ish million dollars, one and a half, two. And then in 20, I want to say 2017, 2018 -ish, we raised an A round, nine million led by Mayfield. And in between the seed and the A, we had a few strategics come in. Look, our seed round, we were relatively young entrepreneurs. probably, you know, it might sound cliche, we probably heard 30, 40, 50 nos until we heard the yes. And we actually had a great fund out of the UK actually, Sweet Capital. They are... the founders, the LPs there and like the partners there, the previous founders of the King Candy Crush company. So they, they exited for a billion each, they started a fund called Sweet Capital, which was heavily investing into consumer and gaming and given we were a consumer, a fintech product, they let our seed round. The moment they let our seed round, it was very quick to kind of fill the rest of the round. That's my experience how it's typically been. Once you have kind of the lead, everything else falls in very, very quickly. So they led our seed round, and then fast forward about probably a year and a half or two later, we went out to raise our A round. We had really strong growth metrics. And I think we did like a two week roadshow mainly in Silicon Valley. And we had Mayfield come in with a term sheet in great terms and they ended up leading our round. had other strategics, I think Comcast Ventures at the time was investing heavily in these types of businesses. And a few other strategic, I don't know if you know, there's a great team out in LA called Science, which is also, they did like Dollar Shave Club and Dog Vacay and they do Lean Liquid Death. So they also invested in and were part of it. So overall, mean, we had, know, relatively a smooth fundraising journey. And then specifically around the bridge. Dori Yona (14:45.824) Look, think it's going back to, it's a really challenging time to raise like in general as a founder when you're at such a dire situation, right? Because on the one hand, you start to understand or start to think that like, holy shit, this might shut down and I might not be able to build what I think I'm, what I want to build. And on the other hand, you need to raise money from your investors and you can't tell your investors that you're thinking of shutting down or. that it might not be going where you want to go, but you need money from them. And so you're really like conflicted, I think, as an entrepreneur at this moment in time. And if you tell your investors that like this might shut down, then why should they invest more money in the company? Right. And also it doesn't make any sense. And you also, on the other hand, you're very close with your investors and you want to share with them. So I think I think it's a it's a very, very challenging point in time in general when founders are kind of with their back against the wall. I think that we were lucky that you know, we were, strongly believed in what we were doing and what we were building. you know, we felt like we could get great returns for investors, given like the vision and the new traction we had around the B2B data business. And so, we ended up, you know, I think it was another million or so ish, raising a bridge kind of at that point, to kind of help fund the company and keep it going. this was also the time we're like, COVID is going crazy and there are QSBS or I forget the loan, SBA loans, like everyone was getting cash like crazy. So we ended up not taking that loan, although that was like at that moment in time when there was a lot of cash being distributed. So we were lucky because I think now raising the bridge is a lot harder than what raising the bridge in 2020, 2021 was when cash was a lot cheaper. And so, yeah, we were fortunate to get that injection and that ultimately like what held us. And when we sold the company, we still had cash in the bank and like, We didn't have to sell at that point in time, but we got a good offer that we were excited about. And so, yeah, that was kind of our journey then. Jason Kirby (16:47.673) No, I just appreciate the fact that you kind of walk us through what was really good, like the psychology of a founder dealing with, you know, what you can and cannot say to who would win and how, and then still having to run a process and, you know, bring fresh capital in. It's, it's, I always like to joke it's, you know, founders are, you know, riding a unicycle juggling balls of fire, you know, on top of a house of cards. It's just like, anything can go at any point in time. Dori Yona (17:14.178) 100%. But that's awesome. I don't know. like a lot of people, it's funny you say that, that that's like, that that's explanation of like the founder journey or the founder life. But a lot of people that come to me and say, Hey, I think it's starting to start up. what do you like? Here's my idea. What do you think? Right. And I asked them, do you like suffering? And they're like, they look at me like, what are you talking about? Like, no, do you, do you like, are you cool with like suffering and pain? And, and they're like, I don't know. Why do you ask? I'm like, well, being a founder is like, you're going to suffer. Like you have to be Jason Kirby (17:32.719) Hahaha Dori Yona (17:43.734) the sense someone that's like okay with suffering and okay with it being painful and doing it with a smile. So it reminds me of kind of like what you're saying, like can you do all these things like, you know, yeah. Jason Kirby (17:55.808) Do you enjoy self -inflicted pain? Dori Yona (17:57.938) Exactly. is a thousand percent self -inflicted play. I think founders and entrepreneurs are addicted to it to some extent. Especially repeat. Yeah, you're addicted to it. It's hard. It's hard not to. If you live it and you have that mentality, it's hard to give it up. Jason Kirby (18:07.001) Yeah. Jason Kirby (18:20.421) Yeah, just make sure to have a good partner in life that knows what you're going to put both of you through. Fortunately, I'm not a winner. All right, so you have this exit. Was there an earn -out period? Did you have to stay around for a little bit? Or were you already eyeing the next phase of simple? Dori Yona (18:42.144) Yeah, we actually, without getting too much into details of the like deal itself, we had a portion of the proceeds that were upfront at closing, and then we had a portion of the proceeds that were over time. Luckily, we were able to negotiate a pretty good deal. We actually had two term sheets at the time of sale, so we had like able to negotiate competing offers, and we were able to negotiate relatively a much heavier distribution of the proceeds upon closing versus over time. And so that worked out in the founders favor and in the team's favor in this case. And so I ended up staying there probably for about six months or so post acquisition. So help with like all the post -emerger acquisition stuff, make sure the teams got integrated, brought everything up to speed, like, know, transfer of knowledge. But I was pretty ready like after those six months to take a break. So took a break. did about probably like six to nine months of traveling, backpacking a bit with my wife and our two kids at the time. Some consulting, like just, you know, like kind of keep myself busy. So that's what I was doing for a bit of time. And I got bored. And that's kind of what I'm saying. Like the bug that is just like, I couldn't, I couldn't sit still. I got bored. And I said to okay, I'm gonna start another company. Like I'm ready. And then my wife's like, no, you're not, you're not ready. You need to stay home, you need to chill, you need to take it easy, be with us a bit more. And she's like, you know, what are your thoughts of like, go work at a big company. Like just take it easy and go like, you know, go spend some time at a big company. You'll work less, you'll be home more, like we'll be able to spend more time with you. Because I just couldn't sit still. And I like at first, like, I don't think it's a good fit kind of thing. But then she's like, just try it out. You have nothing to lose. And actually, interesting enough, like, you know, earning at our peak, we grew to like 30, 40 employees, right? Like when we sold at our peak. I said to myself, the next company I build, Dori Yona (20:59.838) I want it to be like a generational company, a that lasts for decades, a company that we build like really massive company. And I've talked about companies, you know, with hundreds, if not thousands of employees. Right. And I don't know how a company at that scale operates. I've been entrepreneur pretty much from day one. I've, you know, built small teams I've built from zero to one, but I've not seen how a company like that operates. And so I said to myself, How about I go to a company at that scale and see how they operate, see how they work, the pace, how departments between sales and marketing and product and engineering at that kind of scale operate. And so I actually got a really, as I was thinking of building the next company and my wife had really pressured me not to do it yet, I got a really interesting opportunity to join a company called TripActions. They're now calling the Vaughn their corporate travel expense. I got an opportunity to join as like GM of growth and build out their whole SMB PLG motion. So It was a role that kind of ticked a lot of boxes. One, the company was 3000 people when I joined. So seeing how a company at that scale operates and how they think, I got to work very closely and report into Arielle, the CEO of the company. And so on that front, I got to see how a CEO at that scale operates, his executive team operates the board and manages the board. I thought that was something that was like, you know, invaluable to see a company that's like pre IPO growth stage. So I ended up spending, about a year and a half there, build out the whole SMB PLG motion. We actually ended up building out the team in Palo Alto, but then transferring it to Tel Aviv. so eventually that entire department moved out to Tel Aviv. And I had kind of come to two things, peace with myself that I'm ready to start the next company. And my wife saw that even if I have a call it a corporate job, I still worked like crazy and it didn't make a difference that it was either my company or not my company. was still working, whatever. 14 hour days or whatever that was, it didn't really make a difference. So she's like, well, if you're gonna work like this anyways, you might as well do your own thing and have your own company. So I kind of parted ways with Navon, had an awesome experience there and I'm like, okay, I'm ready to go build. And I had, maybe I'm sharing too much info, but I'll go with it anyways. But I'm like, okay, I'm ready to go back to building. I wanna do it, I miss it. Like I feel like I can. Jason Kirby (23:18.392) Okay, now it's a Dori Yona (23:24.706) I feel like I can build something really big and build a scale of company. But what do I want to build? It's kind of coming back to what do I want to build? And so I actually have a draft that I keep in my notes from the moment I started Ernie for the full six -year journey. Every time I had an idea, I wrote it there. And that list got longer and longer and longer. And by the way, since I started Simple Closure, I have a draft of the next thing. Jason Kirby (23:51.611) You Dori Yona (23:54.75) And so I said to myself, OK, I need to go spend some time deciding, like, what am I excited about? What do I think could be a really big opportunity? Obviously, one of the things on that list was the experience I had around preparing company for shutting down and saying, like, that was one of most painful things I've ever done as a founder. It doesn't make sense to me that it's so, like, painful. And so that was one of the things on the list. So I actually told my wife after of after the trip actions. I need to go do a retreat for myself and think what I'm going to do next. So speaking of supportive wives, she was very supportive. I took a flight to Mexico. I went for four days and had a whiteboard and myself. And I just started like pulling out the list of like, you know, 50 to 100 ideas and started going through them and reprioritizing and deleting ones that are dumb and deleting others that already grew into unicorns and the Mac market saturated and. And it started kind of like drilling that, know, that 50 to a hundred down to 30, that 30 down to 10, that 10 down to five, that five down to like two or three, and then spending more and more time like researching those two or three a lot deeper. And obviously, you know, you know the ending, but you know, the idea for Simple Closure was top of the list. It kept staying top of the list. It kept bubbling in me. was something that I felt was, you know, I was very passionate about. So I kind of ended. my first company offsite, which was just me, with the idea of building a platform or company to help companies shut down. I came home from that and I'm like, okay, I got to do two things. One, got to validate, I need to validate the idea and understand like, is there a market for this? Are other people feeling the same pain that I went through? Was I a one -off experience and everyone has great solutions and I'm just exaggerating? kind of understanding the customer pain point. And the second thing I said to myself was, I need to see how big is this market? Like what is the TAM? How big can this really be? And so, you know, I'm happy to double click and dive into those things, but in general, I spent my time doing those two things and coming out of that research and being so much more convinced how big of an opportunity is, how big the TAM is, what a pain point this is. I just ended those conversations like very, very convinced that I'm onto something and there's a really big opportunity. And so that kind of what is what Dori Yona (26:19.5) tipped you over the scale and I said, we're building simple closure. So that was kind of the journey. Jason Kirby (26:28.323) No, I think that's one fantastic journey. One, you have a great wife, it sounds like, who provides you the flexibility to go disappear when you have three kids. I don't think I would let off. And let's kind of get to the, so you made the choice. This is, this is the company. You feel it's validated. You're ready to go. You've raised five and a half million for, for simple closure. Walk us through when you decided. Dori Yona (26:38.954) I Jason Kirby (26:58.009) that you needed money and how did you get to that conclusion? And what was your, know, having raised money previously, you know, what did you maybe change in this fundraise? Dori Yona (27:09.098) Yeah. So I think like, I'll share one thing about fundraising and in general about building repeat, being a repeat founder. I remember when we were raising money for Ernie, there was one specific VC that I walked into their office. We pitched them, we were excited. They were excited. They did a bunch of diligence and they passed. And I, and I left that meeting and I'm like, I need to know why they passed. And so. I reached out to the partner and I said, Hey, I would love to know like, what can we do different? Like, what did you, you know, what did you not like? And they're like, listen, we really believe in what you're doing. We really love what you're doing. We believe in the market. We believe in the vision, but we don't invest in first time founders. And I remember like, I'm very competitive and I remember like leaving that meeting or that call. I'm like, what does the second time founder have that I don't have? Like, I don't get it. Like that makes no sense to me. Like, why am I not being judged on like my merit, on the idea, on the team? Why would like that investor like think that a second time founder has something that I don't? And, you know, my dad always says the sentence, like you learn your whole life and you still die dumb. And so I today, like I thought I was smart then and I knew everything then. I today, who would say the exact same thing if I had to write a check as a VC to an entrepreneur, like I'm not gonna invest in a first time founder, right? Like I actually think that what we went through earning that journey, that is the MBA of life. That was the MBA of an entrepreneurship. That was like the life skills, the professional skills that I gained there to make my chances of, and our team's chances of succeeding, not two X higher, 10 X higher. I really believe that. And I actually, stand behind that saying that like I would not, you if I were to go into VC, I probably would stick to that pretty thesis like that. We don't do first time founders. And so asking of like what's different, everything is different, everything. Like there's not one thing that could say was the same. Everything was different. The level of experience you go through of, you know, building company, building a product, taking the market. Like at Ernie, we had such a roller coaster. Like we raised multiple rounds of funding. We got sued by Chase. Dori Yona (29:29.698) Bank like we dealt with we had one point in time again I don't know how much I'm be sharing this but we had a point that we were doing scraping of all the top merchants the Retailers were doing price protection. We had a point in time where our Google cloud provider called us Okay, and said listen the top four number four merchant in America retailer called us Google and asked us to shut they're getting all this traffic from this IP that's related to Google servers and and they asked us to shut it down because it's their number one volume of traffic on their website and it's flooding their systems. Those are the types of things we dealt with. We went through a process of Gmail shutting off email access and Wall Street Journal investigative reporting and fundraisers and bridges and things like that. So the level of knowledge and experience that you go through as a founder is insane, is immense. And so I think, first of all, there's nothing similar between company one and company two. I don't really count the first. you know, social networking, dating company, it was a company raised $200 ,000. went on for about a year. Like we pivoted very quickly into earning. but like that was an MBA to life, to, to, to entrepreneurial life. so, so nothing was similar, specifically like what we did is look, I was telling you, we're going through the process. was, as I was validating the idea, I was speaking to customers, founders that have gone through the process of shutting down. We're thinking of shutting down. to like pick their brain. told you, I was trying to validate like, did I, what I went through, was this what everyone was going through? So I started getting on calls with them and like, you know, picking their brain and speaking to founder after founder of founder. And every call actually got me more and more convinced of how big the pain point is and how much they need a solution. It got to a certain point by like call 15 with, with customers, like, you know, customer number 15, the customer would be like, listen, Dory, it sounds like you have a bunch of knowledge in the space. Can I just pay you as a consultant to help me shut down the business? Like I'm like, and I was like, Hey, listen, like we don't, I don't have a product. don't have anything. I'm just doing user research. You're like, I know, but you have more knowledge than 99 % of everyone I spoke to about this and I need help now. Here's my credit card charge me just help me. Right. And so that, by the way, convinced me of like how real the pain was when you're on a call with the customer and validating idea, if they're willing to take out their credit card and pay you now, I think that's like a pretty validating metric. and so the first one that told me, I said, no, you're crazy. Dori Yona (31:50.678) The second one told me, said, no, I don't have a product. The third one that told me it, I said, sure, no problem. Our MVP will be live next week. so, and so actually starting the first customer then they were like, I went to work, I built our initial version in an air table in a week. First customer paid. They were delightfully happy with the, with air table I built in a week. And so we actually like kind of like from day one started having revenue. and in true story, like this all happened like around March, April last year. but I ended up going to, I got a free ticket to FinTech meetup because like we'd still not incorporate. It's not really done anything. Got a free ticket. It's a FinTech conference in Vegas. went to the conference. I ran it to someone that I hadn't seen for quite a few years. He was a VC at a gross stage fund. He's like, what are you up to? I told him I'm working on this thing that helped founders shut down. called simple closure. He's like, brilliant. I think I have a friend here at the conference. He's a VC at a pre -seat stage, pre -seat stage five. He's gonna love this. You have to meet him. So we go to like an event at the conference. I meet him. I tell him the pitch. He actually says, brilliant. I love it. But I have a friend. He's a VC at a later stage, Fintech fun. And he shoots down every idea I bring to him. So I use him as like a filter. He's here too. I want you to pitch him. And if he likes it, then like, I'm really excited. Like, sure. So he takes me over the cell, like at a happy hour thing. I pitch it to him on the spot. He started, like, he starts thinking like, like, you know, like, you know, rubbing his beard and saying, interesting. When we said interesting, the other free scene investors like, okay, he didn't shoot it down. I think we're onto something. Okay. I want you to meet my other partner. I ended up like literally in that evening. Plus the next morning meeting like two other people on their team. I boarded that evening, the flight home. from Vegas to LA, when I landed, had a text saying, hey, we wanna lead your pre -seed round here are the terms. And so pretty much got a term sheet in less than 24 hours and had that offer. I was actually not fundraising and not considering fundraising at that moment in time. I felt like I could bring some more traction and then go raise at better terms. And given that, like I said, we had the luxury where we were making revenue kind of from day one. Dori Yona (34:15.382) But I actually started to think long and hard about it. And I kind of saw where the market was. And there was a lot of early talk about like we're in a recession and companies are going to shut down and all these things. And I started thinking to myself, well, do I want to bootstrap it for now, raise later and grow slower? Or do I want to take advantage of like the ecosystem and a lot of the things that are happening in the space right now and be in market faster, build product faster, be ready, scale faster, and actually ultimately made a decision and said, I think that I prefer to take money now and grow much quicker and be ready for that moment in time when like there's a lot more companies shutting down, which was kind of the assumption that I had around early 2023. So that was kind of how the term sheet came for our pre -seed. It came together. We had another fund join, which is awesome. Cambrian Ventures, Rex that leads that fund. Vera was the one that gave us the term sheet and we had a Awesome Angels joined, but that came together in like, you a few days and we ended up closing the million and a half, which was kind of our first race. Jason Kirby (35:22.787) A serendipitous dream come true for most founders to be able to close their round that quickly over a cocktail party. Not too bad. So, appreciate you diving into that and sharing that narrative because I'm sure a lot of founders are probably very jealous hearing that. But it's a culmination of your credibility, your track record and other things that ultimately amount to that and working on something interesting that I think a lot of VCs are very familiar with. Let's talk about how to actually close a business and shut down a business. Yeah. I think if you can kind of give, you know, founders an idea of what this process looks like from what it's like without simple closure and what it's like with simple closure. Dori Yona (36:09.974) Yeah, sounds good. look, I'll talk in this example, let's just talk about like a venture backed startup as like a prime. Obviously it differs if you're in real estate or if you're media and entertainment or in in startup land. Let's talk about startups and venture backed. What makes shutting down so difficult for founders to kind of understand realize is that there are so many moving parts that you need to orchestrate and quarterback in order to properly shut down a company. I'll give an example. Like it's not only where you need your legal team or lawyer to shut down. You need your lawyer and you need your accountant and you need severance packages and you need to interact with investors and employees and vendors and customers and IRS accounts and payroll providers. And like if you kind of map what shutting down entails, it actually entails you orchestrating quarterbacking all these moving parts in order to properly wind down and dissolve a company. And I think that what makes this even harder is that first of all, there's no universal process. Every entity, every state agency, every service provider has a different process from fax, faxes and phone calls and emails and, and, and, and paper mail even, they have different processes. I'll even give you an example. A lot of founders. So in tech, almost all companies are incorporated in Delaware. Like that's where most companies are incorporated. And then A lot of times they'll have foreign state entities in California because their headquarters in California or in New York and they'll have, you know, other representations in other states because they have employees in those states. A lot of founders, what they don't realize is when you go to shut down your company, you think that by telling Delaware, you're done. You notify your state's incorporating, they'll you tell the Delaware you're done. Actually, you've not even scratched the surface of what needs to be done in order to shut down the company. So if you tell Delaware, Delaware doesn't communicate with the IRS. So you're still registered with the IRS and you still have an EIN and you still owe them a bunch of reporting and things like that. Delaware doesn't interact with the state of California because if you're head of court in California, then you have a foreign entity there. Even within California, if you tell the secretary of state, which where your company's registered and that you're shutting down, they don't interact with the different payroll accounts. So if you had an employee in California as well, they don't interact. So you have to separately Dori Yona (38:31.254) do the process, shut down the payroll accounts in California. And even within the world of payroll, there's sub accounts because you have the Department of Labor and you have the unemployment department. And even they don't communicate within themselves. So actually the structure of shutting down a company is very complex in the US, given the fact that there's so many states. I think the fact that more companies have gone remote in recent years have complicated the corporate structure because now like, I'll you an example at Ernie, we were LA based headquarters in California. All 30 employees were in California. We had one office, one secretary of state. Today at Simple Closure, we have less employees than we had at Ernie, but we were registered, I think in like 13 states. And I think that's an example of like any company that's working remote. So I think that that's something really important to understand for founders is that like it's complex. It's very time consuming. The traditional time of a founder, like we did a ton of user research. It takes on average nine to 12 months. for start to finish for a startup to shut down. And in most cases, it ends up costing tens of thousands and sometimes even hundreds of thousands of dollars in fees to properly shut down. And I think that the thing that founders don't realize the most that we've seen is the most painful part around shutting down. So even if you do it yourself and you quarterback it and you work a bit with your lawyer and you work at the county and you drive trying to and rippling crazy and you do all these other things and you spend a year of your life doing it. When we did the user research in every single case where we interviewed a customer about this, they were continuing to get fines and penalties months and years after shutting down because they didn't shut down things properly. And the reason is, is because it's so complex and there's all these moving parts. And so I think that is one of the, and so you think about, I shut down my company. We literally spoke to founders that shut down three years ago and are still dealing with state taxes and fines. And the problem is they have no more money in the bank and they return money to investors and now they're on the hook for it. And then sometimes there's personal liability. depending on what's not paid. And so in general, that is a very, very painful process and that at its core is what we're looking to solve. Jason Kirby (40:35.407) Yeah. And, minus the anxiety attack I just had from everything you just shared. and I imagine other founders having that same feeling, you know, it's you're already at your lowest moment as a founder. When you come to the conclusion that your baby doesn't make it, to then deal with the monstrous headache of the logistics and, the bigger you were, the harder, more complex it becomes. And I remember. Dori Yona (41:00.8) Also, the bigger you were, probably the more emotional it is because you're one of the hardest things we talk to founders is like the hardest thing for them to do is other than actually shutting down is letting part of it, but is letting go of employees like that is a hard thing to do as a founder. You are now sending people like that have families that have kids that have mortgages that like they're losing their job. Right. And so that that's it. That's a level of strain and emotion, you know, burden that's that's hard to overcome. Jason Kirby (41:29.943) And you know, another issue that doesn't come up often is like, I see founders do this where they, they hesitate. and you know, they raise a bunch of money. had money. They have, they have cash, they have runway, but clearly the business is not going in the right direction. And, you know, I walked through founders of like the option of just, you like you can raise, but you got to do a bunch of stuff, which usually they're not capable of doing, or the business is just not going to get there to get to that point. What they do is just bleed out. They basically just delay because, know, ethically or unethically, they're getting a salary, it's investor money. They start to just let it wind itself down. But they realize, what they don't realize is like pulling the trigger faster, sooner with a plan and a strategy and giving everyone notice and like having a and doing it all properly is actually one, it takes work and effort. And rather than kind of sitting in your hands and letting the demise ultimately come very slowly, being proactive and trying to return capital back to investors, when, albeit it hurts and it sucks, but if you show that you are mature enough as a founder to make that decision as early as possible and return as much capital back to investors and close everything nice and clean and with no issues and no strings attached, those investors might reconsider reinvesting you in your next business. Whereas if you string it out and let it just continue to milk the remaining cash reserves and you don't close properly or you don't leave enough funds in reserve, one, those investors don't like you anymore and won't write you a check in the future. They'll tell other investors that you're probably not the person to back. And then the worst part is you might be on, as you said, on the hook for whatever fines and fees are left for the business to resolve after closure because it wasn't properly planned. Part of the reason why I wanted you on the show was to educate founders of this option because I've talked to too many that are on that path that are on that kind of bleed until they're dead, completely bled out and there's nothing left to really do the right process. And then these worst case scenarios happen when they thought it couldn't get any worse. Dori Yona (43:43.158) Yeah, no, I agree with you. Look, I'll talk about something really interesting you brought up. I'll double click on it. First of all, like. Just so you know, like at our company and our team, like we don't get excited about shutting down the company. It's not like we wake up in the morning with you like, we're so excited to shut down a company for a founder. What ultimately what we're trying to help with is giving founders the peace of mind to move on to what's next. That's what we want. want to take the, you know, the burden off their shoulders, off them, the board, the team. want to give them a piece of mind to go and do whatever's next, start that next company and get their next job. You know, whatever that may be, that ultimately is like what, gives us happiness and what drives the team. And so what's really interesting at that point was like, actually from our platform, I would say probably 60 to 70 % of founders that are shutting down on our platform are actually already working on their next company. And that to me was like, mind boggling because I said to myself like, well, as a founder, like you're so emotionally drained, you're so burnt out, like you're never going to, you're going to want a few, you just want a job, right? Or like you just want a vacation, but it's actually super interesting to see that the majority of the founders on our platform are actually ready working on their next thing. And so when you're already thinking about that and working on the next thing to your point, one, the relationship in which you end with your investors is so critical because we see a lot of like founders that end on really good terms with their investors where they have an amicable ending, they try their best. Look, investors are in the game of betting. Investors know that 90 % of their bets will fail, right? And I think that if you've proven to your investors who you are, your ethics, and how you operate, then it actually increases the likelihood. Now, by the way, it goes back to the thing we talked about earlier, where you're a second time founder, you're actually probably like you have a higher likelihood to hit a home run with this founder than probably a first time founder, right? Especially if you had a good experience with them. So so I totally agree there. I think that founders don't realize how much investors now again, I don't want to come across where it's like, well, if you have a million dollars and like you could still build something, you're like, just give up and like, no, you still need as a founder, the mentality of like push and fight and like Dori Yona (46:06.636) build them possible. Like if you woke up and it was easy, then you might be doing something like, you know, you wouldn't be doing this job, right? Other people would be founders. Everyone would be a founder. And so I think you have to balance between. When am I giving up or by the way, we don't call it giving up. We just like you've changed lanes like you're changing lanes and trying your next thing, right? And so I think ultimately like true entrepreneurs, like every failure is one step closer to that success. That's I ultimately believe in that. Jason Kirby (46:23.695) Moving on. Dori Yona (46:36.142) But so anyways, I don't want to go cross like, have any time a million dollars and things are a bit hard, just give up. No. But if you understand that you've, you know, product market fits not there, you've built this stack and it's not where it is. And you don't have, know, the conviction that this can really go somewhere to your point. Don't don't drain it to the end because that exact money that you might hand back will be your next check. Potentially the investor that invests next check. And the second thing you're right, like what founders don't understand is like you cannot shut down a company with zero dollars in the bank. It doesn't work that way. you still, yes, it's going to come here personally. Like, and it's tough. And so what we try to like educate founders that reach out to us, you know, when they're trying to go out for like a Hail Mary bridge or like they're six months out of runway is like, regardless of your simple closure or not, the biggest advice I can give like the two big pieces of advice I always give founders is one, don't try to do this yourself. It's one of those things where you don't know what you don't know. Jason Kirby (47:07.769) It's going to come from your personal bank account if you do. Dori Yona (47:33.61) And if you try to do yourself in every case, we've seen that you end up dealing with this for years. And the question is, do you really want to deal with this for years or do you want to focus on your next thing? And the second thing we say is like, it costs money to shut down taxes, separation packages, vendor invoices, other things that are state fees. And so the last thing we want is it to come out of pocket for, for founders or, you know, needing to ask their investors for more money just to shut down. So that's a really important point. Jason Kirby (48:06.683) Yeah, I think this has been a great topic to cover for founders that just don't really know what to expect as they are, as you said, trained not to think about this and to keep going all in and put every ounce of effort they have. But there are some points, you said, 90 % of these companies just don't work out. And what's ultimately that plan? So I think you did a great job, really. hitting the key points there. For those that are listening, what would be the best way for founders to either learn more about Simple Closure or connect to you? Dori Yona (48:40.834) Sure, so I'm very available on all mediums. mean, my LinkedIn, Doriona, Twitter as well. You can also email me, it's dory at simpleclosure .com. We're here to support founders. love having, there's nothing I love more than like getting on a call, helping founders through this journey, making sure that they can go to sleep at night knowing that things are taken care of. So still speak to founders all the time and happily help guide them. And by the way, just like for advice and bouncing ideas off of me. in different scenarios, always happy to help. And then if anyone, know, unfortunately is thinking through this process or considering their options, they can go to simpleclosure .com. It's exactly as it sounds, simpleclosureoneword .com and click get started. And we ask you a few questions and we get you routed to the right team to start helping you out and handling and sharing, you know, the different scenarios and what your options are. So we're always here to support and always here to help the community. And again, like if you, if you have to go through it, this process, is painful, obviously, and it's an emotional process. But there is light on the other side. The amount of founders we see that jump right back in and go and build. like we've had founders that shut down our company and have already raised their next round for their, for their next company. Like those are the stories that we love, right? And we help out with. So if you're either needing to shut down because you're out of cash or you're shutting down and returning funds to investors, or even if you've done an asset sale. About a third of our customers are companies that have gone through asset sales. You still need to wind down the shell entity. So we take that on as well. I that's probably a third of the type of companies we see. We're here, we're available, we're here to support. Yeah, and that's kind of the best way. Jason Kirby (50:22.479) I appreciate you sharing your journey, sharing your experience, and ultimately sharing a solution which provides a better outcome in a tough situation. So, don't worry, it's been an absolute pleasure having you on the show and I look forward to our audience being able to learn more about Simple Closure. Dori Yona (50:38.188) Thanks for having me. Jason Kirby (50:43.097) Awesome, I feel like I gotta like preface this, where it's like, this was not an ad, this was not paid for, like this is just a legit.