I was a Sherwood Partners client in 2010. Oracle bought our startup, DataScaler. However, they bought the core assets of the company, not the corporate entity. That's a fairly common strategy for acquiring early-stage companies. The buyer gets the parts they want (in our case: the team, code, and patents) without any of the hassle or liabilities of the corporate entity or any assets that they don't want or need.

That left us needing to wind down the DataScaler corporate entity. This is a fairly technical process and not something you do casually. We hired Sherwood Partners to do the wind down. They filed the appropriate paperwork with Delaware and California, since we were a Delaware C corp based in Cupertino. They stored our corporate files (lots of paper back then) in their warehouse for 7 years in case of any litigation, tax disputes, etc. The offered to connect us with a liquidator to sell off our desks, chairs, phones, etc. They don't actually do the liquidation themselves. Perhaps most importantly, they were legally the "Stockholder Representative" and ensured that the stockholders were properly taken care of, etc.

We used Sherwood exclusively for the corporate wind-down part, as we already had a buyer. They also can help companies find buyers and they have lots of contacts in the valley.

I am happy to answer questions if anyone has any.

It's interesting how his moniker is "Undertaker of Silicon Valley", and the process you describe really does have the calm, comforting, and efficient feel of a funeral.

A question out of curiosity, how much did the wind-down of the company cost in comparison to its acquisition cost?

Sorry for the delay in getting back to this...

The wind-down cost was very small in comparison to the price Oracle paid.

Thanks for letting me know

Did the entire team continue to work for Oracle? I suppose that people work for a startup for a reason, and once that reason is gone, it might make more sense to move on.

Sorry for the delay in getting back to this...

All the engineers went to work for Oracle and were given large incentives to stay for 2 years. Most stayed and got their incentive payouts, though they all eventually left later on. I think the longest tenure at Oracle there ~8 years.

Here's a great overview of their process!

https://www.shrwood.com/Assignments-Liquidations/Assignment-...

Nice! This is clearly written, and exactly what I was looking for.

No, typically there is nothing to sell. The "assets" are worthless (code, website, customer lists). Maybe furniture they sell to liquidators at 5% of price. The liquidators will then put that in storage and will sell the assets at 40-50% of price. Unwinding a company is quite complex and he works with a skeleton accounting staff to close the corporation, pay state, federal, sales taxes (you can never escape that), closing the DE corp and all foreign companies as well. Lot of admin work.

This is a shot in the dark and maybe a little insensitive because people are losing their job (I lost mine recently) so I apologize for that. Does anyone know of any of these liquidators for office furniture? I've been trying to get a Herman Miller desk chair for a reasonable price for about a year now.

Tbh, I just called directly to the moving companies that handle the physical moving from office to liquidator, and asked who the usual suspects were.

Scored some nice adjustable desks for pennies on the dollar.

There are about 4 in the Bay Area I know of. Look for office supply warehouse in the suburbs. They also will frequently post to craigslist. Expect 70% of list though. It’s hard to find lower.

> "Expect 70% of list though. It’s hard to find lower."

I'd advise the original poster to wait for a few months. The recession hasn't really hit yet and there are plenty of business closures yet to come. At that point, liquidated office equipment will be a whole lot cheaper because of the glut.

Used these folks in San Mateo a few years ago - YMMV: https://www.abettersource.com/

That's really cool; does anyone know of a similar business in Seattle? I could use a height adjustable table at home while I'm stuck working here in our currently-indefinite quarantine.

I bought my stuff at Ducky's, over in the Industrial District: https://www.duckys.com

thanks!

Thanks for sharing! Who pays for this?

Also, naive question, what happens if you don't do these things? If the company has no assets, it's not like you can get sued? I'm not arguing that this should be done, I'm just curious what the specific reason is that it happens.

The equipment and furniture are either auctioned or liquidated.

If there's a corporation or formal payroll involved, then it's important to wind those down carefully for various legal reasons. So either the remaining assets or owners will have to pay for the paperwork wind down.

Typically with a small company of 50-60 employees, the office manager and 1-2 accountants wll stay on for a few months to wrap all that up.

I was the last eng. employee to leave Novafora/Transmeta, and attended the auction and bought some of the computer equipment.

The most expensive hardware items were the almost new espresso machine, the 3 Ghz scope and the bed of nails tester.

Intel bought most of the IP for a little more than peanuts.

True, there are liquidations of physical assets.

But the biggest benefit to the last remaining employees and board members (particularly those who are Directors or Officers) is reduction in liability around the details of shutting down a business. It's not about the thousands of dollars you get for the office furniture. By the point a company does an ABC, payroll obligations are likely the only category of liabilities to impact any employee still involved.

A firm like Sherwood will in fact readily offload that stuff to the most reputable firm who can haul it away, whatever is most efficient.

It's the forgotten obligation that Sherwood helps protects you from (e.g., rent payment, tons of small bills). When that bill shows up after you have had the hard conversations with stakeholders, that's yet another reminder to your investors that things went south. (Sherwood gets the missed bill and pays it out from a carefully planned escrow and based on a wind-down agreement that your investors signed off on). Much preferable to all of your investors notifying _you_ of an outstanding obligation. Firms like Sherwood play an important role in allowing all of us to move on with life.

There are several details here I'm skimming over that someone at Sherwood would correct me on, but hopefully this is helpful.

Sherwood=good guys who help startup people move on. Hopefully you have your business well-organized. Sherwood has the process down to a science.

[EDIT]: 'who pays for this?' There's typically a negotiation between the remaining creditors with voting rights (your board members at time of wind-down), but the cost of a firm like Sherwood is small compared to the risk of you trying to shut down your startup in your spare time. (Don't do that.)

Fascinating. I had no idea this process was so formalized, but it makes a lot of sense in retrospect.

The directors have legal responsibilities that puts them at risk if the business is not wound up properly.

It is possible to just let it go bankrupt and leave to the appointed administrators to deal with it, but then you have someone with interests not aligned with yours going through all your papers looking for ways to extract value. That's a pretty good incentive for directors to try to ensure an orderly wind-down on their terms.

Sorta the opposite of YC... probably has quite an extensive network of people to buy everything from the people to the chairs...

Agreed - the article does exceptionally little to describe what he actually does. Apparently the secrecy is why he is hired so I suppose that's why this article is so light on specifics.