Whether the economy is in a technology winter or a technology boom, running a company and keeping it successful is difficult. Case in point: According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year.
For companies that don't do well, the next step is a little more complicated than it seems. Simple Closure Co., Ltd.. I want to help. Closing a company includes tasks such as filing dissolution documents, canceling employer identification numbers, resolving financial obligations to vendors and customers, and paying final wages to employees.
simple closure works with companies that have ceased operations, helping entrepreneurs and business owners avoid overcomplicating things or missing important steps. In a sign of growth, the Santa Monica-based technology platform closed $4 million in seed funding last month after launching from stealth with $1.5 million in pre-seed funding in September. His recent $4 million seed round for SimpleClosure exceeds what other startups achieved last year. crunch basethe median seed round for US companies in the first quarter of last year was $2.3 million.
Aiming for beautiful closures
The establishment of SimpleClosure was dori yona Now the company's chief executive, he faced the prospect of shutting down the financial technology business he founded. Ernie Co., Ltd. Santa Monica-based Arnie's was eventually acquired, and although it ultimately did not close, he was at a loss when working to create a closure analysis for investors. Jonah said he was unable to find any guidance online or through Ernie's attorneys about assessing debt, setting a schedule, organizing a projected severance package, or other necessary tasks.
“One of the biggest problems that we've seen businesses and businesses have is they think they're shutting down, but they're not shutting down properly,” Jonah said. Told. “We comb through state public databases to really make sure there aren't any unresolved stones or skeletons in the closet, and we don't just rely on information provided by the company.” takes that, aggregates it with the data we find across public databases, and then our platform puts together a personalized shutdown plan for your company.”
SimpleClosure’s Series A round was led by infinity ventures With participation from fox capital and existing investors. SimpleClosure declined to reveal the number of companies he has partnered with so far, but said his customer base has increased by more than 600% since launching in September.Previous customers include: Lance Global Co., Ltd. and telemedicine companies Peak health.
Other options for closing a business other than SimpleClosure include liquidation companies, accounting firms, law firms, and filing for bankruptcy. Jonah emphasized that SimpleClosure is not a law or accounting firm and does not provide legal advice.
Some companies may be able to continue operating through an acquisition or filing for bankruptcy. marvel comics, general motors company and Texaco Co., Ltd. All had filed for Chapter 11 bankruptcy in the past and have since made significant recoveries.
One concern for companies in bankruptcy is that they may not have enough money to spend on services like SimpleClosure. But SimpleClosure says that while traditional companies charge him more than $75,000 in fees and the process can take him as long as a year to complete, the company's service takes “days or weeks.” It claims to be able to provide a shutdown analysis plan.
SimpleClosure charges businesses a flat, sliding fee based on their size, number of employees, and amount of assistance needed to create a closure plan. The company declined to disclose exact fees, but said it was a “fraction of the cost” of traditional breakup services.
“I think we offer a very attractive, very price-sensitive value proposition,” Jonah said. “If a company is short on cash, there are cases where investors pay the price. Investors have a common interest in ensuring that[the company]is properly lean, and in many cases directors It is at stake. If certain things are not paid, it could pierce the corporate veil, in which case directors (and investors) could be held personally liable.”
Jonah said that after onboarding and providing company information about employees and finances, most of the work users on the platform do is sign documents. The documentation generated by the platform and the resulting Shutdown Analysis Plan are “modifiable.” This means customers can take those documents to an external legal authority for review if necessary.
Another important step in winding down a company involves selling assets or dissolving it. These could include subsidiaries, real estate, digital assets, or physical items such as office furniture. Jonah said his company does not currently provide clearing services for the management and sale of physical assets, but supports the sale of digital assets and intellectual property.
“There are parts of[clearing]that we already support, but the big picture is that we continue to focus on building technology that helps with automation and makes it easier and more efficient.” said.
Is there a “technology winter”?
Jonah said that while SimpleClosure is focused on the tech startup ecosystem, it is also starting to attract customer interest from more “traditional” businesses, such as small consulting firms and corporations. He said most companies come to SimpleClosure with about $1 million to $5 million in funding, and about 10% of the runway remains. But the company has also seen series venture capital firms that have raised up to $40 million or $50 million look to SimpleClosure for help.
Across the technology industry, including social media, gaming, and software development, many companies faced economic challenges last year that led to layoffs and asset sales.In the local economy, Pasadena-based consumer data company Near Intelligence Co., Ltd. and a Long Beach-based space launch company. virgin orbit Both companies filed for bankruptcy in 2023, but neither used SimpleClosure's services. SimpleClosure previously powered a Mar Vista-based social marketplace crispy Cut Co., Ltd. Financial Technology Based in Manhattan Beach Carbon Payment Technologies LLCdoing business as ZenBill Inc.
While there has been widespread talk of a “tech winter” in 2022 and early 2023, a period of economic downturn and reduced investment in technology, the rate of closure faced by small businesses and startups has remained consistent throughout history. Jonah said. According to a report from the U.S. Small Business Administration, between March 2021 and March 2022, 9 out of 14 businesses that opened closed. During the same period from 2020 to 2021, about 8 out of every 10 businesses that opened closed.
“If you look at the aggregate (small business) growth and market graphs across the United States, they've been pretty much flat for the past 10 years[because]there's a constant cycle of businesses starting, incorporating, and closing. “Because I am,” Jonah said. “When I started looking at the company formation market, I thought, 'There are so many companies that can help you start a company, so why isn't there anyone to help you close it?'”
mike jones Co-founder and Managing Director of a Santa Monica-based investment firm and incubator Science Co., Ltd., agreed that startups are always vulnerable and last year was no exception. Jones said companies need to plan for longer funding cycles and prepare for the reality of securing investment in a competitive market environment.
“It's always 'tech winter,'” Jones said. “There is always uncertainty for startups due to market fluctuations and competitive pressures. This highlights the need for startups to continually adapt and innovate in order to grow. That's what successful startups do.”
Jonah agreed that the idea of a recent technology winter ignores the consistent ratio of new openings to closings and liquidations of companies.
“Right now, with the slowdown in financing, there's a heightened awareness of closures, but businesses are closing in every economy,” Jonah said. “This is just a part of entrepreneurship that hasn't been talked about openly before.”
He added that the companies he sees struggling the most include those that started during the coronavirus outbreak and were founded on “pandemic behavior.” Jones emphasized that industries with low or negative margins, such as food delivery and ride-sharing, are particularly vulnerable because they rely on venture capital subsidies to defray consumer costs. . But Jonah, industry agnostic, said it's a very difficult time to be in the technology industry, especially in a time when unit economics don't make sense.
“In the past, you could raise money without any income, thinking you would get income later, but now that is becoming almost impossible,” Jonah said. “You have to show profitable growth. You can't grow without revenue. Many companies are founded on the premise, 'We don't have revenue, but we will have revenue eventually.' I think it’s vulnerable.”
Funding for the future
Jonah said the firm's plans for the new fund are to “grow, grow, grow.”
“We're focused on two things: growing the product and evolving the product,” Yona says. “We have a lot to build, and we plan to invest heavily in research and development. This means growing the engineers and product designers on our team,” Jonah said. “The second focus is market development. We've been very fortunate to be able to grow very aggressively with literally zero marketing. It's all been through word of mouth. Because we think we're really solving a problem. Our goal now is to put money into it.”