Every startup has a foundation story, but SimpleClosure’s is one of the best. Here’s that story – followed by what this very original company can do.
Some years ago US-based Dori Yona was part of a startup and he was attending a regular board meeting. But, there was a surprise: the investors had decided they didn’t like the numbers they were seeing and basically said: ‘We’re not investing any more, you need to shut down.’
Now, that was bad enough, but then came a much more complex challenge: how do you legally and correctly shut down a company? What are the founders’ obligations? What regulations do you need to comply with? Who needs what data? Suddenly, Yona’s biggest battle as a founder was not growing the business, but shuttering it without it turning into a car crash.
‘They don’t teach you how to shut down a company at start-up school,’ Yona told Artificial Lawyer.
But, with faith in the power of the internet and the digitialsation of the world’s collective knowledge, Yona did what all people would do: he started searching on Google.
‘There was nothing there. So, I tried to find information from other founders who had shut down their businesses. But, they don’t post about this on LinkedIn,’ he added.
And that’s right. While you’ll sometimes see a founder do an epic online piece about ‘we tried our best, but now we’re moving on to new challenges…’ you won’t see a detailed outline of all the gnarly closure issues they had to deal with.
Yona then pointed out that this is actually quite strange, given that it’s not unusual for tech founders to go through several company launches, followed by closures, before they hit on a winning offering. I.e. the world should be overflowing with information about this very frequently-occurring process.
Then Yona did the next logical thing: he contacted the startup’s lawyers. It was a large West Coast law firm, which we’ll keep anonymous – but you’d know it. They were not excited about working on shutting down the business. Instead they suggested a referral to a much smaller law firm. Yona then asked an accountancy firm, they also didn’t want to get involved.
So, he had to do much of the work himself. He took it upon himself to learn all about the various aspects of company closure under US law. He talked to experts and built a plan for the board, which he presented to them.
The entire experience left him wondering about one key thing: how can there be no products to help with this? And so he did a search of the market, and he didn’t find anything that really fitted.
The next question was: how big is the market for a software product that helps founders to close down? His research found that 93% of tech startups in the US end up failing, which amounted to many thousands of companies. And depending on which data you look at, the total company closure rate in the US is around 600,000 (or more) per year.
To balance that out roughly the same number are created each year. But, even so, this was the unaddressed market that founders search years to find. Yona also found that there were legal tech companies that helped founders to get started and incorporate their business idea, from LegalZoom and RocketLawyer, to many others, but to help to close……you guessed it.
And then the last bit: costs. Yona found that to close a startup business in the US could cost between $10,000 and $100,000 in various fees. It could also take up to a year to do…..and worse, many founders missed key things and then got hit years later for something they had needed to formally deal with, but didn’t realise.
‘It’s an overlooked market. It’s not sexy. People are not excited about closing companies,’ Yona concluded.
But, within that realisation – and ironically enough – he saw a huge opportunity. And hence, SimpleClosure was born.
So, what does it do?
What they provide is a pathway to wrap things up, making sure everything that needs to be addressed is handled and done properly. A founder can upload all of their paperwork, from HR info to company documentation, which is then handled by SimpleClosure. They also connect to public databases across the country to make sure everything is covered. As Yona highlighted, a company might be based in California now, but perhaps was formed somewhere else, or it has a couple of employees elsewhere. All of that needs to be handled according to each State’s rules.
‘We make sure no stone is left unturned, and we often find additional issues that have been missed. Then we give them a shutdown plan and keep track of things. We also make sure to unify all the legal and accounting work and documents in one place. And we use Docusign to get all the signatures, for example from shareholders, when needed,’ Yona added.
Or, as the company explains:
- ‘We Learn About You
By answering a few questions, you’ll provide us with everything we need to put together the ideal shutdown plan for your startup.
- We Handle It All
You’re matched with an experienced Dissolution Expert that will walk you through your customized plan and keep you updated through the entire process.
- You Move On
Track your shutdown progress while focusing on your next opportunity. We’ll ensure everything is taken care of and you know what’s happening.’
Yona added that they can expedite the process as well, usually taking less than 60 days, which is a big improvement on the many months it usually takes.
‘We also give peace of mind,’ he noted, underlining that leaving loose threads when a company dissolves is not something a founder wants.
They came out of stealth about a year ago and now have a team of about 20 people. They have also started to partner with law firms that actually need something like SimpleClosure to help them when they’re advising their own clients.
Yona said that this has meant the company has already helped to process more shutdowns than most lawyers do in their entire professional lives.
So, there you go. From being told by investors he had to close his startup, to creating a new startup that now helps other founders at one of the most difficult times of their lives. Plus, of course, Yona and his co-founder Nimrod Ram, have built a very successful new business all of their own.
Artificial Lawyer always likes a happy ending. Congrats to SimpleClosure on turning a crisis into a success story.
—
P.S. And if you’ve also got a great origin story to tell about how your startup came to life, then let Artificial Lawyer know.