This Is What Happens When a Startup Dies

You always hear about startup exits. Big acquisitions. Big IPOs. But of course this isn’t the fate for most new ventures. Many of them die outright, without any kind of “exit” at all for shareholders. So how do you wind down a company, and sell off the scraps? How do you actually pull the plug? David Johnson of Resolution Financial Advisors specializes in exactly that. Because the formal bankruptcy process is very expensive, many companies look for some way to salvage value by doing an asset fire sale. David tells us how the process works, and also goes through a bunch of fun examples of odd transactions, such as the time he had to find a buyer for some actual human skulls that were in the office of a dying startup. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Finance is increasingly being built on digital rails. But as the adoption of virtual assets, tokenization and stable coins grows, can regulation not only keep pace but help accelerate it? Find out more later in the podcast.

• 0:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 0:59Speaker 01

  But according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:39Speaker 02

  The world of business is constantly evolving and Comcast business keeps you totally in step with secure AI-backed networking in more than 100 countries. They're powering over 90% of the Fortune 500 and millions of small businesses. That's a lot of muscle. And behind it all, thousands of experts answering your call at 2 AM like it's 2 PM. One partner powering how business gets done for companies around the globe. When you add it all up, no one does business like Comcast business.

• 2:10Speaker 03

  Smart way to manage the currencies you need around the globe. When you send money abroad using your bank, you could get hit with hidden fees and exchange rate markups. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google with no unwelcome surprises. Plus, most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. It's simple and free to sign up when you download the Wise app. Be smart. Get wise. T's and C's apply.

• 2:56Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 3:01Tracy Alloway?

  And I'm Tracy Alloway.

• 3:03Joe Weisenthal?

  Tracy, we always hear about big startup exits, you know, people becoming billionaires, companies getting acquired, going IPO, et cetera. But I don't think that's most of them is not that. That's just the ones we talk about. You never hear about the scores of other ones that always fail.

• 3:17Tracy Alloway?

  No, this is called survival bias, right? So you only ever hear about the winners because all the losers are basically gone and can no longer communicate.

• 3:27Joe Weisenthal?

  That's right. And then the other thing is that most startups fail and, you know, VCs talk about, oh, I need one winner for every, you know, whatever, 100, maybe 20 losers or whatever. There are probably a few in the middle that get two or three X returns, but that's not what delivers the big money. But yeah, it's funny because the losers, that's the norm. That's the expectation going in with any series of investments. And yeah, we really should talk about losers more often.

• 3:53Tracy Alloway?

  Yeah, I'm into it. Let's talk about losers.

• 3:56Joe Weisenthal?

  I'll say one other thing too, which is that when we talk about a lot of startup investing, particularly in technology, you know, you don't really think of them as having assets or a lot of assets that can be sold, right? So when a sort of cardboard box manufacturer goes bankrupt or whatever, well, there's probably some equipment that can be sold. There's land, maybe there's a building that could be re-proposed, some intellectual property, maybe, I don't know, for some of these. With a lot of tech companies, it seems like there's nothing there if they don't succeed. And then there's like, all right, you just pull the plug and everybody moves on. But I don't really know if that's the case. Like, I don't actually know what happens at that moment of death.

• 4:35Tracy Alloway?

  Well, from what I remember, bankruptcy tends to be pretty complicated

• 4:40Joe Weisenthal?

  Yeah.

• 4:41Tracy Alloway?

  in various ways. And I'm thinking back, this is the ultimate extreme example, but the Lehman Brothers bankruptcy.

• 4:48Joe Weisenthal?

  Yeah.

• 4:48Tracy Alloway?

  That took 14 years. And I remember covering it for like years and years and years and years. And they had all these counterparties, this big waterfall of predators and things like that. And I wonder how it works for, I guess, smaller VC companies.

• 5:04Joe Weisenthal?

  Totally. And it seems like that whole court experience is probably something you might want to avoid if you can. So anyway, we really do have the perfect guest to talk about what happens when a company fails. What happens when the startup fails? We are talking with David Johnson. He has a managing principal at Resolution Financial Advisors. They're a financial advisory firm based out of Los Angeles that focuses exclusively on the insolvency world. So we're going to learn about all of this. David, thank you so much for coming on the podcast.

• 5:33Speaker 06

  Thank you, Joe and Tracy. I'm delighted to be here.

• 5:35Joe Weisenthal?

  This is going to be a lot of fun. Why don't you start off, what do you do or what does Resolution Financial Advisors do? What is your sort of typical client and what are they looking for?

• 5:44Speaker 06

  Resolution Financial Advisors is a financial advisory firm. It's true. But we don't do a lot of the work that other financial advisory firms do. I started my career at Alvera's and Marcel a long time ago. I think I was employee number 21 of what is now a 10,000 person firm.

• 5:58Tracy Alloway?

  Wow.

• 5:59Speaker 06

  And I did restructuring work and interim management work and forensic accounting work there. So I've done a lot of that in my career. But that's not what we do anymore. We focus like a laser beam on what I call the insolvency world. That is alternatives to bankruptcy and other ways to wind down companies, create value by recovering value. And sometimes we do use the bankruptcy code. I am a bankruptcy specialist. I'm a chartered financial analyst and I am a certified insolvency and restructuring advisor. And so bankruptcy is the right tool in some cases. But for most of the people with whom I do work, it's not the right solution.

• 6:34Tracy Alloway?

  So why don't we talk about the various solutions that are potentially on the table? Because I think a lot of people will recognize something like Chapter 11 bankruptcy. I know as the daughter of a commercial airline pilot, I am certainly familiar with Chapter 11 bankruptcy. And that allows you to, you know, keep operating, keep the business going while you sort out your various creditors. And then there's Chapter 7, which is an actual liquidation. And then there's, I assume, more creative workouts that you are advising on. What are the options?

• 7:05Speaker 06

  That's a really good summary, Tracy. Thank you. Yes, Chapter 11 is the restructuring. That's where you get an automatic stay, a pause from your creditors and a chance to catch your breath, raise new money under favorable terms, conduct a sale of the assets in a very, very court-supervised process. It has its place. I've been through many of those. They are terrific if you want to restructure a company. Many buyers buying assets out of bankruptcy will prefer a judge's order to do it that way. Chapter 7, as you said, is when you throw the keys on the table and walk away. And bankruptcy court will appoint an independent attorney, a bankruptcy trustee they're called. But they tend to be people who are not specialists at selling esoteric assets.

• 7:47Speaker 06

  You don't really expect any value recovery in a Chapter 7. So what we do is we specialize in alternatives that give the company a little bit more control and certainly don't ask them to incur so many costs. For example, to get into a Chapter 11 bankruptcy, you almost certainly need upwards of $100,000 or $200,000 just to give a retainer to your bankruptcy counsel.

• 8:07Tracy Alloway?

  Wow.

• 8:08Speaker 06

  Sometimes that's warranted, but for the companies we'll be talking about today, it's not a wise use of money, especially when you don't have an expected outcome where there will be a sale or restructuring. You simply want to shut down.

• 8:20Joe Weisenthal?

  I have one really short question and a real question. Like, I've never heard of a Chapter 6 bankruptcy. Does that exist? Or what's up with all those other chapters?

• 8:28Speaker 06

  There are other bankruptcies. There are some especially for farmers, for example. There are some that deal with international companies in the United States. But Chapter 11, Chapter 7, and then Chapter 13 are the ones you hear about most of the time.

• 8:39Joe Weisenthal?

  Got it. Okay. That was just one of those questions I've been dying to get off my chest. I probably could have asked ChatGPT. See that and got a decent answer, but now I got that out of the way. You mentioned esoteric assets, so I imagine that there are some types of assets that are very easy for anyone to sell, like a building or something. It's not very complicated offices, whatever. And then what is an esoteric asset for which if you're not a specialist in it, you might really not know how to get top value for it?

• 9:04Speaker 06

  So I do a lot of work in the new economy. I've spent most of the past 20 years working with Silicon Valley firms who have tech startups, biopharma, clean energy, things that are very intellectual, property heavy. It is sometimes the case that in selling a company's assets, we have machinery and equipment or inventory or something that could easily be auctioned. But if you have a patent portfolio for a specific technology, or if you've got a drug in development, or you've got a special software that does something unique, there's no benchmark for that. There's no open outcry auction system that you can conduct for that. You've really got to find the right buyers narrowly tailored and conduct an effort to monetize those assets.

• 9:47Tracy Alloway?

  Okay, I want to talk about the losers because I am a firm believer. You know, you always read all those business books that are like, here's this massive company that was a huge success story. And no one ever writes about the ones that didn't make it, as you mentioned at the beginning, Joe. So one thing I'm wondering, in your many, many years of doing this, have you observed like a commonality among companies that fail? Is there something that is, I guess, endemic to all the failures?

• 10:17Speaker 06

  I wouldn't say so. The people that are doing the investing in those companies have a lot more information and probably are a lot more intelligent than I am. There was a recent book out a year or so ago called The Venture Mindset, and it makes the point that Silicon Valley venture firms don't really mind losing money. They don't mind investing in something that won't succeed. They're much more concerned about missing the ones that do succeed. They know that eight out of 10, perhaps more, but my number is eight out of 10 investments will either break even or fail completely. It's the other two or the other one out of that 10 that will carry the fund for the year. So they cast a wide net. They do their best to pick intelligently, of course, but they cast a wide net and most of them need to be shut down.

• 11:00Tracy Alloway?

  Well, what's the trigger or the catalyst from going to losing money for years and years and years to an actual bankruptcy and failure?

• 11:08Speaker 06

  Good question. That's when they come to me. The companies come to me when they're perhaps pre-revenue. They're almost always pre-profitability. They are relying probably on the next tranche of venture funding to come in. Their plan says we're going to burn a certain amount of money and the venture partners are going to continue to fund us. Eventually, the venture fund runs out of patience. The fund is full or old, or they simply don't believe in the idea anymore. That's the first thing. If that money doesn't come in, you can't make payroll, you can't operate. Or perhaps they've got a secured lender, like Silicon Valley Bank. I do work with them. They do a lot of venture investing. The bank may run out of patience. The bank may have to write down the loan. The bank may want to recover their debt and they'll cut off their line of credit perhaps, or simply fail to advance them any more money.

• 11:52Speaker 06

  Or perhaps the venture firm has tried to sell the company, tried to sell the technology. They've run an investment banking process and no buyer has emerged. So what do you do when you come to the end of the road? There's no more cash to pay payroll. You can't continue funding your company. What do you do?

• 12:07Joe Weisenthal?

  All right. So they come to you. And as you said, there are going to be these esoteric assets in at least some cases for which a typical court-appointed liquidator does not have the specialty to get the max dollar for them. Incidentally, I imagine there are situations in which you don't have the specialty, but you have to learn it or you have to focus on that. So let's say I'm doing something novel and, I don't know, drug discovery or whatever it is. You can give us the example. Some new type of asset comes to you. Your job is to get max dollar. You haven't really dealt, you don't know this specific thing yet, maybe because it's novel. Give us an example of some esoteric asset and how you sought out to find the buyer who is able to pay max dollar.

• 12:50Speaker 06

  You know, Paul McCartney once said that he was fortunate because in his line of work, he did not need to know how to read music.

• 12:57Speaker 06

  I deal in broad-based technology, as I said, clean tech and biopharma and software and AI, all of which I know nothing about. I don't need to be a specialist in the technology. I need to know how to find the people that know it. So I want to put those assets in front of the right people. I run what I call a mini investment banking process. We have to do it quickly. We don't have much money. The people that are at the company are going to be gone very, very soon. So I don't do it for six months. I do it for eight weeks. I sum up the technology. I put it into a little package and I put it in front of the 50 to 100 companies in that very narrowly targeted space, whatever that space happens to be.

• 13:35Joe Weisenthal?

  Okay.

• 13:36Speaker 06

  I want to make sure that everybody in that respective industry has a chance to look at it and opine. I don't have to learn it. I have to know enough to talk about it a little bit, but I'm there to bring people to the table. I want to put them in front of the people who invented the technology, the people who can tell everybody why it's the greatest thing and let the market tell me what it is.

• 13:55Joe Weisenthal?

  So give us an example of ad technology or give us a story about where you had to do that.

• 14:01Speaker 06

  A long time ago, I worked on a company called Proteogenics. It was more than 10 years ago, so I feel comfortable releasing the name. They were doing research in neonatal disease. They had collected, oh, I don't know how many pints of vaginal fluid, all in deep freeze in the basement of their laboratory. Didn't have the ability.

• 14:22Tracy Alloway?

  Is there a secondary market for vaginal fluid?

• 14:25Speaker 06

  Well, that was my job to find out.

• 14:26Tracy Alloway?

  Oh, mine.

• 14:27Speaker 06

  That's exactly right.

• 14:28Joe Weisenthal?

  All right, tell more.

• 14:28Speaker 06

  Now, there were patents and there were research and there were medical tests and there were patient records, all analyzing for disease, for whatever disease they were looking for. We ultimately did sell that technology to a large, I think, Boston-based pharmaceutical company. I don't know whatever happened to it from there, but I had to manage that process. The company closed overnight. The facility was locked with the vaginal fluid in the deep freezers and I had a landlord who wasn't very happy about that. So my job was to, two things. My job is always two things. Number one, monetize the assets. Do it quickly before the Ice cube melts. I had to find a buyer.

• 15:08Joe Weisenthal?

  You're being very literal here.

• 15:10Speaker 06

  Yes, I am.

• 15:11Joe Weisenthal?

  It's a melting ice cube. And this is sometimes a cliche in the world, but you're talking about literal melting refrigeration.

• 15:17Speaker 06

  It got a little dicey because the landlord locked me out. Landlords aren't supposed to be able to do that in California. But I wound up having to negotiate something and keeping the lights on until such time as I could run the sale process, get people interested, back up the technical data, and move those freezers out on refrigerated trucks. All while the clock was ticking, while I had a very limited budget to pay the rent and to keep the electricity on. Now, that was a good outcome again because we sold the technology. I'm thinking, if I remember correctly, maybe $2 million, which is a great outcome in my business. That was probably enough to repay the secured lender. There was often a bank that's first in line to get paid. And then there were unsecured creditors who come second, trade creditors, landlords, things like that. So we're going to try to get as much.

• 16:02Speaker 06

  But now, there was probably $50 million invested in that company from various funds, lenders, equity investors. And so we're not going to get those guys repaid. But we want to source as much value as we can. Somebody will say to me, how much is the technology worth? My answer is always, I have no idea, but I'm going to find out. How am I going to find out? As I said before, we're going to talk to everybody in the industry, everybody who knows this technology, everybody who is in a position to say, this might be useful to me. And we'll let them speak. Sometimes the answer is no one.

• 16:35Tracy Alloway?

  Who was the buyer for the fluid and the fridges?

• 16:38Speaker 06

  I don't recall the name of the buyer, but it was, I remember, a large Boston-based biotech company with a well-known name. I just remember that as the buyer. And then the day, the other thing I remember is the day we moved out, we had the technology backed up on an external hard drive. Again, they had paid $2 million for it. And when they went to leave, they couldn't find it. We found it in the trash can.

• 16:58Joe Weisenthal?

  Oh, my God.

• 16:58Speaker 06

  So things are a little bit Wild West, a little bit touch and go. But that's the kind of work we do.

• 17:20Speaker 00

  What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 17:36Speaker 02

  We're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high-frequency traders and that sort of thing, and folks who service institutional clients.

• 17:44Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Reese Merrick of Ripple says.

• 17:52Tracy Alloway?

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 18:11Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 18:22Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 19:04Speaker 01

  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads. That candidates quote must be willing to work extended hours and weekends as needed. One major perk for all that hard work employees access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 19:44Speaker 07

  Quick question for you. How much of your day is spent typing? Email, Slack, notes, prompts to ChatGPT, Whisperflow is a voice to text app. Instead of typing, you talk and it types for you in any app on your Mac, Windows, iPhone or Android. It takes out the ums, fixes the typos, and the result sounds like you wrote it. Four times faster than typing. So the email that used to take two minutes now takes 30 seconds. Whisperflow is free. Download it at whisperflow.ai. That's W I S P R flow.ai.

• 20:15Tracy Alloway?

  I'm just going to get very voyeuristic about corporate failures, I guess, and just ask for a bunch of specific examples. But have you ever gone into a company and just, you know, shook your head in disgust or surprise at what's been going on? Like, how could this company actually have been running this way for, I don't know, however long?

• 20:36Speaker 06

  It is often surprising to me that the destruction of value is so great. If you told me fifty to a hundred million dollars was invested in X and there's nothing to show for it, or maybe the technology has a buyer for a million or two million dollars, where does the money go? That's a very good question, and I've been doing this a long time, and I don't really have a good answer for that.

• 20:54Joe Weisenthal?

  You know, something I'm curious about is when a company is on its deathbed, if I were a founder, or if I were a board member, or whatever, like, I would be pretty checked out. Like, I'm kind of not surprised in some instances that, like, you know what? Some important bit of technology, it's on a hard drive, et cetera, gets thrown in the trash, or no one really cares about keeping the refrigeration bill going. But, you know, if you're whatever involved in this, like, you might be thinking about your next thing. This is dead. This is a waste of time. I see no future upside. Talk about like those late stages and who actually is incentivized to till the very end till

• 21:32Joe Weisenthal?

  The keys are handed over until the sale is made. Like, how do you get them focused on extracting that less value when most people, I would imagine, want to move on at that point?

• 21:41Speaker 06

  That's an excellent segue, Joe. So how do we get hired? Why do people bring us in? It's exactly right. If I'm on the board of a company, I'm probably residing at a venture capital firm, or a private equity firm, or maybe a venture lender. And once I see that there's not going to be any recovery, or minor recovery.

• 21:58Joe Weisenthal?

  Why would you want to spend another second on it?

• 22:00Speaker 06

  Or another dollar.

• 22:01Joe Weisenthal?

  Yeah.

• 22:01Speaker 06

  That's exactly right. So I'd rather go focus on my things with upside. So they want to, as quickly as possible, hand it off to me. So under the rubric of my business, we very often, not always, but very often engage in a formal kind of insolvency process, known as an assignment for the benefit of creditors.

• 22:18Joe Weisenthal?

  Okay.

• 22:18Speaker 06

  Or ABC for short. It's a form of insolvency that's well-recognized in many states. It's not under federal bankruptcy law. It's under state law in California, state law in Delaware. Has a long storied history. It's nothing new. Goes back to English common law.

• 22:35Speaker 06

  Under an ABC, a company says, "We have assets. We have debts. We can't continue to operate the business. So we're going to take all of our assets and assign them to a third-party trustee. That's me. And I have, again, I have two jobs. One, turn those assets into cash, try to collect as much money and put it in a trust account for creditors. And my second function is to do the administrative wind down of the company. Get the final tax returns prepared. Store the books and records. Make sure the W2s go out to the employees at the end of the year. Wind down the 401K under ERISA law properly. All the administrative things that board members really do care about and should care about, but don't have the expertise or the interest to do themselves. Therefore, when the transaction happens, when the company signs over these assets to me,

• 23:19Speaker 06

  the board generally resigns that same day. In a Delaware dissolution, if the company is just going to file paperwork to close the company without a formal insolvency process, Delaware requires at least one director stay on the hook as a director for three years, which means you've got to keep, you know, insurance in place. You've got to continue to bother the directors with items. He may be at risk. In this case, they don't have to. They put all of the work on the shoulders of me and my partners. And we have a legal fiduciary duty to do the things we've talked about. To monetize the assets and wind it down. And very often, we never talk to those directors again.

• 23:54Tracy Alloway?

  I'm thinking how to frame this question, but does anyone ever try to influence your decisions as a trustee who is, you know, supposed to be independent, following the law? Does anyone ever try to kick themselves up the waterfall or something like that?

• 24:11Speaker 06

  That's a good question. I've had very few experiences like that. We handle the insolvency process very strictly. We adhere to a lot of the same rules that occur in Chapter 11 in federal bankruptcy. The veneer of having the formal ABC insolvency process is itself powerful. We tell our companies, if you just walk away and you owe the bank money and you owe unsecured creditors money, people are going to be angry. People are going to look for somebody to sue. People are going to perhaps push for an involuntary bankruptcy. You guys don't want any of that. You want to walk away. Instead, make resolution the target. Give somebody a place to file a claim. Give them someone to yell at. Let them know there's a process and give them the assurance that you're acting independently.

• 24:55Speaker 06

  And if there's any money to distribute, you'll get your fair share.

• 24:58Tracy Alloway?

  Are you paid to be yelled at? Is that basically it?

• 25:01Speaker 06

  I am paid to be yelled at.

• 25:02Tracy Alloway?

  Okay. Well, the other thing I wanted to ask is, I mentioned at the beginning, the Lehman Brothers bankruptcy, which, you know, took more than a decade to resolve and was perhaps an extreme example, but you do often hear about bankruptcy proceedings that go on for years and years and years. And in your business, it sounds like you're trying to be pretty fast with the wind down, right? You're trying to get as much money as possible and maybe that means you have to move really, really quickly. So I'm curious how you kind of balance the need for speed with the financial and legal complexities of actually winding down a company.

• 25:44Speaker 06

  Bankruptcies that go on for a long time do so because there are material assets that have to get sold or divvied up. And you often have a huge constituency of creditors. Those creditors can form their own committee, they can hire their own counsel, their own financial advisors. There's many competing interests. You're right, Lehman would be an extreme example. That was my old boss, Brian Marcel. We spent years doing that one. In these cases, you don't have that, in my cases, because you have a single asset, or you have assets that have unknown value and likely several million dollars at most. We're not talking about a billion dollars. In most cases, they go through my process. So there's less to manage. You don't have some of the legal benefits of bankruptcy, but nor do you have the restrictions. You don't have to ask a judge for permission to do all sorts of things.

• 26:26Speaker 06

  You don't have to usually have a large staff of financial advisors managing the cash. It is true that sometimes in my processes, we continue to run the operations of the company, but on a skeleton crew and maybe for a few months at most. So they're not nearly as complicated. The outcome is not nearly as fraught for so many creditors. But I will give you one example of when we had hoped to do an ABC, but wound up doing a Chapter 11 instead. Hmm. It was a company a few years ago that was in the sports business. They had a website that accumulated or curated sportswriter. And we had one sportswriter who only wrote about the Florida Marlins, and one sportswriter that only wrote about this team in San Francisco. Sorry, I'm not much of a sports buff.

• 27:08Speaker 06

  So they had a collection of people, all of whom were contracted with this company. The company had the website and was a well-known brand. We had hoped to do an assignment for the benefit of creditors, because we had $10 million of debt, we had a buyer who wanted to pay $10 million for the assets, sounded like a great match. Unfortunately, there are special rules in bankruptcy that come in handy here that we can't take advantage of in the outside of the bankruptcy process. Specifically, in bankruptcy, if you have contractors like that, if you have executory contracts, you can drag those contracts along and put them in a sale to a buyer. And those contractors have to go along with that, along with the bankruptcy court. In an ABC, I don't have that power. So I would have had to negotiate with 100 or 200 sportswriters to get them to go along

• 27:53Speaker 06

  with the sale to the buyer, and that was not tenable. Therefore, we filed a Chapter 11, we processed the sale with the buyer through a Chapter 11 363 sale process, and the sale was completed. Now, here's the downside. We had a $10 million loan, we had a $10 million buyer. By the time the bankruptcy process was paid, bankruptcy counsel and my firm and the creditors committee and their counsel and their financial advisors and the delays and the special insurance and the funds that had to be set aside. The buyer did pay $10 million. The lender only walked away with seven.

• 28:31Tracy Alloway?

  The lawyers always win, huh?

• 28:33Speaker 06

  There are a lot of people who take a toll on the way through bankruptcy.

• 28:37Joe Weisenthal?

  That sounds like a good way to put it. Tell us about another weird esoteric asset for which you had to find a buyer.

• 28:46Speaker 06

  Well, I have a cute little story from a while back. A company called Coapt, C-O-A-P-T, was developing some new technology for cosmetic surgery. We did operate that company for a few weeks. We did run a sale process and we did find a buyer. Now, a couple of funny things about this company. First, when we go into a company like this, we have to remember, sell the assets, but we also have to wrap everything up. People get up from their desks and walk away. They leave things almost as if they were taken by aliens in some cases. So we do everything. Remember, the board put us in charge. We've got to monetize the assets, but we've got to report to the landlord. We've got to get rid of the furniture, perhaps. Back in the vaginal fluid company, I forgot to mention, there was E. coli in their laboratory.

• 29:29Joe Weisenthal?

  Lovely, lovely.

• 29:30Speaker 06

  So we very often contract with hazardous materials firms to make sure we clean those things up. That's part of the deal. Remember, we're putting a bow on these things for the directors and they expect to not have, they don't want to hear about any blowback, anything later on. So we have a full service process here. So at Coapt, though, remember, this was cosmetic surgery. They had a technology for a special device with hooks that they would drill into your skull. And then they would pull the skin up over those hooks.

• 29:57Joe Weisenthal?

  I've seen pictures of that.

• 29:58Speaker 06

  That was, that was the technology that was being developed.

• 30:00Joe Weisenthal?

  I've seen these images. It's so disturbing. I can't even believe that's real. Anyway, keep going.

• 30:04Speaker 06

  It's real and we did sell it to somebody. Somebody found value in that enough to get the bank repaid almost in that case. But the real trick of the story here was that to practice this, to experiment on this, to develop this technology, you actually need real human heads to do it, apparently.

• 30:19Joe Weisenthal?

  Lovely, lovely.

• 30:20Speaker 06

  So as we were moving out, we found four or five human heads in the freezer. So if you're a director of a company, if you're in Silicon Valley and you're deciding where to allocate your investments and you find out that this one's gone down, do you want to be the one making the decision or trying to figure out how to get rid of things like that? I have lots of stories about things that just nobody would want to deal with. Now, you might ask yourself, what do you do with human heads?

• 30:45Joe Weisenthal?

  Yep.

• 30:46Speaker 06

  You'll be surprised to learn that there are actually people that specialize in this industry. A van rolled up. These are people that look like they might have worked for the circus. This is not an industry where you attract everyday run-of-the-mill people, I suppose. So I deal with things like that. I had nuclear waste in one of my deals.

• 31:04Tracy Alloway?

  Wait, wait, what do they do with the heads?

• 31:07Speaker 06

  I wasn't going to ask that question.

• 31:09Tracy Alloway?

  Oh, okay.

• 31:10Speaker 06

  I'm sorry, I don't have more to the story, but we found somebody to take them off our hands.

• 31:14Joe Weisenthal?

  Your job was to get the human heads off and then move on with life.

• 31:16Tracy Alloway?

  Your job is done.

• 31:17Speaker 06

  I divide the world into two sections. Things that are my problem, things that are not my problem, and I find that I'm much happier that way.

• 31:23Joe Weisenthal?

  Yeah.

• 31:24Speaker 06

  But I did have nuclear waste one time. There was a nuclear medicine company, not buckets of glowing rods, but something you could hold in your hand, but still it needed to be disposed of properly. Once again, these are things that people who sign up to be a director don't want to spend their time solving.

• 31:37Tracy Alloway?

  I was about to ask, what's the weirdest thing you ever had to sell? But I'm assuming, you know, human heads would be up there, along with nuclear waste. So maybe I'll ask instead, what's the most creative buyer solution that you have come up with?

• 31:53Speaker 06

  Well, let me tell another story then, and I don't want to mention the name because it was a Fortune 500 company that was involved, but I'll tell you enough to be interesting. I got a call about a year and a half ago from an attorney who sends me business here in New York, actually. They said, my client has a disaster, they need to talk to you right away. I get on the phone with the board of directors. Oh, we just found out the CEO's been lying to us and we're out of cash and we can't make payroll and we've got to shut down right away. Okay, so we came in, took over. It turns out, the company, and again, I can't get too specific. I can tell you, it was so new economy that it just screams peak.com. Silliest concept that I'd heard in a long time, and I wish I could tell you what it was.

• 32:34Speaker 06

  Company was teed up to be sold for $50 million. And the CEO was running out of cash, but trying to extend his runway to get to the sale. So he was going to hard money lenders, almost like check cashing shops, and borrowing $250,000 at a time, again and again and again, to try to pay for payroll and extend his runway till he could get the sale done. He ran at a time. The board found out that he was doing this. They found out they didn't have any cash left over, and they shut the company down right away. Now, the buyer was still very interested in the company. The company didn't really exist anymore. All of the employees were terminated. All the systems were shut down. But they still had the technology. They still had the patents. They still had the interface. They still had the customer base. They still had the business plan.

• 33:18Speaker 06

  So the buyer said, "We'd still like to buy the technology, but we're not going to pay $50 million anymore." So we negotiated a little bit. We shopped the company around a little bit. But these guys were at the table, and they were ready to buy. They bought the company for $15 million, one five. They got essentially the same technology. Now, they had to put Humpty Dumpty back together again. But they got a great bargain, buying the company through this ABC insolvency process. Didn't have to go through bankruptcy. Didn't have to pay all those fees. It was done in a matter of weeks, not months. And they got what they were looking for. At the same time, I was able to collect enough money to repay the venture lender in full, which is rare. Now, there are unsecured creditors that weren't paid,

• 34:03Speaker 06

  and equity, of course, is completely out of the money. But the technology lives on. They hired some of the former employees. The senior lender got paid. That's a pretty good outcome in my world.

• 34:30Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume, so writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 35:12Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 35:53Speaker 07

  Most meeting note takers get the easy words right and the important ones wrong: the client's name, the acronym. Whisperflow Note Taker is built to get the hard words right. It takes notes on any meeting platform: Zoom, Google Meet, Teams, even WhatsApp calls. Keeps every meeting searchable and connects to Claude or ChatGPT, so you can ask, "What did we agree to last Tuesday?" Free to try on Mac and Windows at whisperflow.ai. That's W-I-S-P-R-flow.ai.

• 36:23Tracy Alloway?

  Running a small business takes everything you've got, but with Chase for Business, you're not alone. They bring together local support and a broad range of resources to more than 7 million. Customers with a deep understanding of your day to day needs. They provide products and guidance built to help you thrive. Right now, earn $500 when you open a new Chase Business Complete Checking account for new business checking customers with qualifying activities. Offer expires January 21, 2027. Chase Business Complete Checking has the flexible tools you need to accept payments, make deposits, and manage your finances with confidence. Learn more at chase.com/podcastbizoffer. Chase, make more of what's yours. Fees may apply to Chase Business Complete Checking accounts.

• 37:05Tracy Alloway?

  The $500 offer is available for new business checking accounts with qualifying activities through 121 2027. Eligibility and qualification requirements must be met. Additional restrictions may apply. Please speak with a business banker for more information. J.P. Morgan Chase Bank, N.A., member FDIC.

• 37:23Joe Weisenthal?

  I don't know if you have experience with this, but to my mind, it strikes me that for finding the right buyers, it seems like this is where AI could be really useful. You come upon some asset that you've never experienced before, like human heads, et cetera. And then I go in and say, what is the type of buyer that would maybe be in the market to purchase human heads? Or whatever. I'm curious if you've found that to be the case, because I imagine, you know, your Rolodex, your intuition, the research you do. But have you found that technology over time in your industry has made it easier to rapidly locate the ideal buyer of certain assets?

• 38:02Speaker 06

  A bit. Now, I'm 54. My partners are younger than I am, so they're more interested and savvy at doing that. But when I find a company who has an asset for sale, I say to the owners of the company, or the inventor of the intellectual property, or the president of the company, tell me you know the top five companies that should buy this. Your competitors, your customers, your suppliers. Give me the top four or five people that you know off the top of your head. And then I'm going to use AI to develop a larger list.

• 38:28Joe Weisenthal?

  Got it.

• 38:28Speaker 06

  I can usually get that to 50 or up to 100 of people really targeted. I've got thousands of people in my database, but I don't want to send this opportunity to everybody. I want the people in that industry to have a chance to look at it.

• 38:39Tracy Alloway?

  I just typed into perplexity the question. I have legally acquired some human heads that I need to sell. Who would be a potential buyer? And it's given me a list, including specific names such as Bone Dealers, Skulls Unlimited and The Bone Room. I don't know if that's a hallucination or not.

• 38:58Joe Weisenthal?

  Those might be hallucinations.

• 38:59Tracy Alloway?

  Yeah.

• 39:00Joe Weisenthal?

  Skulls Unlimited.

• 39:02Speaker 06

  Well, that's fantastic.

• 39:04Tracy Alloway?

  Maybe it exists. That's pretty funny.

• 39:05Speaker 06

  We do a lot of work with new economy, but old economy as well. For example, right now, we're liquidating two retail furniture stores.

• 39:11Joe Weisenthal?

  Wait, Skulls Unlimited, world leader in real and replica skulls?

• 39:16Tracy Alloway?

  Oh, wow.

• 39:17Joe Weisenthal?

  And they said, do you need a skull cleaned? So this is a, I don't know if they do human ones. It looks like it's mostly animals and stuff. Anyway, at least perplexity came up with a company that is in the skull business. Anyway, keep going.

• 39:28Speaker 06

  There are niche industries.

• 39:30Joe Weisenthal?

  Yeah.

• 39:30Speaker 06

  Yeah, so old economy as well. I've done a lot of brick and mortar work, especially down here in the Los Angeles area versus Silicon Valley. As I say, we're doing some furniture companies. At one point, I was serving as a receiver for a chain of pawn shops. Now, receivership is a little bit different than bankruptcy. It's different than the ABC we talked about. It is the case that a lender or even investors don't have faith in management and they want a babysitter. They want someone to can take control of the cash, look over management's shoulders, perhaps hire and fire management, ultimately perhaps sell the company. But this is not when you want to shut a company down or destroy something. You just want some adult supervision. So I served as a receiver for this chain of pawn shops, which was really check cashing stores.

• 40:15Speaker 06

  But they dealt in gold. They had a big vault in their headquarters where they would store some of the gold. If you go into a check cashing store and you have a gold necklace and you want to borrow $50, they'll keep your gold necklace. It got very interesting, though, when people were depositing their gold teeth into the vault. And you know, if they don't come back and repay the loan, the gold teeth stay in the vault. So we had a lot of interesting things to deal with there. And again, in a check cashing store, all cash business. You see a lot of hundred dollar bills, buckets and buckets of those things floating around. So new economy, old-

• 40:48Joe Weisenthal?

  Those are easy to value at least.

• 40:49Speaker 06

  They're easy to value, but new economy, old economy, there's a lot of management and judgment calls and what do I do about this situation in my line of work?

• 40:57Joe Weisenthal?

  We were talking earlier before we started, you did a scooter company and I've wondered about those scooter, because you know, some of the, they're still going. All the companies in that business seemed terrible. The ones that have gone public have done awful. Joe, you were so into scooters. Yes, and you were gonna say that. I was very bullish on the scooters. I still actually like them. When I'm in a city, it's not a bad way to get around medium length distances. Nonetheless, my understanding is that they have not been particularly, at least in the US, particularly profitable companies. What happens when they have like a bunch of old branded scooters laying around?

• 41:28Speaker 06

  That's an interesting question. It is an interesting business. I think it was probably over invested in. I have a story with both a good outcome and a bad outcome.

• 41:35Joe Weisenthal?

  Okay.

• 41:35Speaker 06

  So a company called Super Pedestrian, which is not one I was familiar with, but it's up there with Lime and Bird and does the exact same thing, has a very large presence in Europe. Company ran out of cash. The venture lender, not a bank, but the venture lender contacted us and said, we need somebody to figure out what to do. How do we get our money back? There's gotta be value here. We invested X gazillion dollars. We've got a lot of scooters all over the United States, all over Europe. What do you do? So we started out in Europe. Turns out there was a lot of interest from European investors. And so we had scooters in Spain, we had scooters in the UK, we had scooters in France, we had scooters in Germany, we had scooters in Switzerland. And I don't do a lot of work

• 42:18Speaker 06

  in Europe. I don't know European insolvency law. I don't know all the very different ones. I sometimes do work over there, but I rely on local specialists sometimes. But I had a lot of attention on that business. Fortunately, we were able to get counsel in the UK, who did a fantastic job of corralling all of these buyers and selling. We didn't have to take apart the companies this time. We sold the German entity and this French entity and the Spanish entity, all to a company I think from Norway, who was well funded and believed in scooters. And so we were able to flip that almost in a matter of a month or two, and that business is still going. I still see them in the news. On the other hand, we didn't have so much luck in the United States. We didn't find anybody interested enough in the local business here.

• 43:03Speaker 06

  And after a lot of searching and a lot of bill paying and a lot of landlords locking up the scooters, to my knowledge, those scooters are still sitting on the corners of Los Angeles and Washington DC and maybe at the bottom of the river.

• 43:16Joe Weisenthal?

  And unusable.

• 43:17Speaker 06

  And unusable because once the technology gets turned off, they're like bricks.

• 43:22Tracy Alloway?

  Wow.

• 43:23Speaker 06

  So good outcome in Europe. I wish them well.

• 43:25Joe Weisenthal?

  I like the scooters, but I do think that there is this element of like sort of weird public vandalism about it in some point where like a company just thinks it can deposit its products all around neighborhoods. It's like, what? Like, where did these come from? And then you see them in ditches. Anyway, Tracy, keep going.

• 43:40Tracy Alloway?

  I was gonna ask, so the scooters that are left over, would the company be liable for anything that like happened to those? Or if they, I don't know, caused an accident of some sort? If I'm cycling down the sidewalk and I accidentally run into a defunct scooter, could I sue the failed company?

• 44:00Speaker 06

  Who would you sue?

• 44:01Tracy Alloway?

  The company. But it doesn't exist anymore.

• 44:03Speaker 06

  Doesn't exist.

• 44:04Tracy Alloway?

  So I can't. So there's no liability.

• 44:05Speaker 06

  Oh, you can sue. Yes, you can sue all day long, but there's nothing to recover.

• 44:08Tracy Alloway?

  Okay.

• 44:09Speaker 06

  That's both a blessing and a curse. I remember when the scooters first came to Los Angeles a few years ago and people would just throw them in the river, throw them in the ocean. It was astounding to me that that business model could work. Somebody believed in it. There are a lot of those scooters still around Los Angeles. And again, they're not useful unless you have the technology active. So I don't know what happened. I wound up leaving that company before that was fully resolved. But that is the question. There were all sorts of government penalties. Cities imposed fines or wanted to make sure we had insurance, for example, if we were going to operate scooters. So we're a little bit hamstrung. We don't want to be operating a scooter company. I've got a small firm and I'm not staffed. I can certainly rely on some of the former employees if I can pay them. But I don't want to be operating a company like that.

• 44:48Joe Weisenthal?

  I have just one last question, but one particularly complicated and interesting liquidation or sale or failure that's in the news for the last several months had been 23andMe, which raises all kinds of interesting things about like privacy in particular. I'm curious if this is a story you followed and whether you have any insight to bear on how a situation like that will or should play out from a legal perspective.

• 45:14Speaker 06

  I followed it just a bit, just enough to know that I would not want to be making the decisions as an assignee in an ABC in that case. That's a case that belongs in bankruptcy court.

• 45:23Joe Weisenthal?

  Oh, okay.

• 45:24Speaker 06

  Because you've got a judge who will make the decisions for you. I don't want to be responsible for selling personal identifiable information without someone telling me it's okay.

• 45:35Joe Weisenthal?

  But actually, I imagine that in a lot, I mean, 23andMe is an extreme example because it's so personal. But I have to imagine personal identifiable information is actually got to be pretty common in a lot of internet startups, et cetera, where people have to submit information to set up an account, et cetera. I imagine that there are a lot of maybe not quite as tricky, but still pretty tricky questions that are raised with some of these companies.

• 45:56Speaker 06

  We do have to take care. I sold a business earlier last year in the ticketing. Actually, I've done four or five deals in the ticketing business, like a StubHub-type competitor. And there are, of course, credit card information and personal information. We don't generally sell that. And so as long as I'm careful that it doesn't get disseminated out in the public, I don't have to worry about that too much. There is sometimes the case, if I sell a company, I have to review their internet privacy policy to make sure I'm able to sell the customer list. And we do take that seriously. And we do work with counsel to make sure that we aren't going to be on the hook. Certainly don't want to make those decisions and have someone come back and say, I did something illegal.

• 46:31Tracy Alloway?

  I could sit here and listen to corporate failure stories for hours.

• 46:35Joe Weisenthal?

  Me too.

• 46:36Tracy Alloway?

  But we are running out of time, so I'm just going to ask one other question, which is, for esoteric assets, how do you go about ensuring that you have, that you're getting a reasonable price? So something like human heads, I imagine there is no secondary market for human heads. There's no, what I mean is, there's no exchange showing you a price.

• 46:56Joe Weisenthal?

  There's no benchmark.

• 46:56Tracy Alloway?

  That's right. There's no benchmark human head price. So someone could make you an offer, but I imagine without expertise in that particular market, you wouldn't necessarily know if it was a good price or not. So how do you go about making sure that you're getting the most money possible?

• 47:11Speaker 06

  I get that question a lot. And the answer is, there are no benchmarks. There's no liquid market for these type of assets that are very unique and very interesting technology in some cases. You have to ask the market. Something is worth what someone else is willing to pay for it. So it's important that I get the opportunity in front of everybody who might have an interest. That's why I said earlier, 50 to 100 people in that industry. And if I shop it to all of the people who should know what it is and how to value it, and they say, "Sorry, I'm not interested," then I can be pretty sure it's got no market value today. If I get four or five people to say, "Hey, this is interesting. Let me do some homework. Let me talk to management. Let me make an offer."

• 47:52Speaker 06

  And I get four or five offers, and the offers are all centered around $3 million? Well, I've identified the market value of that technology. If I've got three offers at $500,000 and one offer at $5 million, I'm going to grab the $5 million offer. That's the value of the technology. So I know better than anybody else what that technology is worth. In fact, I had to go to court only one time, I think, in almost 20 years, where, it was this co-op case again, I'll tell you that, where I sold the technology for, let's call it, $3 million, and I repaid the secured lender, and there was no money for anybody else. There was a plaintiff's attorney who was representing some people who had said that they were injured, not by this new technology we discussed, but something else the company

• 48:36Speaker 06

  had done, some kind of derma filler or something. And those patients had potential claims, contingent claims. They said they suffered injury. They weren't adjudicated. There were no judgments. But the plaintiff's attorney may have had a case, his patients may have suffered. Nevertheless, when we sold the technology, there was enough money to pay back the bank and nobody else. The plaintiff's attorney took us to court, and they said, "Yes, you sold the company for $3 million. But if you knew what you were doing, Johnson, you would have sold it for $11 million, and we all would have gotten paid." He says, "And I have an ivory tower economist right here at my desk, and he says this company was worth $11 million."

• 49:12Speaker 06

  And I said, really? Because here is my binder. Here are the people that I reached out to to sell this technology. Fifty, sixty, seventy of them. And here are the ten that said they were interested in looking at it. And they signed nondisclosure agreements. And after doing their diligence, four of them came to me with an offer to buy the company. And I chose the one with the highest price. So if your ivory tower economist wanted to buy this company for $11 million, I sure wish I would have met him. I would have been happy to sell it to him. But I know in the real world that something is worth what someone's willing to pay. And I asked everybody, and this is what they told me.

• 49:47Tracy Alloway?

  I'm going to ask one more question. I can't resist. But is there a lesson about corporate mortality that you wish more executives or entrepreneurs would learn and internalize? If you could give a piece of advice to executives of failing companies or companies that are managing to survive, but there's always a risk of failure, what would it be?

• 50:09Speaker 06

  I won the court case, by the way. I'll give you the same advice that everybody says. Coming to us earlier rather than later is always wise. You only have as long as your cash runway allows you to be there. So if you have six months' worth of cash instead of six weeks' worth of cash, I can do a more thorough search. I can come up with potentially other buyers, create more value. I can keep more people around for a longer period of time. I can make better preparations for the preservation of the technology. So earlier is always better. And I do a lot of contingency planning. People come to me and say, I've got an offer on the table, but I don't know if it's going to close. So how do I prepare for the downside? Or we think we're going to get that next round of venture funding, but just in case it doesn't come in, what do I do?

• 50:54Speaker 06

  So I do a lot of that kind of planning. And the more time we have, the better. On the other hand, I have gotten the phone call before. Can't make payroll on Friday. Can you help me?

• 51:04Joe Weisenthal?

  Should have called me earlier. David Johnson, I think if I were on the board of a company and you showed up and said, you know what? Tough situation, but we're going to get you the max dollar. I think I'd feel really good. I feel like you'd do a good job for us. Really appreciate you coming on Odd Lots and telling us about this niche that I knew nothing about.

• 51:22Speaker 06

  It's been fun. Thank you, Joe.

• 51:23Joe Weisenthal?

  Thank you, Tracy.

• 51:36Joe Weisenthal?

  Tracy, that was a lot of fun. I didn't know anything about any of this topic and he was the perfect guest for that.

• 51:41Tracy Alloway?

  Yes, a very niche topic for someone who specializes sometimes in very niche sales. That was so interesting. I'm trying to think what my big takeaway is here. I mean, I guess the emphasis on how comfortable a lot of Silicon Valley actually is with losing money for years and years and years, and then how suddenly that tap can be turned off.

• 52:04Joe Weisenthal?

  Well, so I thought your last question and his last answer about like sooner the better was really interesting and really important. And I just feel like if I were a founder of a company, I would never do sooner. I would hold out till the very last second, the last dollar in my account in order to make payroll. I would never call David up until I was absolutely forced out of the room, even though, you know, you get into all, what are they called, principal agent problems here, right? Because you're suddenly operating for yourself as someone who's trying to keep your equity in the money in the hopes that it can going on. Meanwhile, you're burning through creditor cash and probably,

• 52:44Joe Weisenthal?

  you know, diminishing their recovery value by the day. A lot of interesting incentive disalignment potential at the end of life there.

• 52:52Tracy Alloway?

  Yeah. And I imagine that the founders of startups that might eventually fail, they're probably optimistic by nature. And so they're probably sat there thinking they might get a hail mary at the very last minute and then it doesn't materialize and it's too late and they're scrambling to make payroll.

• 53:08Joe Weisenthal?

  I guess this is with the board, right? The board is supposed to solve some of these incentive alignment problems. And it's like, bro, come on, you gotta give up. You gotta, you gotta begin the liquidation phase, which I guess is why the founder in one of his stories was taking, you know, personal check cashing loans to keep it going, precisely because the board maybe wouldn't have let it keep going had they been aware of the true financial state of the company. Although, anyway, very interesting conversation.

• 53:34Tracy Alloway?

  Bro, you gotta give up. Signed, the chairman.

• 53:37Joe Weisenthal?

  Yeah, exactly.

• 53:38Tracy Alloway?

  All right. Shall we leave it there?

• 53:39Joe Weisenthal?

  Let's leave it there.

• 53:40Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 53:46Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Kermit Rodriguez at KermitArmand, Dashell Bennett at Dashbot, and Kail Brooks at KailBrooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 54:07Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about how companies die, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 54:58Speaker 06

  If you're a business owner, you need a card that can keep up. With the Delta SkyMiles Reserve Business American Express Card, everyday purchases transform into miles you can use towards future travel. So business as usual can lead to a well-deserved getaway. And for a limited time, card members can earn 200,000 bonus miles, the highest miles offered this year. Whether you're traveling for business or planning your next adventure, now's a great time to make every purchase go further. Apply today at www.delta.com/podcast. Offer ends November 4. Minimum spending requirements and terms apply. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you

• 55:41Speaker 06

  started with a dream to do what you love and watch it grow. What you probably didn't dream about? Keeping up with cyber threats. That's where MasterCard can help with access to tools that help identify cyber threats to better protect your business. Building your dream business? Priceless. For cybersecurity in a changing world, there's MasterCard.

• 56:01Speaker 06

  Learn more at mastercard.com/smallbusiness.

• 56:04Speaker 03

  A business gift should do more than check a box. It should reflect your brand and show someone they're appreciated, recognized, and truly seen. 4imprint offers thousands of high-quality customizable products like premium apparel, drinkware, tech, and more, making it easy to create a gift that feels meaningful and on-brand. And with 4imprint's expert support and their 360-degree guarantee, you can be 4imprint certain your order will arrive exactly as intended. Explore gifting with confidence at 4imprint.com. 4imprint: For Certain. If you listen to financial news, you know a lot of time is spent thinking about what's next: the next opportunity, the next investment, the next move.

• 56:47Speaker 03

  But sometimes what matters most is being ready for what you never saw coming. For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more. Because planning for the future isn't only about knowing what's next, it's about making sure you're ready for what you can't predict. Let Cincinnati Insurance make your bad day better. Find an independent agent at C-I-N-F-I-N dot com.