
The 'Undertaker of Silicon Valley' Stays Busy as Startups Lay Off Thousands - stygiansonic
https://www.npr.org/2020/04/20/837527666/the-undertaker-of-silicon-valley-stays-busy-as-startups-lay-off-thousands
======
jamestimmins
I'm disappointed that this article is more about job loss in tech at large,
rather than a look at what Sherwood Partners actually does.

How does one wind down or sell off the assets of a technology company? What
percentage of tech companies even have assets in the traditional sense? I can
see the value of selling off inventory, machinery, owned facilities, and IP,
but I'm guessing that a small percentage of Silicon Valley companies have any
of these things in meaningful quantities.

Does Sherwood Partners buyout the company for cheap and then make a profit by
selling individual pieces? I'm very curious. If anyone knows some of the
answers, I'd love to hear!

~~~
charrington
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.

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

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

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

~~~
raverbashing
Thanks for letting me know

------
wrs
I am tired of this pandemic being described as a “black swan”. Scenarios with
decades of warning, billions spent on plans and agencies to react to them, and
several real-world near-misses are not black swans!

~~~
krmmalik
Nassim Nicholas Taken echoed your point in an interview recently. He said this
is actually a White swan event because it was inevitable.

~~~
karpierz
Why isn't Taleb a billionaire if he's great at predicting events that are
surprising to the market (IE, aren't priced in)?

~~~
alexmat
"Aug. 30, 2015 8:54 am ET - The recent market rout caught some star Wall
Street traders by surprise. But not a hedge-fund firm affiliated with “The
Black Swan” author Nassim Nicholas Taleb, which gained more than $1 billion on
a strategy that seeks to profit from extreme events in financial markets."

[https://www.wsj.com/articles/nassim-talebs-black-swan-
fund-m...](https://www.wsj.com/articles/nassim-talebs-black-swan-fund-
made-1-billion-this-week-1440793953)

"April 8, 2020, 11:28 AM EDT - Nassim Taleb-Advised Universa Tail Fund
Returned 3,600% in March"

[https://www.bloomberg.com/news/articles/2020-04-08/taleb-
adv...](https://www.bloomberg.com/news/articles/2020-04-08/taleb-advised-
universa-tail-risk-fund-returned-3-600-in-march)

~~~
short_sells_poo
The Universa figure is extremely misleading, and it's either some appalling
marketing job or appalling journalism.

Universa is not a traditional fund, it is a so called "premium spend"
structure. With a traditional fund, you give them money, and they try to make
some profits. At a later time, you can retrieve the profits and original
investment.

With Universa, you give them money as you would to an insurer, that is, you
cannot back that original investment back, you only get the profits they make
on it. It is literally insurance premium.

This is a very important distinction because when returns are traditionally
quoted, they are not based on the premium the fund spent buying financial
instrument, but the total capital invested. In the case of Universa, their
assumption is that you'll spend 3% of your capital with them as insurance
premium. It is therefore much more clear to quote the returns based on the
capital insured, which results in a much more modest (although still great)
120%

------
arthurjj
It's interesting (although morbid) to speculate about which types of companies
will be hit the hardest.

1 Anything focusing on AI/ML that isn't directly revenue generating such as
sales leads/conversion optimization

2 Blockchain

3 Consumer non-essentials. Think Tesla and Subscription boxes

Industries that should be ok.

1 Gov/DoD contractors

2 Consumer 'essentials' (Netflix, online commerce, food delivery

3 Biotech? (I don't have a good insight into this sector)

~~~
blackrock
I would actually think that Tesla would be less affected by this pandemic.

Why? Because their target market, are people that would be last to be laid
off. Not entirely of course, but they are the programmers that can work from
home, or the senior managers that can jump between companies if they’re laid
off.

Of course, the lockdown is affecting everyone, but Tesla has always targeted
the affluent and entrepreneurial, as their primary customers.

And let’s be realistic here, these people that can afford an $80k Tesla, are
not concerned about the price of gasoline.

~~~
tomatocracy
People on average (including the demographic you are talking about) do defer
making big capital purchases in this type of environment - it’s the “conserve
money in case the worst happens” attitude.

Of course there is a demographic who are wealthy enough that a Tesla wouldn’t
be a big capital purchase for them. But I don’t think that demographic alone
is enough to sustain them as a business.

In addition, with governments likely to be looking for cost savings in the
coming years, subsidies for electric cars aimed at or claimed by “rich people”
(thinking about some European markets here) look like an easy target
politically speaking.

What might offset that for Tesla is potential for them to grow in China but
that’s a difficult one to predict.

~~~
ghaff
In addition, while I suppose you could make a Tesla purchase and take delivery
mostly virtually, people are still deferring significant purchases for reasons
that go beyond money.

It's just one more unnecessary thing to deal with right now. Furthermore, for
many purchases, you can't totally deal with things over the phone or over the
computer. I should get a new refrigerator one of these days but it's just not
something I'm going to do until this is all over.

------
Hydraulix989
This guy just uses these puff pieces to get himself more limelight/business.
As a self-professed former pop-music manager, he certainly knows how to market
himself. I've seen articles with him as the subject before topping HN in years
past, foreboding all sorts of doom and gloom which, of course, never happened.

~~~
randycupertino
> This guy just uses these puff pieces to get himself more limelight/business.
> As a self-professed former pop-music manager, he certainly knows how to
> market himself.

I used to work with this nurse who wasn't very good at his job and most people
didn't like working with him. He hired a PR agency and suddenly was being
highlighted in all these news articles as a medical expert/color commentary
and getting listed on "Top Emergency Nurse" lists. He flew to various
environmental disasters to help out but they were mainly just ego trips to get
in the news. For example when there was an avalanche on Everest and many
people died, he took a month off work and flew there to basically screw around
"volunteering." He would come back and post the articles about himself on our
bulletin board in the breakroom.

He got let go after having a third affair with a coworker and during a messy
breakup she complained that he played porn on his computer during a work
meeting.

~~~
ApolloRising
How does a nurse afford a PR agency?

~~~
randycupertino
Our nurses start at $180k, it varies by hospital and unit.

~~~
jdhn
Start at $180k? Are these nurses who specialize in some esoteric medical
procedure, or just "run of the mill" nurses who don't specialize in anything?

~~~
Hydraulix989
Well, they're nurses in one of the highest COL, highest taxed locations in the
US (based on the "Cupertino" in his username) where median one-bedroom rent is
over $3,000 and the "poverty line" is drawn at $100k per year income.

------
cbanek
I totally hoped this would be about whoever the real person that "The Carver"
from HBO's Silicon Valley is based on: [https://silicon-
valley.fandom.com/wiki/The_Carver](https://silicon-
valley.fandom.com/wiki/The_Carver)

"The Carver" takes bankrupt startups and "moves the carcass to the cloud."
Sadly disappointed.

~~~
neilv
I think the initial "The Carver" mystique set up the comedy of introducing a
kid, but that the character might've actually been a stealth critique of a
much more common dotcom stereotype:

* Mechanically grinding out large amounts of formulaic code.

* Routinely abusing medication for performance enhancement.

* Smug, strutting, arrogant, and rude.

* Demands very high compensation.

* "Laidback".

* Secretly a massive fudge-up in their work, but there's mutual interest in not calling that out.

~~~
strken
What does "laidback" mean?

~~~
randycupertino
Stanford Duck Syndrome, perhaps?
[https://www.stanforddaily.com/2018/01/31/duck-syndrome-
and-a...](https://www.stanforddaily.com/2018/01/31/duck-syndrome-and-a-
culture-of-misery/)

------
fouc
Another article about Sherwood Partners
[https://www.theguardian.com/technology/2018/aug/21/the-
under...](https://www.theguardian.com/technology/2018/aug/21/the-undertakers-
of-silicon-valley-how-failure-became-big-business)

------
birdyrooster
"Everything has been hit. I never in my life thought I'd see a black swan,"
Pichinson said. "This is a black swan."

He must be pretty young if he can't remember 9/11.

~~~
xtracto
But 9/11 as ugly as it was, was US only. It did not have any financial
repercussions in my circles outside of USA.

This thing is impacting worldwide

~~~
birdyrooster
It had global repercussions.
[https://en.m.wikipedia.org/wiki/Economic_effects_of_the_Sept...](https://en.m.wikipedia.org/wiki/Economic_effects_of_the_September_11_attacks)

~~~
TeMPOraL
The main repercussion of 9/11 was the US collectively going crazy, starting
wars and taking away civil liberties. And western fiction getting so dark and
dystopian ever since. But outside the US, Iraq and Afghanistan, nothing
substantially changed for anyone.

9/11 is nothing compared to this pandemic. It hit swiftly and brought the
entire world to its knees. There's no hiding from repercussions for anyone,
and we're not even through the worst of them.

------
m12k
"He hopes it catches the attention of companies like Google, Amazon and
Facebook. Because while the startup world is being shaken, some tech giants
are still hiring."

Can't help but think of the giant sequoia trees, that are much more fire-
resistant than the underbrush beneath them, and whose seeds flourish in a
recently-burned forest floor.

------
ww520
Any asset fire sales? Could use another aeron chair or large monitor.

~~~
madengr
I’m looking forward to picking up some test equipment. The problem is hardware
is no longer built here. Back in the 2000 dot-com bust, there was plenty of RF
and optical equipment going for cheap. As another poster mentioned though,
these companies have no assets.

~~~
matheweis
There is a little bit. Happened to come across this auction just by accident
(A headphone manufacturer), with oscilloscopes and more:
[https://murphyauction.hibid.com/catalog/209050/human-
inc----...](https://murphyauction.hibid.com/catalog/209050/human-inc----
online-only/?ipp=10)

------
Thorentis
> "Well, we used to do two, three to four a week,"

Uh, shit. I expected the rate before COVID to be way less. No wonder COVID is
causing so much havoc. COVID has simply been the pin that popped the bubble.

4 startups a week that just this one firm are shutting down due to no revenue
or investment? And not just 4 companies closing a week, but 4 that have enough
assets that need a law firm to clean up the mess. What a disaster the start-up
economy has turned out to be.

~~~
gentleman11
The investment wouldn’t exist if the investors were not making money

~~~
TeMPOraL
Making money is how the bubble inflates; if investors weren't making money
anymore then it would be a popped bubble.

------
JackFr
> Silicon Valley has developed a reputation for building up companies at
> hyperspeed, propelled by mega-financed investment that can result in
> overnight fortunes or colossal failures.

> That zero-sum approach is now being reimagined as the coronavirus pandemic,
> which has spared no industry, rips across the technology sector.

Those are just nonsense words strung together. It doesn’t seem like author
understands what “zero sum” means.

~~~
TomMarius
Right? Sounds just like an episode of Star Trek, placed in business sector
instead of in space.

------
dredmorbius
Becoming a cyclical milestone. From 2004:

[https://www.npr.org/templates/story/story.php?storyId=166649...](https://www.npr.org/templates/story/story.php?storyId=1666494)

------
coolswan
Sherwood is not very good. But they are the only real choice you have if
you're a tech startup. There is definitely a startup to be built in just
helping businesses close properly.

~~~
kevin_thibedeau
This can be the pivot for the remnants of Atrium.

------
ipsum2
Does anyone know if they sell chairs, desks, and other equipment to
individuals? Would love to get an Aeron chair at a discount.

------
ccozan
So if I am reading correctly the article, this is just affecting 1% of the
total ( 21k from 2.2M ).

I would assume such fluctuation is normal?

------
RickJWagner
Wow. How much can half-written software be worth? I bet this guy offers some
very deep discounts.

------
rrggrr
We do this as well. Many companies do.

------
japanaway
Any FAANG workers here worried about the possibility of layoffs?

~~~
gt2
Hard enough to retain/hire talent, they will weather the storm for a while.

They regularly fire low performers though.

------
3fe9a03ccd14ca5
> *”We don't know what's happening, but we do know everything we believed in
> is changing. Everything we thought to be true may not be true."”

This is 2020 America in a nutshell.

------
55555
So what does this company actually do?

~~~
therealdrag0
[https://www.shrwood.com/Assignments-
Liquidations/Assignment-...](https://www.shrwood.com/Assignments-
Liquidations/Assignment-for-the-Benefit-of-Creditors)

