- SimpleClosure just raised a $1.5 million pre-seed funding round from Rex Salisbury and Vera Equity.
- The startup uses AI to automate the legal and procedural tasks for when a startup shuts down.
- The startup industry is predicted to be on the brink of a ‘mass extinction event.’
Dori Yona, Earny co-founder and COO, was presenting financial information at a quarterly board meeting in early 2017. The numbers for the fintech startup were not looking good, so one of the investors asked him to write a shutdown proposal.
“I went home that evening thinking I had homework to do, but I Googled and couldn’t find any meaningful information, and I became frustrated that there weren’t any resources for help,” Yona said in an interview with Insider. He went on to say that when he contacted Earny’s lawyers and accountants, both told him that they couldn’t assist with company closure and referred him to other firms.
Yona was left to delve into the world of business dissolution on his own, hoping that whatever he came up with would be acceptable.
“I sat with that experience for years,” he reflected. “It’s painful and contradictory that starting a business is so simple, but closing one is so difficult.”
Fortunately, Yona never had to implement his shutdown strategy; Earny raised a $7 million Series A later that year and was acquired in 2021. However, after speaking with other startup founders who shared his concerns and frustrations about properly closing down a failing business, he eventually founded SimpleClosure, a startup that uses artificial intelligence to automate the startup-shutdown process.
The startup announced on Wednesday that it had raised $1.5 million in pre-seed funding from Vera Equity’s Michael Vaughn and Jon Pomerantz, as well as Cambrian Ventures’ Rex Salisbury.
While he wishes the founders success, Yona claims that the vast majority of startups fail — roughly 90%, according to Failory, a newsletter platform that focuses on failed startups. When a company closes, improper winding-down procedures can add insult to injury in the form of fines, fees, and errors that can affect customers and investors.
“Founders tell me that this is the worst thing they’ve ever gone through,” Yona said. “However, shutting down incorrectly can cost a lot more in penalties and fines years later.”
This is where SimpleClosure comes into play. The startup, which operates at the intersection of fintech, legal tech, and AI, develops and implements company-specific dissolution and closure plans, as well as resolves remaining obligations with customers, state agencies, and team members.
Yona stated that the startup has experienced exponential growth since its inception in June, all through word of mouth. He declined to provide specifics, but said that in one case, a founder-customer posted about SimpleClosure on a startup-focused Slack workspace, which resulted in “a dozen or so” new companies reaching out for assistance over the next few days.
The demand for SimpleClosures’ automated shutdown assistance comes as the tech industry faces a’mass extinction event,’ which will result in the failure of many young startups. After raising massive sums of money at exorbitant valuations in 2021, many startups are nearing the end of their runways with no additional funding in sight.
According to Yona, there are 40,000 startups that raised a pre-seed, seed, or Series A two years ago and haven’t raised since, indicating that there will soon be a flood of closures requiring SimpleClosure’s services.
“Things are going to pick up speed in the coming months,” he predicted. “I don’t want businesses to fail, but if they do, we’ll be there as smoothly and simply as possible.”
As SimpleClosure expands, Yona says he’ll be focusing not just on failing startups, but on the entire ecosystem that suffers when one company fails.
“Angels, VCs, accountants, lawyers, the IRS, vendors, and consumers – this is a lot bigger than just a service to the company shutting down,” Yona explained. “We’re working hard to meet the needs and requirements of everyone in the ecosystem.”