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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of The Odd Lots podcast.

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Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway.

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Speaker 2: Tracy, we always hear about big startup exits, you know,

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Speaker 2: people becoming billionaires, companies getting acquired, going ipo, et cetera.

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Speaker 2: But I don't think that's most of them. Is not

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Speaker 2: that that's just the ones we talk about. You never

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Speaker 2: hear about the scores of other ones that always fail.

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Speaker 3: No, this is called survival bias, right, so you only

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Speaker 3: ever hear about the winners because all the losers are

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Speaker 3: basically gone and can no longer communicate.

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Speaker 4: That's right.

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Speaker 2: And then the other thing is that most startups fail,

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Speaker 2: and you know vcs talk about, oh, I need one

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Speaker 2: winner for every you know whatever, one hundred and maybe

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Speaker 2: twenty losers or whatever. They're probably few in the middle.

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Speaker 2: They get two or three x returns, But that's not

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Speaker 2: what delivers the big money. But yeah, it's funny because

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Speaker 2: the losers, that's the norm, that's the expectation going in

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Speaker 2: with any series of investments. And you we really should

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Speaker 2: talk about losers more often.

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Speaker 3: Yeah, I'm into it. Let's talk about losers.

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Speaker 2: I'll say one other thing too, which is that when

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Speaker 2: we talk about a lot of startup investing, particularly in technology,

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Speaker 2: you know, you don't really think of them as having

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Speaker 2: assets or a lot of assets that can be sold. Right,

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Speaker 2: So when a sort of cardboard box manufacturer goes bankrupt

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Speaker 2: or whatever, well, there's probably some equipment that could be sold.

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Speaker 2: There's land, maybe there's a building that could be reproposed,

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Speaker 2: and intellectual property maybe. I don't know.

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Speaker 5: For some of these.

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Speaker 2: With a lot of tech companies, it seems like there's

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Speaker 2: nothing there if they don't succeed, and then there's like,

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Speaker 2: all right, you just pulled the plug and everybody moves on.

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Speaker 2: But I don't really know if that's the case, Like

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Speaker 2: I don't actually know what happens at that moment of death.

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Speaker 3: Well, from what I remember, bankruptcy ten to be pretty

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Speaker 3: complicated in various ways. And I'm thinking back this is

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Speaker 3: the ultimate extreme example. But the Lehman Brothers bankruptcy that

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Speaker 3: took fourteen years, and I remember covering it for like

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Speaker 3: years and years and years and years, and they had

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Speaker 3: all these counter parties, this big waterfall of creditors and

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Speaker 3: things like that, and I wonder how it works for

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Speaker 3: I guess smaller VC.

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Speaker 2: Companies totally, and it seems like that whole court experience,

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Speaker 2: it's probably something you might want to avoid if you can.

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Speaker 2: So anyway, we really do have the perfect guest to

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Speaker 2: talk about what happens when a company fails, what happens

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Speaker 2: when the startup fails. We are talking with David Johnson.

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Speaker 2: Here's a managing principle, Resolution Financial Advisors. They're financial advisory

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Speaker 2: firm based out of Los Angeles that focuses exclusively on

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Speaker 2: the insolvency world. So we're going to learn about all

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Speaker 2: of this. David, thank you so much for coming on

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Speaker 2: the podcast.

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Speaker 4: Thank you, Joe and Tracy.

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Speaker 5: I'm delighted to be here.

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Speaker 2: This is gonna be a lot of fun. What did

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Speaker 2: you start off, What do you do or what is

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Speaker 2: Resolute Financial Advisors do? What is your sort of typical

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Speaker 2: client and what are they looking for.

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Speaker 4: Resolution Financial Advisors is a financial advisory firm, It's true,

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Speaker 4: but we don't do a lot of the work that

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Speaker 4: other financial advisories firms do. I started my career at

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Speaker 4: alvarezm Marcel a long time ago. I think I was

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Speaker 4: employee number twenty one of what is now a ten

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Speaker 4: thousand person firm well, and I did restructuring work and

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Speaker 4: inner management work and forensic accounting work there. So I've

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Speaker 4: done a lot of that in my career. That's not

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Speaker 4: what we do anymore. We focus like a laser beam

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Speaker 4: on what I call the insolvency world, that is, alternatives

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Speaker 4: to bankruptcy and other ways to wind down companies create

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Speaker 4: value by recovering value, and sometimes we do use the

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Speaker 4: bankruptcy code. I am a bankruptcy specialist. I'm a chartered

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Speaker 4: financial analyst, and I am a certified insolvency and restructuring advisor,

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Speaker 4: And so bankruptcy is the right tool in some cases,

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Speaker 4: but for most of the people with whom I do work,

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Speaker 4: it's not the right solution.

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Speaker 3: So why don't we talk about the various solutions that

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Speaker 3: are potentially on the table, Because I think I think

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Speaker 3: a lot of people will recognize something like Chapter eleven bankruptcy.

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Speaker 3: I know, as the daughter of a commercial airline pilot,

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Speaker 3: I am certainly familiar with Chapter eleven bankruptcy, and that

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Speaker 3: allows you to keep operating, keep the business going while

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Speaker 3: you sort out your various creditors. And then there's Chapter seven,

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Speaker 3: which is an actual liquidation, and then there's I assume

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Speaker 3: more creative workouts that you are advising on. What are

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Speaker 3: the options.

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Speaker 5: That's a really good summary, Tracy. Thank you.

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Speaker 4: Yes. Chapter eleven is the restructuring. That's where you get

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Speaker 4: an automatic stay, a pause from your creditors, and a

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Speaker 4: chance to catch your breath, raise new money under favorable terms,

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Speaker 4: conduct a sale of the assets in a very very

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Speaker 4: court supervised process as its place. I've been through many

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Speaker 4: of those. They are terrific if you want to restructure

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Speaker 4: a company. Many buyers buying assets out of bankruptcy will

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Speaker 4: prefer a judge's order to do it that way. Chapter seven,

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Speaker 4: as you said, is when you throw the keys on

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Speaker 4: the table and walk away, and bankruptcy court will appoint

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Speaker 4: a independent attorney a bankruptcy trustee either called, but they

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Speaker 4: tend to be people who are not specialists at selling

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Speaker 4: esoteric assets. You don't really expect any value recovery.

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Speaker 5: In a chapter seven.

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Speaker 4: So what we do is we specialize in alternatives that

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Speaker 4: give the company a little bit more control and certainly

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Speaker 4: don't ask them to incur so many costs. For example,

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Speaker 4: to get into a chapter eleven bankruptcy, you almost certainly

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Speaker 4: need upwards of one hundred or two hundred thousand dollars

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Speaker 4: just to give a retainer to your bankruptcy council. Sometimes

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Speaker 4: that's warranted, but for the companies we'll be talking about today,

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Speaker 4: it's not a wise use of money, especially when you

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Speaker 4: don't have an expected outcome where there will be a

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Speaker 4: sale or restructuring.

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Speaker 5: You simply want to shut down.

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Speaker 2: I have one really short question, then a real question

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Speaker 2: like I've never heard of, like a chapter six bankruptcy.

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Speaker 2: Does that exist? Or what's so with all those other.

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Speaker 4: Chap There are other bankruptcies. There are some, especially for

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Speaker 4: farmers for example. Ok there are some that deal with

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Speaker 4: international companies in the United States, but Chapter eleven, Chapter seven,

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Speaker 4: and then Chapter thirteen are the ones you hear about

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Speaker 4: most of the time.

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Speaker 2: Got it Okay? That was just one of those questions

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Speaker 2: I've been dying to get off my chest. I probably

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Speaker 2: could have asked chat GPT that and got a decent answer,

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Speaker 2: But now I got that out of the way. You

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Speaker 2: mentioned esoteric asset, so I imagine that there are some

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Speaker 2: types of assets that are very easy for anyone to sell,

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Speaker 2: like a building or something. It's not very complicated office whatever,

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Speaker 2: and then what is an esoteric asset for which if

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Speaker 2: you're not a specialist and you might really not know

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Speaker 2: how to get top value for it.

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Speaker 4: So I do a lot of work in the new economy.

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Speaker 4: I've spent most of the past twenty years working with

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Speaker 4: Silicon Valley firms who have tech startups, biopharma, clean energy,

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Speaker 4: things that are very intellectual property heavy. It is sometimes

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Speaker 4: the case that in selling a company's assets, we have

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Speaker 4: machinery and equipment or inventory or something that can easily

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Speaker 4: be auctioned. But if you have a patent portfolio for

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Speaker 4: a specific technology, or if you've got a drug and development,

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Speaker 4: or you've got a special software that does something unique,

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Speaker 4: there's no benchmark for that. There's no open outcry auction

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Speaker 4: system that you can conduct for that. You've really got

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Speaker 4: to find the right buyers, narrowly tailored and conduct an

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Speaker 4: effort to monetize those assets.

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Speaker 3: Okay, I want to talk about the losers because I

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Speaker 3: am a firm believer. You know, you always read all

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Speaker 3: those business books that are like, here's this massive company

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Speaker 3: that was a huge success story. No one ever writes

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Speaker 3: about the ones that didn't make it. As you mentioned

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Speaker 3: at the beginning, Joe, So, one thing I'm wondering in

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Speaker 3: your many, many years of doing this, have you observed

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Speaker 3: like a commonality among companies that fail? Is there something

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Speaker 3: that is I guess endemic to all the failures?

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Speaker 5: I wouldn't say so.

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Speaker 4: The people that are doing the investing in those companies

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Speaker 4: have a lot more information and probably are a lot

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Speaker 4: more intelligent than I am. There was a recent book

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Speaker 4: out a year or so ago called The Venture Mindset,

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Speaker 4: and it makes the point that Silicon Valley venture firms

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Speaker 4: don't really mind losing money. They don't mind investing in

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Speaker 4: something that won't succeed. They're much more concerned about missing

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Speaker 4: the ones that do succeed. They know that eight out

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Speaker 4: of ten, perhaps more but my numbers, eight out of

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Speaker 4: ten investments will either break even or fail completely. Is

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Speaker 4: the other two or the other one out of that

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Speaker 4: ten that will carry the fund for the year. So

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Speaker 4: they cast a wide net. They do their best to

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Speaker 4: pick intelligently, of course, but they cast a wide net,

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Speaker 4: and most of them need to be shut down.

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Speaker 3: Well, what's the trigger or the catalyst from going to

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Speaker 3: losing money for years and years and years to an

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Speaker 3: actual bankruptcy and failure.

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Speaker 5: Good question.

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Speaker 4: That's when they come to me. The companies come to

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Speaker 4: me when they're perhaps pre revenue. They're almost always pre profitability.

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Speaker 4: They are relying probably on the next tranch of venture

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Speaker 4: funding to come in. If their plan says we're going

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Speaker 4: to burn a certain amount of money and the venture

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Speaker 4: partners are going to continue to fund us. Eventually the

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Speaker 4: venture fund runs out of patience, the fund is full

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Speaker 4: or old, or they simply don't believe in the idea anymore.

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Speaker 4: That's the first thing. That money doesn't come in. You

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Speaker 4: can't make payroll, you can't operate. Or perhaps they've got

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Speaker 4: a secured lender, Silicon Valley Bank. I do work with them.

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Speaker 4: They do a lot of venture investing. The bank may

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Speaker 4: run out of patients, the bank may have to write.

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Speaker 5: Down the loan.

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Speaker 4: The bank may want to recover their debt and they'll

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Speaker 4: cut off their line of credit perhaps or simply fail

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Speaker 4: to advance them any more money. Or perhaps the venture

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Speaker 4: firm has tried to sell the company, tried to sell

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Speaker 4: the technology. They've run an investment banking process and no

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Speaker 4: buyer has emerged. So what do you do when you

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Speaker 4: come to the end of the road. There's no more

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Speaker 4: cash to pay payroll, you can't continue funding your company.

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Speaker 5: What do you do?

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Speaker 4: All Right?

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Speaker 2: So they come to you, and as you said, there

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Speaker 2: are going to be these esoteric assets in at least

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Speaker 2: some cases for which a typical court appointed liquidator does

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Speaker 2: not have the specialty to get the max dollar for them. Incidentally,

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Speaker 2: I imagined are situations in which you don't have the specialty,

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Speaker 2: but you have to learn it, or you have to

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Speaker 2: focus on that. So let's say I'm doing something novel

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Speaker 2: in I don't know drug discovery or whatever it is.

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Speaker 2: You can give us the example. Some new type of

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Speaker 2: asset comes to you. Your job is to get maxtellar

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Speaker 2: you haven't really you don't know this specific thing yet,

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Speaker 2: maybe because it's novel. Give us an example of some

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Speaker 2: esoteric asset in how you saw it out to find

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Speaker 2: the buyer who is able to pay max dollar.

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Speaker 5: You know.

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Speaker 4: Paul McCartney once said that he was fortunate because in

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Speaker 4: his line of work he did not need to know

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Speaker 4: how to read music. Yeah, I deal in broad based technology,

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Speaker 4: as I said, clean tech and biopharma and software and AI,

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Speaker 4: all of which I know nothing about. I don't need

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Speaker 4: to be a specialist in the technology. I need to

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Speaker 4: know how to find the people that know it. So

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Speaker 4: I want to put those assets in front of the

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Speaker 4: right people. I run what I call a mini investment

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Speaker 4: banking process. We have to do it quickly.

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Speaker 5: We don't have much money.

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Speaker 4: The people that are at the company are going to

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Speaker 4: be gone very very soon. So I don't do it

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Speaker 4: for six months. I do it for eight weeks. I

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Speaker 4: sum up the technology, I put it into a little package,

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Speaker 4: and I put it in front of the fifty to

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Speaker 4: one hundred companies in that very narrowly targeted space. Whatever

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Speaker 4: that space happens to be, Okay, I want to make

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Speaker 4: sure that everybody in that respective industry has a chance

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Speaker 4: to look at it and opine. I don't have to

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Speaker 4: learn it. I have to know enough to talk about

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Speaker 4: it a little bit. But I'm there to bring people

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Speaker 4: to the table. I want to put them in front

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Speaker 4: of the people who invented the technology, the people who

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Speaker 4: can tell everybody why it's the greatest thing, and let

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Speaker 4: the market tell me what it is.

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Speaker 2: So give us an example of ad technology, or give

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Speaker 2: us a story about where you had to do that.

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Speaker 4: Long time ago, I worked on a company called Proteogenics,

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Speaker 4: it was more than ten years ago, so I feel

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Speaker 4: comfortable releasing the name. They were doing research in neonatal disease.

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Speaker 4: They had collected, oh, I don't know how many pints

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Speaker 4: of vaginal fluid, all in deep freeze in the basement

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Speaker 4: of their laboratory. Didn't have the ability.

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Speaker 3: They're a secondary market for vassional fluid.

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Speaker 4: Well, that was my job to find out it's exactly

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Speaker 4: right now. There were patents, and there were research, and

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Speaker 4: there were medical tests, and there were patient records, all

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Speaker 4: analyzing for disease, for whatever disease they were looking for.

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Speaker 4: We ultimately did sell that technology to a large I

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Speaker 4: think Boston based pharmaceutical company.

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Speaker 5: I don't know.

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Speaker 4: Whatever happened to it from there, but I had to

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Speaker 4: manage that process. The company closed overnight, the facility was

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Speaker 4: locked with the vaginal fluid in the deep freezers, and

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Speaker 4: I had a landlord it wasn't very happy about that.

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Speaker 4: So my job was to two things. My job is

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Speaker 4: always two things. Number One, monetize the assets, do it

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Speaker 4: quickly before the ice cube melts.

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Speaker 5: I had to find a buyer.

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Speaker 2: Very literal here a melting ice cube, and this is

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Speaker 2: sometimes a cliche in the world but you're talking about

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Speaker 2: literal melting refrigeration.

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Speaker 4: It got a little dicey because the landlord locked me out.

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Speaker 4: The landlord'sn't supposed to be able to do that in California,

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Speaker 4: but I wound up having to negotiate something and keeping

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Speaker 4: the lights on until such time as I could run

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Speaker 4: the sale process, get people interested, back up the technical data,

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Speaker 4: and move those freezers out on refrigerated trucks, all while

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Speaker 4: the clock was ticking, while I had a very limited

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Speaker 4: budget to pay the rent and to keep the electricity on. Now,

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Speaker 4: that was a good outcome again because we sold the technology.

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Speaker 4: I'm thinking, if I remember correctly, maybe two million dollars,

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Speaker 4: which is a great outcome in my business. That was

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Speaker 4: probably enough to repay the secured lender. There was often

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Speaker 4: a bank that's first in line to get paid, and

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Speaker 4: then there are unsecured creditors who come second, trade creditors, landlords,

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Speaker 4: things like that. So we're going to try to get

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Speaker 4: as much. But now there was probably fifty million dollars

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Speaker 4: invested in that company from various funds, lenders, equity investors,

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Speaker 4: and so we're not going to get those guys repaid.

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Speaker 4: But we want to source as much value as we can.

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Speaker 4: Somebody will say to me, how much is the technology worth?

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Speaker 4: My answer is always I have no idea, But I'm

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Speaker 4: going to find out. How Am I going to find out?

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Speaker 4: As I said before, We're going to talk to everybody

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Speaker 4: in the industry, everybody who knows this technology, everybody who

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Speaker 4: is in a position to say this might be useful

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Speaker 4: to me, and will let them speak. Sometimes the answer

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Speaker 4: is no one.

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Speaker 3: Who is the buyer for the fluid?

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Speaker 4: And the Fridges don't recall the name of the buyer,

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Speaker 4: but it was I remember a large Boston based biotech

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Speaker 4: company with a well known name. I just remember that

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Speaker 4: as the buyer. And then the day. The other thing

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Speaker 4: I remember was the day we moved out. We had

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Speaker 4: the technology backed up on an external hard drive. Again,

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Speaker 4: they had paid two million dollars for it, and when

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Speaker 4: they went to leave, they couldn't find it. We found

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Speaker 4: it in the trash can.

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Speaker 2: Oh my god.

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Speaker 4: So things are a little bit wild West, a little

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Speaker 4: bit touch and go, but that's the kind of.

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Speaker 5: Work we do.

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Speaker 3: I'm just going to get very voyeuristic about corporate failures,

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Speaker 3: I guess, and just ask for a bunch of specific examples.

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Speaker 3: But have you ever gone into a company and just

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Speaker 3: you know, shook your head in disgust or surprise at

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Speaker 3: what's been going on? Like how could this company actually

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Speaker 3: happened running in this way for I don't know however long.

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Speaker 4: It is often surprising to me that the destruction of

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Speaker 4: value is so great. If you told me a fifty

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Speaker 4: to one hundred million dollars was invested in X and

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Speaker 4: there's nothing to show for it, or maybe the technology

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Speaker 4: has a buyer for a million or two million dollars,

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Speaker 4: where does the money go? That's a very good question.

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Speaker 4: And I've been doing this a long time, and I

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Speaker 4: don't really have a good answer for that.

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Speaker 2: You Know, something I'm curious about is if when a

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Speaker 2: company is on its deathbed, if I were a founder,

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Speaker 2: or if I were a board member or whatever, like

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Speaker 2: I would be pretty checked out. Like I'm kind of

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Speaker 2: not surprised in some instances that, like, you know what,

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Speaker 2: some important bit of technology it's on a hard drive,

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Speaker 2: et cetera, gets thrown in the trash, or no one

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Speaker 2: really cares about keeping the refrigeration bill going. But you know,

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Speaker 2: if you're whatever involved in this, like you might be

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Speaker 2: thinking about your next thing, this is dead. This is

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Speaker 2: a waste of time. I see no future upside talk

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Speaker 2: about like those late stages and who actually is incentivized

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Speaker 2: to till the very end, till the keys are handed over,

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Speaker 2: till the sale is made, Like, how do you get

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Speaker 2: them focused on extracting that less value when most people,

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Speaker 2: I would imagine want to move on at that point.

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Speaker 4: That's an excellent segue, Joe, So how do we get hired?

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Speaker 4: Why do people bring us in? It's exactly right. If

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Speaker 4: I'm on the board of a company, I'm probably residing

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Speaker 4: at a venture capital firm or a private equity firm,

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Speaker 4: or maybe.

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Speaker 5: A venture lender.

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Speaker 4: And once I see that there's not going to be

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Speaker 4: any recovery or minor recovery, why.

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Speaker 2: Would you want to spend another second on it or

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Speaker 2: another dollar?

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Speaker 4: Yeah, that's exactly right. So I'd rather go focus on

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Speaker 4: my things with upside, So they want to as quickly

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Speaker 4: as possible hand it off to me. So under the

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Speaker 4: rubric of my business, we very often, not always, but

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Speaker 4: very often engage in a formal kind of insolvency process

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Speaker 4: known as an Assignment for the Benefit of Creditors or

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Speaker 4: ABC for short. It's a form of insolvency. That's well

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Speaker 4: recognized in many states. It's not under federal bankruptcy law,

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Speaker 4: it's under state law. In California. State law on Delaware

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Speaker 4: has a long storied history. It's nothing new, goes back

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Speaker 4: to English com and law. Under an ABC, a company

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Speaker 4: says we have assets, we have debts. We can't continue

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Speaker 4: to operate.

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Speaker 5: The business, so we're going.

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Speaker 4: To take all of our assets and assign them to

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Speaker 4: a third party trustee. That's me and I have Again,

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Speaker 4: I have two jobs. One, turn those assets into cash,

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Speaker 4: try to collect as much money and put it in

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Speaker 4: a trust account for creditors. And my second function is

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Speaker 4: to do the administrative wind down of the company. Get

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Speaker 4: the final tax returns prepared, store the books and records,

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Speaker 4: make sure the w twos go out to the employees

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Speaker 4: at the end of the year, wind down the four

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Speaker 4: oh one k under Ristle law, properly all the administrative

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Speaker 4: things that board of members really do care about and

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Speaker 4: should care about, but don't have the expertise or the

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Speaker 4: interest to do themselves. Therefore, when the transaction happens, when

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Speaker 4: the company signs over these assets to me, the board

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Speaker 4: generally resigns that same day. In a Delaware dissolution if

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Speaker 4: the company is just going to file PaperWorks to close

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Speaker 4: the company without a formal insolvency process, Delaware requires at

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Speaker 4: least one director stay on the hook as a director

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Speaker 4: for three years, which means you've got to keep insurance

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Speaker 4: in place. You've got to continue to bother the directors

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Speaker 4: with items he may be at risk. In this case,

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Speaker 4: they don't have to. They put all of the work

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Speaker 4: on the shoulders of me and my partners, and we

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Speaker 4: have a legal fiduciary duty to do the things we've

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Speaker 4: talked about to monetize the assets and wind it down,

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Speaker 4: and very often we never talk to those directors.

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Speaker 3: Again, I'm thinking how to frame this question, but does

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Speaker 3: anyone ever try to influence your decisions as a trustee

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Speaker 3: who is supposed to be independent following the law. Does

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Speaker 3: anyone ever try to kick themselves up the waterfall or

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Speaker 3: something like that.

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Speaker 4: That's a good question. I've had very few experiences like that.

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Speaker 4: We handle the insolvency process very strictly. We adhere to

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Speaker 4: a lot of the same rules that occur in Chapter

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Speaker 4: eleven in federal bankruptcy. The veneer of having the formal

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Speaker 4: ABC insolvency process is itself powerful. We tell our companies.

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Speaker 4: If you just walk away and you owe them bank

398
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Speaker 4: money and you owe unsecret creditors money, people are going

399
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Speaker 4: to be angry. People are going to look for somebody

400
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Speaker 4: to sue. People are going to perhaps push for an

401
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Speaker 4: involuntary bankruptcy. You guys, don't want any of that. You

402
00:19:09,280 --> 00:19:13,680
Speaker 4: want to walk away. Instead, make resolution the target. Give

403
00:19:13,760 --> 00:19:16,720
Speaker 4: somebody a place to file acclaim, give them someone to

404
00:19:16,800 --> 00:19:19,800
Speaker 4: yell at, let them know there's a process, and give

405
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Speaker 4: them the assurance that you're acting independently and if there's

406
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Speaker 4: any money to distribute, you'll get your fair share.

407
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Speaker 3: Are you paid to be yelled at?

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Speaker 5: Is that?

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Speaker 1: Basically it?

410
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Speaker 4: I am paid to be yell Okay?

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Speaker 3: Well, the other thing I wanted to ask is I

412
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Speaker 3: mentioned at the beginning the Lehman Brothers bankruptcy, which took

413
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Speaker 3: more than a decade to resolve and was perhaps an

414
00:19:40,080 --> 00:19:44,080
Speaker 3: extreme example. But you do often hear about bankruptcy proceedings

415
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Speaker 3: that go on for years and years and years. And

416
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Speaker 3: in your business, it sounds like you're trying to be

417
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Speaker 3: pretty fast with the wind down, right, You're trying to

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Speaker 3: get as much money as possible, and maybe that means

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Speaker 3: you have to move really, really quickly. So I'm curious

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Speaker 3: how you kind of balance the need for speed with

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Speaker 3: the financial and legal complexities of actually winding down a company.

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Speaker 4: Bankruptcies have gone for a long time do so because

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00:20:13,000 --> 00:20:15,399
Speaker 4: there are material assets that have to get sold or

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Speaker 4: divvied up, and you often have a huge constituency of creditors.

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Speaker 4: Those creditors can form their own committee, they can hire

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Speaker 4: their own council, their own financial advisors. There's many competing interests.

427
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Speaker 4: You're right, Eleman would be an extreme example. That was

428
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Speaker 4: my old boss, Brian Marcel. We spent years doing that one.

429
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Speaker 4: In these cases, you don't have that in my cases

430
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Speaker 4: because you have a single asset, or you have assets

431
00:20:36,160 --> 00:20:39,600
Speaker 4: that have unknown value and likely several million dollars at most,

432
00:20:39,760 --> 00:20:42,040
Speaker 4: we're not talking about a billion dollars. In most cases,

433
00:20:42,040 --> 00:20:45,320
Speaker 4: they go through my process, so there's less to manage.

434
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Speaker 4: You don't have some of the legal benefits of bankruptcy,

435
00:20:48,480 --> 00:20:50,040
Speaker 4: but nor do you have the restrictions. You don't have

436
00:20:50,040 --> 00:20:52,359
Speaker 4: to ask a judge for permission to do all sorts

437
00:20:52,440 --> 00:20:55,119
Speaker 4: of things. You don't have to usually have a large

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00:20:55,200 --> 00:20:58,400
Speaker 4: staff of financial advisors, managing the cash. It is true

439
00:20:58,440 --> 00:21:00,600
Speaker 4: that sometimes in my processes we can you to run

440
00:21:00,640 --> 00:21:03,200
Speaker 4: the operations of the company, but on a skeleton crew

441
00:21:03,200 --> 00:21:05,280
Speaker 4: and maybe for a few months at most, so they're

442
00:21:05,280 --> 00:21:08,560
Speaker 4: not nearly as complicated. The outcome is not nearly as

443
00:21:08,960 --> 00:21:11,159
Speaker 4: fraud for so many creditors. But I will give you

444
00:21:11,200 --> 00:21:13,840
Speaker 4: one example of when we had hoped to do an

445
00:21:13,840 --> 00:21:18,040
Speaker 4: ABC but wound up doing a Chapter eleven instead. It

446
00:21:18,160 --> 00:21:21,320
Speaker 4: was a company a few years ago that was in

447
00:21:21,359 --> 00:21:26,119
Speaker 4: the sports business. They had a website that accumulated or

448
00:21:26,200 --> 00:21:28,880
Speaker 4: curated sports writering. We had one sports writer who only

449
00:21:28,880 --> 00:21:31,080
Speaker 4: wrote about the Florida Marlins, and one sports writer that

450
00:21:31,160 --> 00:21:33,119
Speaker 4: only wrote about this team in San Francisco.

451
00:21:33,280 --> 00:21:34,920
Speaker 5: Sorry, I'm not much of a sports buff.

452
00:21:35,320 --> 00:21:37,040
Speaker 4: So they had a collection of people, all of whom

453
00:21:37,080 --> 00:21:39,440
Speaker 4: were contracted with this company, and the company had the

454
00:21:39,480 --> 00:21:42,600
Speaker 4: website and was a well known brand. We had hoped

455
00:21:42,600 --> 00:21:44,760
Speaker 4: to do an assignment for the benefit of creditors because

456
00:21:44,800 --> 00:21:47,159
Speaker 4: we had ten million dollars of debt. We had a

457
00:21:47,160 --> 00:21:49,480
Speaker 4: buyer who wanted to pay ten million dollars for the assets.

458
00:21:49,640 --> 00:21:53,520
Speaker 4: Sounded like a great match. Unfortunately, there are special rules

459
00:21:53,520 --> 00:21:56,000
Speaker 4: in bankruptcy that come in handy here that we can't

460
00:21:56,000 --> 00:21:58,720
Speaker 4: take advantage of in the outside of the bankruptcy process.

461
00:21:59,000 --> 00:22:02,880
Speaker 4: Specifically in bankruptcy if you have contractors like that, if

462
00:22:02,880 --> 00:22:06,240
Speaker 4: you have executory contracts, you can drag those contracts along

463
00:22:06,359 --> 00:22:08,920
Speaker 4: and put them in a sale to a buyer, and

464
00:22:09,160 --> 00:22:11,199
Speaker 4: those contractors have to go along with that, along with

465
00:22:11,200 --> 00:22:14,639
Speaker 4: the bankruptcy court. In an ABC, I don't have that power.

466
00:22:14,920 --> 00:22:16,960
Speaker 4: So I would have had to negotiate with one hundred

467
00:22:17,040 --> 00:22:19,520
Speaker 4: or two hundred sports writers to get them to go

468
00:22:19,600 --> 00:22:21,320
Speaker 4: along with the sale to the buyer, and that was

469
00:22:21,359 --> 00:22:25,840
Speaker 4: not tenable. Therefore, we filed a Chapter eleven. We processed

470
00:22:25,840 --> 00:22:27,880
Speaker 4: the sale with the buyer through a Chapter eleven three

471
00:22:27,840 --> 00:22:31,080
Speaker 4: to sixty three sale process, and the sale was completed.

472
00:22:31,320 --> 00:22:34,800
Speaker 4: Now here's the downside. We had a ten million dollar

473
00:22:34,840 --> 00:22:38,439
Speaker 4: long We had a ten million dollar buyer. By the

474
00:22:38,480 --> 00:22:42,600
Speaker 4: time the bankruptcy process was paid, bankruptcy Council and my

475
00:22:42,760 --> 00:22:46,360
Speaker 4: firm and the creditors committee and their counsel and their

476
00:22:46,359 --> 00:22:50,280
Speaker 4: financial advisors, and the delays and the special insurance and

477
00:22:50,280 --> 00:22:53,080
Speaker 4: the funds that had to be set aside, the buyer

478
00:22:53,119 --> 00:22:56,240
Speaker 4: did pay ten million dollars. The lender only walked away with.

479
00:22:56,200 --> 00:22:58,880
Speaker 3: Seven The lawyers always win.

480
00:22:59,040 --> 00:23:02,400
Speaker 4: Huh, there are a lot of people who take a

481
00:23:02,480 --> 00:23:03,920
Speaker 4: toll on the way through bankruptcy.

482
00:23:04,040 --> 00:23:05,880
Speaker 2: Yes, that sounds like a good way to put it.

483
00:23:06,040 --> 00:23:10,320
Speaker 2: Tell us about another weird esoteric asset for which you

484
00:23:10,440 --> 00:23:12,399
Speaker 2: had to find a buyer.

485
00:23:13,440 --> 00:23:15,280
Speaker 4: I have a cute little story from a while back,

486
00:23:15,320 --> 00:23:19,879
Speaker 4: company called Coapt. Coapt was developing some new technology for

487
00:23:20,359 --> 00:23:24,679
Speaker 4: cosmetic surgery. We did operate that company for a few weeks.

488
00:23:25,160 --> 00:23:27,160
Speaker 4: We did run a sale process, and we did find

489
00:23:27,160 --> 00:23:31,240
Speaker 4: a buyer. Now, a couple funny things about this company. First,

490
00:23:32,160 --> 00:23:34,960
Speaker 4: when we go into a company like this, we have

491
00:23:35,000 --> 00:23:37,120
Speaker 4: to remember sell the assets, but we also have to

492
00:23:37,400 --> 00:23:39,720
Speaker 4: wrap everything up. People get up from their desks and

493
00:23:39,720 --> 00:23:43,040
Speaker 4: walk away. They leave things almost as if they were

494
00:23:43,119 --> 00:23:46,359
Speaker 4: taken by aliens in some cases. So we do everything. Remember,

495
00:23:46,359 --> 00:23:48,119
Speaker 4: the board put us in charge. We've got to monetize

496
00:23:48,160 --> 00:23:49,880
Speaker 4: the assets, but we've got to report to the landlord.

497
00:23:49,880 --> 00:23:52,600
Speaker 4: We've got to get rid of the furniture. Perhaps back

498
00:23:52,600 --> 00:23:54,720
Speaker 4: in the Vaginal Fluid company, I forgot to mention there

499
00:23:54,760 --> 00:23:56,320
Speaker 4: was E. Coli in their laboratory.

500
00:23:56,400 --> 00:23:57,240
Speaker 2: Lovely, Lovely.

501
00:23:57,600 --> 00:24:00,480
Speaker 4: So we very often contract with hazardous materials firms to

502
00:24:00,480 --> 00:24:02,399
Speaker 4: make sure we clean those things up. That's part of

503
00:24:02,400 --> 00:24:04,520
Speaker 4: the deal. Remember we're putting a bow on these things

504
00:24:04,520 --> 00:24:07,240
Speaker 4: for the directors and they expect to not have They

505
00:24:07,240 --> 00:24:10,119
Speaker 4: don't want to hear about any blowback anything later on.

506
00:24:10,160 --> 00:24:13,520
Speaker 4: So we have a full service process here, so a

507
00:24:13,640 --> 00:24:16,199
Speaker 4: coapp though. Remember this was cosmetic surgery. They had a

508
00:24:16,240 --> 00:24:19,640
Speaker 4: technology for a special device with hooks that they would

509
00:24:19,680 --> 00:24:22,359
Speaker 4: drill into your skull and then they would pull the

510
00:24:22,400 --> 00:24:23,639
Speaker 4: skin up over those hooks.

511
00:24:23,760 --> 00:24:24,720
Speaker 5: I've seen pictures of that.

512
00:24:25,600 --> 00:24:27,280
Speaker 4: That was the technology that was being developed.

513
00:24:27,320 --> 00:24:29,920
Speaker 2: I've seen these images so disturbing. I can't even believe

514
00:24:29,920 --> 00:24:30,239
Speaker 2: that's real.

515
00:24:30,280 --> 00:24:32,119
Speaker 4: Anyway, keep going, it's real, and we did sell it

516
00:24:32,160 --> 00:24:34,280
Speaker 4: to somebody. Somebody found value in that enough to get

517
00:24:34,280 --> 00:24:37,160
Speaker 4: the bank repaid almost in that case. But the real

518
00:24:37,440 --> 00:24:40,840
Speaker 4: trick to the story here was that to practice this,

519
00:24:40,960 --> 00:24:43,560
Speaker 4: to experiment on this, to develop this technology, you actually

520
00:24:43,560 --> 00:24:44,760
Speaker 4: need real human.

521
00:24:44,480 --> 00:24:45,159
Speaker 5: Heads to do it.

522
00:24:45,160 --> 00:24:48,440
Speaker 4: Apparently, so as we were moving out, we found four

523
00:24:48,520 --> 00:24:52,040
Speaker 4: or five human heads in the freezer. So if you're

524
00:24:52,040 --> 00:24:54,200
Speaker 4: a director of a company, if you're in Silicon Valley

525
00:24:54,200 --> 00:24:56,720
Speaker 4: and you're deciding where to allocate your investments and you

526
00:24:56,760 --> 00:24:59,320
Speaker 4: find out that this one's gone down, do you want

527
00:24:59,320 --> 00:25:01,240
Speaker 4: to be the one making the decision or trying to

528
00:25:01,240 --> 00:25:03,760
Speaker 4: figure out how to get rid of things like that.

529
00:25:04,480 --> 00:25:07,280
Speaker 4: I have lots of stories about things that just nobody

530
00:25:07,280 --> 00:25:10,560
Speaker 4: would want to deal with. Now you might ask yourself,

531
00:25:10,560 --> 00:25:13,040
Speaker 4: what do you do with human heads? Yep, you'll be

532
00:25:13,040 --> 00:25:15,280
Speaker 4: surprised to learn that there are actually people that specialize

533
00:25:15,280 --> 00:25:19,399
Speaker 4: in this industry. A van rolled up. These are people

534
00:25:19,440 --> 00:25:21,560
Speaker 4: that look like they might have worked for the circus.

535
00:25:22,600 --> 00:25:26,360
Speaker 4: This is not an industry where you attract every day,

536
00:25:26,440 --> 00:25:27,200
Speaker 4: run of the mill people.

537
00:25:27,280 --> 00:25:29,479
Speaker 5: I suppose, so I deal with things like that.

538
00:25:29,520 --> 00:25:30,760
Speaker 4: I had nuclear waste in one.

539
00:25:30,720 --> 00:25:33,320
Speaker 3: Of my Wait, wait, what do they do with the heads?

540
00:25:34,240 --> 00:25:35,480
Speaker 5: I wasn't going to ask that question.

541
00:25:35,600 --> 00:25:38,000
Speaker 4: Okay, I'm sorry. I don't have more to the story,

542
00:25:38,080 --> 00:25:42,040
Speaker 4: but we found somebody to take them off from hours on.

543
00:25:42,359 --> 00:25:43,160
Speaker 3: Your job is done.

544
00:25:43,240 --> 00:25:45,760
Speaker 4: I divide the world into two sections, things that are

545
00:25:45,760 --> 00:25:48,199
Speaker 4: my problem, things that are not my problem, and I

546
00:25:48,200 --> 00:25:49,639
Speaker 4: find that I'm much happier that way.

547
00:25:50,440 --> 00:25:50,919
Speaker 5: But I did have.

548
00:25:50,960 --> 00:25:53,480
Speaker 4: Nuclear waste one time. There was a nuclear medicine company.

549
00:25:53,800 --> 00:25:55,879
Speaker 4: Not buckets of glowing rods, but you know, something you

550
00:25:55,920 --> 00:25:57,480
Speaker 4: could hold in your hand, but still it needed to

551
00:25:57,480 --> 00:26:01,160
Speaker 4: be disposed of properly. Once again, these things that people

552
00:26:01,160 --> 00:26:03,240
Speaker 4: who signed up to be a director don't want to

553
00:26:03,280 --> 00:26:04,280
Speaker 4: spend their time solving.

554
00:26:05,080 --> 00:26:07,280
Speaker 3: I was about to ask, what's the weirdest thing you

555
00:26:07,359 --> 00:26:10,160
Speaker 3: ever had to sell? But I'm assuming you know human

556
00:26:10,240 --> 00:26:13,479
Speaker 3: heads would be up there along with nuclear waste. So

557
00:26:13,840 --> 00:26:18,120
Speaker 3: maybe I'll ask instead, what's the most creative buyer solution

558
00:26:18,320 --> 00:26:19,320
Speaker 3: that you have come up with?

559
00:26:21,520 --> 00:26:23,520
Speaker 4: Well, let me tell another story then, And I don't

560
00:26:23,520 --> 00:26:25,359
Speaker 4: want to mention the name because was Fortune five hundred

561
00:26:25,400 --> 00:26:27,040
Speaker 4: company that was involved, but I'll tell you enough to

562
00:26:27,080 --> 00:26:29,000
Speaker 4: be interesting. I got a call about a year and

563
00:26:29,040 --> 00:26:31,240
Speaker 4: a half ago from an attorney who sends me a

564
00:26:31,320 --> 00:26:34,760
Speaker 4: business here in New York. Actually, they said, my client

565
00:26:35,000 --> 00:26:36,720
Speaker 4: has a disaster. They need to talk to you right away.

566
00:26:36,960 --> 00:26:39,320
Speaker 4: I get on the phone with the bord of directors. Ah,

567
00:26:39,359 --> 00:26:41,000
Speaker 4: we just found out the CEO has been lying to

568
00:26:41,080 --> 00:26:42,639
Speaker 4: us and we're out of cash and we can't make

569
00:26:42,640 --> 00:26:45,600
Speaker 4: perrol and we've got to shut down right away. Okay,

570
00:26:45,760 --> 00:26:50,040
Speaker 4: So we came in took over. It turns out the company,

571
00:26:51,000 --> 00:26:53,239
Speaker 4: and again I can't get too specific, I can tell

572
00:26:53,280 --> 00:26:55,640
Speaker 4: you it was so new economy that it just screamspeak

573
00:26:55,720 --> 00:26:59,119
Speaker 4: dot com silliest concept that I had heard in a

574
00:26:59,119 --> 00:27:00,199
Speaker 4: long time, and I wish I could tell you.

575
00:27:00,240 --> 00:27:00,600
Speaker 5: What it was.

576
00:27:01,119 --> 00:27:03,800
Speaker 4: The company was teed up to be sold for fifty

577
00:27:03,880 --> 00:27:07,720
Speaker 4: million dollars, and the CEO was running out of cash

578
00:27:07,800 --> 00:27:09,240
Speaker 4: but trying to extend his runway to.

579
00:27:09,200 --> 00:27:10,000
Speaker 5: Get to the sale.

580
00:27:10,280 --> 00:27:13,000
Speaker 4: So he was going to hard money lenders, almost like

581
00:27:13,080 --> 00:27:15,760
Speaker 4: check cashing shops, and borrowing two hundred and fifty thousand

582
00:27:15,760 --> 00:27:18,840
Speaker 4: dollars at a time, again and again and again to

583
00:27:18,920 --> 00:27:21,239
Speaker 4: try to pay for payroll and extend his run way

584
00:27:21,320 --> 00:27:22,000
Speaker 4: till he could get.

585
00:27:21,840 --> 00:27:22,520
Speaker 5: The sale done.

586
00:27:23,000 --> 00:27:24,960
Speaker 4: He ran out of time. The board found out that

587
00:27:24,960 --> 00:27:26,960
Speaker 4: he was doing this, they found out they didn't have

588
00:27:27,000 --> 00:27:28,720
Speaker 4: any cash left over, and they shut the company down

589
00:27:28,800 --> 00:27:32,720
Speaker 4: right away. Now the buyer was still very interested in

590
00:27:32,760 --> 00:27:36,000
Speaker 4: the company. If the company didn't really exist anymore. All

591
00:27:36,040 --> 00:27:38,760
Speaker 4: of the employees were terminated, all the systems were shut down,

592
00:27:38,800 --> 00:27:41,480
Speaker 4: but they still have the technology, They still had the patents,

593
00:27:41,480 --> 00:27:43,680
Speaker 4: they still had the interface, they still had the customer base,

594
00:27:43,680 --> 00:27:46,400
Speaker 4: They stild the business plan. So the buyer said, we'd

595
00:27:46,400 --> 00:27:49,000
Speaker 4: still like to buy the technology, but we're not going

596
00:27:49,040 --> 00:27:52,639
Speaker 4: to pay fifty million dollars anymore. So we negotiated a

597
00:27:52,680 --> 00:27:54,560
Speaker 4: little bit. We shopped the company around a little bit,

598
00:27:54,560 --> 00:27:55,919
Speaker 4: but these guys were at the table and they were

599
00:27:55,960 --> 00:28:00,520
Speaker 4: ready to buy. They bought the company for fifteen million

600
00:28:00,520 --> 00:28:04,080
Speaker 4: dollars one five. They got essentially the same technology. Now

601
00:28:04,119 --> 00:28:06,199
Speaker 4: they had to put Humpty Dumpty back together again, but

602
00:28:06,240 --> 00:28:10,080
Speaker 4: they got a great bargain buying the company through this

603
00:28:10,200 --> 00:28:13,440
Speaker 4: ABC insolvency process. Didn't have to go through bankruptcy, didn't

604
00:28:13,440 --> 00:28:15,159
Speaker 4: have to pay all those fees. It was done in

605
00:28:15,200 --> 00:28:18,680
Speaker 4: a matter of weeks, not months, and they got what

606
00:28:18,720 --> 00:28:21,240
Speaker 4: they were looking for. At the same time, I was

607
00:28:21,280 --> 00:28:24,160
Speaker 4: able to collect enough money to repay the venture lender

608
00:28:24,240 --> 00:28:26,960
Speaker 4: in full, which is rare.

609
00:28:27,520 --> 00:28:29,000
Speaker 5: Now there are unsecured.

610
00:28:28,520 --> 00:28:31,200
Speaker 4: Creditors that weren't paid, and equity, of course is completely

611
00:28:31,200 --> 00:28:34,199
Speaker 4: out of the money. But the technology lives on. They

612
00:28:34,240 --> 00:28:37,760
Speaker 4: hired some of the former employees, the senior lender got paid.

613
00:28:38,400 --> 00:28:39,800
Speaker 4: That's a pretty good outcome in my world.

614
00:28:55,960 --> 00:28:59,680
Speaker 2: I don't know if you have experience with this, but

615
00:29:00,560 --> 00:29:03,800
Speaker 2: it strikes me that for finding the right buyers, it

616
00:29:03,840 --> 00:29:06,160
Speaker 2: seems like this is where AI could be really useful.

617
00:29:06,200 --> 00:29:10,280
Speaker 2: You come upon some asset that you've never experienced before,

618
00:29:10,760 --> 00:29:13,200
Speaker 2: like human heads, et cetera, and then I go in

619
00:29:13,240 --> 00:29:15,920
Speaker 2: and say, what is the type of buyer that would

620
00:29:16,040 --> 00:29:19,160
Speaker 2: maybe be in the market to purchase human heads or whatever.

621
00:29:19,360 --> 00:29:21,360
Speaker 2: I'm curious if you've found that to be the case,

622
00:29:21,400 --> 00:29:25,960
Speaker 2: because I imagine you know your rolodex, your intuition, the

623
00:29:26,000 --> 00:29:29,680
Speaker 2: research you do. But have you found the technology over

624
00:29:29,760 --> 00:29:32,680
Speaker 2: time in your industry has made it easier to rapidly

625
00:29:32,840 --> 00:29:35,920
Speaker 2: locate the ideal buyer of certain certain assets.

626
00:29:35,760 --> 00:29:38,040
Speaker 4: A bit now, I'm fifty four. My partners are younger

627
00:29:38,080 --> 00:29:40,040
Speaker 4: than I am, so they're more interested.

628
00:29:39,680 --> 00:29:40,640
Speaker 5: In SAVVA doing that.

629
00:29:40,880 --> 00:29:42,800
Speaker 4: But when I find a company who has an asset

630
00:29:42,840 --> 00:29:45,440
Speaker 4: for sale, I say to the owners of the company,

631
00:29:45,480 --> 00:29:47,520
Speaker 4: or the inventor of the intellectual property or the president

632
00:29:47,520 --> 00:29:50,239
Speaker 4: of the company, tell me, you know, oh yeah, the

633
00:29:50,240 --> 00:29:53,640
Speaker 4: top five companies that should buy this. Your competitors, your customers,

634
00:29:53,640 --> 00:29:56,360
Speaker 4: your suppliers. Give me the top four or five people

635
00:29:56,400 --> 00:29:57,920
Speaker 4: that you know at the top of your head, and

636
00:29:57,960 --> 00:30:01,280
Speaker 4: then I'm going to use AI to develop a larger list. God,

637
00:30:01,400 --> 00:30:03,320
Speaker 4: I can usually get that to fifty or up to

638
00:30:03,360 --> 00:30:06,040
Speaker 4: one hundred of people really targeted. I've got thousands of

639
00:30:06,080 --> 00:30:07,920
Speaker 4: people on my database. But I don't want to send

640
00:30:07,920 --> 00:30:10,360
Speaker 4: this opportunity to everybody. I want the people in that industry.

641
00:30:10,440 --> 00:30:11,680
Speaker 4: You have a chance to look at it.

642
00:30:12,480 --> 00:30:16,520
Speaker 3: I just typed into Perplexity the question I have legally

643
00:30:16,640 --> 00:30:19,000
Speaker 3: acquired some human heads that I need to sell. Who

644
00:30:19,040 --> 00:30:22,200
Speaker 3: would be a potential buyer? And it's given me a list,

645
00:30:22,320 --> 00:30:28,120
Speaker 3: including specific names such as Bone Dealers, Skulls Unlimited, and

646
00:30:28,160 --> 00:30:29,720
Speaker 3: the Bone Room. I don't know if that's a.

647
00:30:31,520 --> 00:30:36,240
Speaker 4: Yeah, But Skulls Unlimited, that's fantastic.

648
00:30:36,800 --> 00:30:38,280
Speaker 3: Maybe it exists. That's pretty funny.

649
00:30:38,280 --> 00:30:39,560
Speaker 4: We do a lot of work with new economy, but

650
00:30:39,800 --> 00:30:42,160
Speaker 4: old economy as well. For example, right now we're liquiding

651
00:30:42,200 --> 00:30:44,040
Speaker 4: two retail furniture stores.

652
00:30:44,560 --> 00:30:49,200
Speaker 2: Wait, Skull's Unlimited world leader in real and replica skulls,

653
00:30:49,560 --> 00:30:52,239
Speaker 2: and they say, do you need a skull clean? So

654
00:30:52,320 --> 00:30:54,120
Speaker 2: this is I don't know if they do human ones.

655
00:30:54,160 --> 00:30:57,040
Speaker 2: It looks like it's mostly animals and stuff. Anyway, at

656
00:30:57,120 --> 00:31:00,240
Speaker 2: least the Perplexity came up with a company. It is

657
00:31:00,240 --> 00:31:01,680
Speaker 2: in this cold business anyway, keep going.

658
00:31:01,720 --> 00:31:04,440
Speaker 4: There are niche industries, yes, so old economy as well.

659
00:31:04,440 --> 00:31:06,840
Speaker 4: I've done a lot of brick and mortar work, especially

660
00:31:06,840 --> 00:31:09,480
Speaker 4: down here in the Los Angeles area versus Silicon Valley.

661
00:31:09,600 --> 00:31:12,280
Speaker 4: As I say, we're doing some furniture companies. At one

662
00:31:12,280 --> 00:31:14,720
Speaker 4: point I was serving as a receiver for a chain

663
00:31:14,760 --> 00:31:17,800
Speaker 4: of pawn shops. Now, a receivership is a little bit

664
00:31:17,800 --> 00:31:20,680
Speaker 4: different than bankruptcy. It's different than the ABC we talked about.

665
00:31:21,320 --> 00:31:24,720
Speaker 4: It is the case that a lender or even investors

666
00:31:25,040 --> 00:31:28,200
Speaker 4: don't have faith in management and they want a babysitter.

667
00:31:28,800 --> 00:31:31,760
Speaker 4: They want someone to keep take control of the cash,

668
00:31:31,800 --> 00:31:36,320
Speaker 4: lookover management, shoulders, perhaps hire and fire management, ultimately perhaps

669
00:31:36,320 --> 00:31:38,360
Speaker 4: sell the company. But this is not when you want

670
00:31:38,360 --> 00:31:40,480
Speaker 4: to shut a company down or destroy something. You just

671
00:31:40,520 --> 00:31:43,240
Speaker 4: want some adult supervision. So I served as a receiver

672
00:31:43,280 --> 00:31:46,360
Speaker 4: for this chain of pawn shops, which was really check

673
00:31:46,360 --> 00:31:49,320
Speaker 4: cashing stores, but they dealt in gold. They had a

674
00:31:49,360 --> 00:31:52,080
Speaker 4: big vault in their headquarters where they would store some

675
00:31:52,160 --> 00:31:54,200
Speaker 4: of the gold. If you go into a check cashing

676
00:31:54,240 --> 00:31:55,880
Speaker 4: store and you have a gold necklace and you want

677
00:31:55,920 --> 00:31:58,560
Speaker 4: to borrow fifty dollars, they'll keep your gold necklace.

678
00:31:59,400 --> 00:32:00,840
Speaker 5: Got very interesting.

679
00:32:00,360 --> 00:32:04,880
Speaker 4: Though, when people were depositing their gold teeth into the vault,

680
00:32:05,600 --> 00:32:07,120
Speaker 4: and you know, if they don't come back and repay

681
00:32:07,160 --> 00:32:10,360
Speaker 4: the loan, the gold teeth stay in the vault. So

682
00:32:10,400 --> 00:32:12,400
Speaker 4: we had a lot of interesting things to deal with there.

683
00:32:12,640 --> 00:32:15,480
Speaker 4: And again in a check cashing store all cash business.

684
00:32:16,240 --> 00:32:18,000
Speaker 4: You see a lot of one hundred dollars bills, buckets

685
00:32:18,040 --> 00:32:20,960
Speaker 4: and buckets of those things floating around. So new economy

686
00:32:21,080 --> 00:32:23,360
Speaker 4: those are easy to value, at least they're easy to value.

687
00:32:23,360 --> 00:32:25,720
Speaker 4: But new economy old economy that there's a lot of

688
00:32:25,840 --> 00:32:28,360
Speaker 4: management and judgment calls, and what do I do about

689
00:32:28,360 --> 00:32:29,800
Speaker 4: this situation in my line of work.

690
00:32:29,960 --> 00:32:32,440
Speaker 2: We were talking earlier before we started. You did a

691
00:32:32,480 --> 00:32:35,719
Speaker 2: scooter company, and I've wondered about those scooter because you know,

692
00:32:35,840 --> 00:32:37,760
Speaker 2: some of the they're still going. All the companies in

693
00:32:37,800 --> 00:32:41,000
Speaker 2: that business seemed terrible. The ones that have gone public

694
00:32:41,040 --> 00:32:45,040
Speaker 2: have done awful. Yes, Yes, and you're going to say

695
00:32:45,080 --> 00:32:46,920
Speaker 2: that I was very bullish on the scooters. I still

696
00:32:46,960 --> 00:32:49,440
Speaker 2: actually liked them. When I'm in a city, it's not

697
00:32:49,480 --> 00:32:52,440
Speaker 2: a bad way to get around medium length distances. Nonetheless,

698
00:32:52,560 --> 00:32:54,960
Speaker 2: my understanding is that they have not been particularly, at

699
00:32:55,040 --> 00:32:58,800
Speaker 2: least in the US, particularly profitable companies. What happens when

700
00:32:58,840 --> 00:33:00,960
Speaker 2: they have like a bunch of old brands and scooters

701
00:33:01,040 --> 00:33:01,760
Speaker 2: laying around, That's.

702
00:33:01,640 --> 00:33:03,960
Speaker 4: An interesting question. It isn't an interesting business. I think

703
00:33:03,960 --> 00:33:06,320
Speaker 4: it was probably over invested in. I have a story

704
00:33:06,320 --> 00:33:08,680
Speaker 4: with both a good outcome and a bad outcome. So

705
00:33:08,720 --> 00:33:12,000
Speaker 4: a company called super Pedestrian, which is not what I

706
00:33:12,040 --> 00:33:14,120
Speaker 4: was familiar with, but it's up there with Lime and

707
00:33:14,160 --> 00:33:16,840
Speaker 4: Bird and it does the exact same thing. Has a

708
00:33:17,000 --> 00:33:20,320
Speaker 4: very large presence in Europe. Company rant it of cash.

709
00:33:20,920 --> 00:33:23,480
Speaker 4: The venture lender, not a bank, but the venture lender

710
00:33:24,000 --> 00:33:26,240
Speaker 4: contacted us and said, we need somebody to figure out

711
00:33:26,400 --> 00:33:28,000
Speaker 4: what to do. How do we get our money back?

712
00:33:28,000 --> 00:33:31,080
Speaker 4: It's got to be value here. We invested ex gazillion dollars.

713
00:33:31,280 --> 00:33:33,880
Speaker 4: We've got a lot of scooters all over the United States,

714
00:33:33,920 --> 00:33:36,640
Speaker 4: all over Europe. What do you do? So we started

715
00:33:36,640 --> 00:33:40,120
Speaker 4: out in Europe. Turns out there was a lot of

716
00:33:40,120 --> 00:33:43,920
Speaker 4: interest from European investors, and so we had scooters in Spain,

717
00:33:44,000 --> 00:33:46,840
Speaker 4: we had scooters in the UK, we had scooters in France,

718
00:33:46,880 --> 00:33:49,320
Speaker 4: we had scooters in Germany, we had scooters in Switzerland.

719
00:33:50,240 --> 00:33:52,040
Speaker 4: And I don't do a lot of work in Europe.

720
00:33:52,120 --> 00:33:54,239
Speaker 4: I don't know European insolvency law. I don't know all

721
00:33:54,240 --> 00:33:56,440
Speaker 4: the very different ones. I sometimes do work over there,

722
00:33:56,480 --> 00:33:59,280
Speaker 4: but I rely on local specialists sometimes. But I had

723
00:33:59,280 --> 00:34:02,840
Speaker 4: a lot of attention on that business. Fortunately, we were

724
00:34:02,880 --> 00:34:05,360
Speaker 4: able to get counsel in the UK who did a

725
00:34:05,360 --> 00:34:09,200
Speaker 4: fantastic job of corralling all of these buyers and selling.

726
00:34:09,360 --> 00:34:11,040
Speaker 4: We didn't have to take apart the companies this time.

727
00:34:11,040 --> 00:34:13,640
Speaker 4: We sold the German entity, and this French entity and

728
00:34:13,680 --> 00:34:16,080
Speaker 4: the Spanish entity all to a company I think from

729
00:34:16,120 --> 00:34:20,279
Speaker 4: Norway who was well funded and believed in scooters, and

730
00:34:20,360 --> 00:34:22,920
Speaker 4: so we were able to flip that almost in a

731
00:34:22,920 --> 00:34:25,360
Speaker 4: matter of a month or two, and that business is

732
00:34:25,400 --> 00:34:25,839
Speaker 4: still going.

733
00:34:25,840 --> 00:34:27,160
Speaker 5: I still see them in the news.

734
00:34:28,080 --> 00:34:30,000
Speaker 4: On the other hand, we didn't have so much luck

735
00:34:30,040 --> 00:34:33,480
Speaker 4: in the United States. We didn't find anybody interested enough

736
00:34:33,840 --> 00:34:37,440
Speaker 4: in the local business here, and after a lot of

737
00:34:37,440 --> 00:34:39,400
Speaker 4: searching and a lot of bill paying and a lot

738
00:34:39,440 --> 00:34:43,839
Speaker 4: of landlords locking up the scooters. To my knowledge, those

739
00:34:43,840 --> 00:34:46,719
Speaker 4: scooters are still sitting on the corners of Los Angeles

740
00:34:46,840 --> 00:34:47,759
Speaker 4: and Washington, d C.

741
00:34:47,960 --> 00:34:48,440
Speaker 5: And maybe at the.

742
00:34:48,400 --> 00:34:52,080
Speaker 4: Bottom of the unusable and unusable because once the technology

743
00:34:52,080 --> 00:34:56,600
Speaker 4: gets turned off, they're like bricks. Wow. So good outcome.

744
00:34:56,760 --> 00:34:58,279
Speaker 4: In Europe, I wish them well.

745
00:34:58,400 --> 00:35:00,399
Speaker 2: I like the scooters, but I did. Do you think

746
00:35:00,440 --> 00:35:02,680
Speaker 2: that there is this element of like sort of weird

747
00:35:02,840 --> 00:35:05,600
Speaker 2: public vandalism about it at some point where like a

748
00:35:05,600 --> 00:35:08,799
Speaker 2: company just thinks it can deposit its products on this

749
00:35:09,440 --> 00:35:11,080
Speaker 2: it's like what, like, where did these come from? I

750
00:35:11,120 --> 00:35:13,279
Speaker 2: was going to see them in digits anyway, Tracy, keep going.

751
00:35:13,400 --> 00:35:16,000
Speaker 3: I was going to ask, so the scooters that are

752
00:35:16,080 --> 00:35:20,000
Speaker 3: left over, would the company be liable for anything that

753
00:35:20,280 --> 00:35:22,800
Speaker 3: like happened to those or if they, I don't know,

754
00:35:22,920 --> 00:35:26,000
Speaker 3: caused an accident of some sort. If I'm cycling down

755
00:35:26,360 --> 00:35:30,880
Speaker 3: the sidewalk and I accidentally run into a defunct scooter,

756
00:35:31,200 --> 00:35:33,280
Speaker 3: could I sue the failed company?

757
00:35:33,320 --> 00:35:34,960
Speaker 4: Oh? Would you sue the company?

758
00:35:35,440 --> 00:35:36,200
Speaker 3: But it doesn't exist.

759
00:35:36,280 --> 00:35:37,440
Speaker 5: It doesn't exist, so I can't.

760
00:35:37,560 --> 00:35:39,080
Speaker 4: So there's no Oh you can sue.

761
00:35:38,920 --> 00:35:40,840
Speaker 5: Yes, you can sue all day long, but there's nothing

762
00:35:40,840 --> 00:35:41,320
Speaker 5: to recover.

763
00:35:41,480 --> 00:35:43,600
Speaker 4: Okay, that's both a blessing and a curse. I remember

764
00:35:43,600 --> 00:35:45,239
Speaker 4: when this scooters first came to Los Angeles a few

765
00:35:45,280 --> 00:35:46,799
Speaker 4: years ago, and people would just throw them in the river,

766
00:35:46,840 --> 00:35:48,719
Speaker 4: throw them in the ocean. It was astounding to me

767
00:35:48,760 --> 00:35:51,239
Speaker 4: that that business model could work. Somebody believed in it.

768
00:35:52,280 --> 00:35:54,280
Speaker 4: There are a lot of those scooters still around Los Angeles,

769
00:35:54,320 --> 00:35:57,120
Speaker 4: and again, they're not useful unless you have the technology active.

770
00:35:57,200 --> 00:35:59,440
Speaker 4: So I don't know what happened. I wound up leaving

771
00:35:59,640 --> 00:36:02,239
Speaker 4: that company before that was fully resolved. But that is

772
00:36:02,280 --> 00:36:05,040
Speaker 4: the question there whereas all sorts of government penalties, cities

773
00:36:05,120 --> 00:36:08,080
Speaker 4: and post fines, or I want to make sure we

774
00:36:08,080 --> 00:36:10,440
Speaker 4: had insurance, for example, if we're going to operate scooters,

775
00:36:10,640 --> 00:36:12,480
Speaker 4: so we're a little bit hamstrong. We don't want to

776
00:36:12,480 --> 00:36:14,479
Speaker 4: be operating a scooter company. I've got a small firm,

777
00:36:14,560 --> 00:36:16,920
Speaker 4: I'm not staffed. I can certainly rely on some of

778
00:36:16,960 --> 00:36:19,840
Speaker 4: the former employees if I can pay them, but I

779
00:36:19,840 --> 00:36:21,319
Speaker 4: don't want to be operating a company like that.

780
00:36:21,640 --> 00:36:26,000
Speaker 2: I have just one last question, but one particularly complicated

781
00:36:26,120 --> 00:36:29,400
Speaker 2: and interesting liquidation or sale or failure that's in the

782
00:36:29,440 --> 00:36:31,719
Speaker 2: news for the last several months have been twenty three

783
00:36:31,800 --> 00:36:34,720
Speaker 2: in me, which raises all kinds of interesting things about

784
00:36:34,760 --> 00:36:38,520
Speaker 2: like privacy in particular. I'm curious if this is a

785
00:36:38,560 --> 00:36:41,719
Speaker 2: story you've followed in whether you have any insight to

786
00:36:41,800 --> 00:36:45,160
Speaker 2: bear on how a situation like that will or should

787
00:36:45,280 --> 00:36:46,880
Speaker 2: play out from a legal perspective.

788
00:36:46,920 --> 00:36:48,719
Speaker 4: I followed it just a bet, just enough to know

789
00:36:48,800 --> 00:36:51,839
Speaker 4: that I would not want to be making the decisions

790
00:36:51,960 --> 00:36:54,680
Speaker 4: as an assignee in an ABC. In that case, that's

791
00:36:54,680 --> 00:36:58,000
Speaker 4: a case that belongs in bankruptcy court, okay, because you've

792
00:36:58,000 --> 00:37:00,080
Speaker 4: got a judge who will make the decisions for you.

793
00:37:00,760 --> 00:37:05,520
Speaker 4: I don't want to be responsible for selling personal identifiable

794
00:37:05,560 --> 00:37:08,160
Speaker 4: information without someone telling me it's okay.

795
00:37:08,200 --> 00:37:10,640
Speaker 2: But actually imagine that in all I mean twenty three

796
00:37:10,719 --> 00:37:13,120
Speaker 2: in me is an extreme example because it's so personal,

797
00:37:13,200 --> 00:37:16,840
Speaker 2: but I have to imagine personal identifiable information. It's actually

798
00:37:16,960 --> 00:37:19,520
Speaker 2: got to be pretty common in a lot of Internet startups, etc.

799
00:37:19,800 --> 00:37:22,399
Speaker 2: Where people have to submit information to set up an account, etc.

800
00:37:22,840 --> 00:37:24,880
Speaker 2: I imagine that there are a lot of maybe not

801
00:37:25,000 --> 00:37:27,480
Speaker 2: quite as tricky, but still pretty tricky questions that are

802
00:37:27,600 --> 00:37:28,760
Speaker 2: raised with some of these companies.

803
00:37:28,800 --> 00:37:30,520
Speaker 4: We do have to take care I sold the business

804
00:37:30,640 --> 00:37:32,759
Speaker 4: earlier or last year. In the ticketing I actually have

805
00:37:32,760 --> 00:37:34,640
Speaker 4: done four or five deals in the ticketing business, like

806
00:37:34,680 --> 00:37:37,239
Speaker 4: a sub hub type competitor, And there are of course

807
00:37:37,360 --> 00:37:41,080
Speaker 4: credit card information and personal information. We don't generally sell that,

808
00:37:41,440 --> 00:37:43,520
Speaker 4: and so as long as I'm careful that it doesn't

809
00:37:43,520 --> 00:37:45,800
Speaker 4: get disseminated out in the public, I don't have to

810
00:37:45,840 --> 00:37:48,359
Speaker 4: worry about that too much. There is sometimes the case

811
00:37:48,400 --> 00:37:50,560
Speaker 4: if I sell a company, I have to review their

812
00:37:50,640 --> 00:37:53,399
Speaker 4: Internet privacy policy to make sure I'm able to.

813
00:37:53,480 --> 00:37:54,600
Speaker 5: Sell the customer list.

814
00:37:55,280 --> 00:37:56,799
Speaker 4: And we do take that seriously and we do work

815
00:37:56,800 --> 00:37:58,920
Speaker 4: with counsel to make sure that we aren't going to

816
00:37:58,920 --> 00:38:00,399
Speaker 4: be on the hook. Certainly it don't want to make

817
00:38:00,480 --> 00:38:02,400
Speaker 4: those decisions and have someone come back and say I

818
00:38:02,440 --> 00:38:03,200
Speaker 4: did something illegal.

819
00:38:03,760 --> 00:38:07,640
Speaker 3: I could sit here and listen to corporate failure stories

820
00:38:07,680 --> 00:38:10,279
Speaker 3: for hours, but we are running out of time, so

821
00:38:10,320 --> 00:38:12,520
Speaker 3: I'm just going to ask one other question, which is

822
00:38:12,960 --> 00:38:17,239
Speaker 3: for esoteric assets, how do you go about ensuring that

823
00:38:17,280 --> 00:38:21,160
Speaker 3: you have that you're getting a reasonable price. So something

824
00:38:21,239 --> 00:38:24,640
Speaker 3: like human heads, I imagine there is no secondary market

825
00:38:24,719 --> 00:38:27,160
Speaker 3: for human heads. There's no What I mean is there's

826
00:38:27,160 --> 00:38:30,040
Speaker 3: no exchange showing you a price bench mark. That's right,

827
00:38:30,040 --> 00:38:33,560
Speaker 3: there's no benchmark human head price. So someone could make

828
00:38:33,560 --> 00:38:36,719
Speaker 3: you an offer, but I imagine without expertise in that

829
00:38:36,760 --> 00:38:39,840
Speaker 3: particular market, you wouldn't necessarily know if it was a

830
00:38:39,840 --> 00:38:41,920
Speaker 3: good price or not. So how do you go about

831
00:38:42,200 --> 00:38:44,680
Speaker 3: making sure that you're getting the most money possible.

832
00:38:44,920 --> 00:38:47,120
Speaker 4: I get that question a lot, and the answer is

833
00:38:47,719 --> 00:38:51,160
Speaker 4: there are no benchmarks. There's no liquid market for these

834
00:38:51,200 --> 00:38:54,920
Speaker 4: type of assets that are very unique and very interesting technology.

835
00:38:54,960 --> 00:38:58,200
Speaker 4: In some cases, you have to ask the market. Something

836
00:38:58,280 --> 00:39:00,359
Speaker 4: is worth what someone else is willing to pay for it.

837
00:39:00,920 --> 00:39:03,880
Speaker 4: So it's important that I get the opportunity in front

838
00:39:03,880 --> 00:39:06,239
Speaker 4: of everybody who might have an interest. That's why I

839
00:39:06,280 --> 00:39:09,040
Speaker 4: said earlier, fifty to one hundred people in that industry.

840
00:39:09,480 --> 00:39:11,360
Speaker 4: And if I shop it to all of the people

841
00:39:11,360 --> 00:39:14,680
Speaker 4: who should know what it is and how to value it,

842
00:39:14,719 --> 00:39:17,640
Speaker 4: and they say, sorry, I'm not interested, and I could

843
00:39:17,640 --> 00:39:18,360
Speaker 4: be pretty sure.

844
00:39:18,239 --> 00:39:19,800
Speaker 5: It's got no market value today.

845
00:39:20,160 --> 00:39:21,799
Speaker 4: If I get four or five people to say, hey,

846
00:39:21,800 --> 00:39:23,480
Speaker 4: this is interesting, let me do some homework, let me

847
00:39:23,520 --> 00:39:25,719
Speaker 4: talk to management, let me make an offer, and I

848
00:39:25,760 --> 00:39:28,120
Speaker 4: get four or five offers, and the offers are all

849
00:39:28,160 --> 00:39:31,640
Speaker 4: centered around three million dollars. Well, I've identified the market

850
00:39:31,719 --> 00:39:34,640
Speaker 4: value of that technology. If I've got three offers at

851
00:39:34,640 --> 00:39:37,240
Speaker 4: five hundred thousand dollars and one offer at five million dollars,

852
00:39:37,760 --> 00:39:40,080
Speaker 4: go to grab the five million dollar offer, that's the

853
00:39:40,160 --> 00:39:43,440
Speaker 4: value of the technology. So I know better than anybody

854
00:39:43,480 --> 00:39:45,400
Speaker 4: else what that technology is worth. In fact, I had

855
00:39:45,440 --> 00:39:47,040
Speaker 4: to go to court only one time, I think, in

856
00:39:47,080 --> 00:39:50,319
Speaker 4: almost twenty years, where it was this co op case. Again.

857
00:39:50,360 --> 00:39:53,960
Speaker 4: I'll tell you that where I sold the technology for

858
00:39:54,600 --> 00:39:57,600
Speaker 4: let's call it, three million dollars and I repaid the

859
00:39:57,719 --> 00:40:00,719
Speaker 4: secured lender and there was no money for anybody else.

860
00:40:01,560 --> 00:40:05,000
Speaker 4: There was a planiff' attorney who was representing some people

861
00:40:05,000 --> 00:40:07,359
Speaker 4: who had said that they were injured, not by this

862
00:40:07,440 --> 00:40:09,759
Speaker 4: new technology we discussed, but something else. The company had done,

863
00:40:09,800 --> 00:40:13,680
Speaker 4: some kind of derma filler or something, and those patients

864
00:40:13,680 --> 00:40:16,960
Speaker 4: had potential claims, contingent claims. They said they suffered injury.

865
00:40:17,120 --> 00:40:20,000
Speaker 4: They weren't adjudicated. There were no judgments, but the planeiff's

866
00:40:20,000 --> 00:40:23,360
Speaker 4: attorney may have had a case as patients may have suffered. Nevertheless,

867
00:40:23,600 --> 00:40:25,480
Speaker 4: when we sold the technology, there was enough money to

868
00:40:25,480 --> 00:40:28,160
Speaker 4: pay back the bank and nobody else. The planet's attorney

869
00:40:28,200 --> 00:40:31,319
Speaker 4: took us to court and they said, yes, you sold

870
00:40:31,320 --> 00:40:33,839
Speaker 4: the company for three million dollars, but if you knew

871
00:40:33,840 --> 00:40:35,520
Speaker 4: what you were doing, Johnson, you would have sold it

872
00:40:35,520 --> 00:40:37,479
Speaker 4: for eleven million dollars and we all would have gotten paid.

873
00:40:38,040 --> 00:40:40,200
Speaker 4: He said, I have an Ivory Tower economists right here

874
00:40:40,200 --> 00:40:42,640
Speaker 4: at my desk, and he says this company was worth

875
00:40:42,719 --> 00:40:46,560
Speaker 4: eleven million dollars. And I said, really so, because here's

876
00:40:46,640 --> 00:40:49,319
Speaker 4: my binder. Here are the people that I reached out

877
00:40:49,320 --> 00:40:52,799
Speaker 4: to to sell this technology, fifty sixty seventy of them,

878
00:40:53,400 --> 00:40:55,280
Speaker 4: and here are the ten that said they were interested

879
00:40:55,320 --> 00:40:57,880
Speaker 4: in looking at it, and they signed non disclosure agreements.

880
00:40:58,480 --> 00:41:01,200
Speaker 4: And after doing their diligence. Four of them came to

881
00:41:01,239 --> 00:41:04,000
Speaker 4: me with an offer to buy the company, and I

882
00:41:04,120 --> 00:41:06,759
Speaker 4: chose the one with the highest price. So if your

883
00:41:06,800 --> 00:41:09,040
Speaker 4: Ivory Tower economists wanted to buy this company for eleven

884
00:41:09,040 --> 00:41:10,640
Speaker 4: million dollars, I sure wish I would.

885
00:41:10,480 --> 00:41:10,799
Speaker 5: Have met it.

886
00:41:10,880 --> 00:41:12,279
Speaker 4: I would have been happy to sell it to them.

887
00:41:12,920 --> 00:41:15,320
Speaker 4: But I know in the real world that something is

888
00:41:15,360 --> 00:41:18,279
Speaker 4: worth what someone's willing to pay. And I asked everybody,

889
00:41:18,400 --> 00:41:19,480
Speaker 4: and this is what they told me.

890
00:41:20,360 --> 00:41:22,800
Speaker 3: I'm going to ask one more question. I can't resist,

891
00:41:23,120 --> 00:41:27,080
Speaker 3: But is there a lesson about corporate mortality that you

892
00:41:27,160 --> 00:41:32,400
Speaker 3: wish more executives or entrepreneurs would learn and internalize? If

893
00:41:32,440 --> 00:41:35,560
Speaker 3: you could give a piece of advice to executives of

894
00:41:35,719 --> 00:41:39,000
Speaker 3: failing companies or companies that are managing to survive but

895
00:41:39,040 --> 00:41:41,399
Speaker 3: there's always a risk of failure, what would it be.

896
00:41:41,960 --> 00:41:42,719
Speaker 5: I won the court case.

897
00:41:42,760 --> 00:41:45,360
Speaker 4: By the way, I'll give you the same advice that

898
00:41:45,600 --> 00:41:49,960
Speaker 4: everybody says, coming to us earlier rather than later is

899
00:41:50,040 --> 00:41:53,040
Speaker 4: always wise. You only have as long as your cash

900
00:41:53,120 --> 00:41:55,759
Speaker 4: runway allows you to be there. So if you have

901
00:41:55,960 --> 00:41:58,200
Speaker 4: six months worth of cash instead of six weeks worth

902
00:41:58,200 --> 00:42:01,080
Speaker 4: of cash, I can do a more thorough search. I

903
00:42:01,120 --> 00:42:04,920
Speaker 4: can come up with potentially other buyers create more value.

904
00:42:05,239 --> 00:42:07,640
Speaker 4: I can keep more people around for a longer period

905
00:42:07,680 --> 00:42:11,320
Speaker 4: of time. I can make better preparations for the preservation

906
00:42:11,400 --> 00:42:13,880
Speaker 4: of the technology. So earlier is always better. And I

907
00:42:13,960 --> 00:42:16,279
Speaker 4: do a lot of contingency planning. People come to me

908
00:42:16,440 --> 00:42:19,000
Speaker 4: and say, I've got an offer on the table, but

909
00:42:19,040 --> 00:42:21,080
Speaker 4: I don't know if it's going to close, So how

910
00:42:21,080 --> 00:42:23,239
Speaker 4: do I prepare for the downside? Or we think we're

911
00:42:23,239 --> 00:42:25,279
Speaker 4: gonna get that next round of venture funding, but just

912
00:42:25,280 --> 00:42:26,759
Speaker 4: in case it doesn't come in, what do I do?

913
00:42:26,840 --> 00:42:28,840
Speaker 4: So I do a lot of that kind of planning.

914
00:42:29,120 --> 00:42:31,080
Speaker 4: And the more time we have the better. On the

915
00:42:31,080 --> 00:42:33,440
Speaker 4: other hand, I have gotten the phone call before. I

916
00:42:33,480 --> 00:42:34,680
Speaker 4: can't make payroll on Friday?

917
00:42:34,680 --> 00:42:35,239
Speaker 5: Can you help me?

918
00:42:36,920 --> 00:42:39,799
Speaker 2: Should have called me earlier. David joneson I think if

919
00:42:39,840 --> 00:42:42,560
Speaker 2: I were on the board of a company and you

920
00:42:42,680 --> 00:42:44,840
Speaker 2: showed up and said, you know what, tough situation, but

921
00:42:44,840 --> 00:42:46,759
Speaker 2: we're gonna get give a max dollar, I think I

922
00:42:46,840 --> 00:42:48,440
Speaker 2: feel really good. I feel like you do a good

923
00:42:48,719 --> 00:42:51,239
Speaker 2: job for us. I really appreciate you coming on odd

924
00:42:51,280 --> 00:42:53,680
Speaker 2: loads and telling us about this a niche that I

925
00:42:53,840 --> 00:42:54,640
Speaker 2: knew nothing about.

926
00:42:54,760 --> 00:42:55,359
Speaker 5: This has been fun.

927
00:42:55,360 --> 00:42:55,600
Speaker 4: Thank you.

928
00:42:55,640 --> 00:42:56,640
Speaker 5: Joe thank you Chasing.

929
00:43:09,280 --> 00:43:10,920
Speaker 2: Tracy. That was a lot of fun. I didn't know

930
00:43:10,960 --> 00:43:13,480
Speaker 2: anything about any of this topic, and he was the

931
00:43:13,480 --> 00:43:14,279
Speaker 2: perfect guest for that.

932
00:43:14,600 --> 00:43:19,000
Speaker 3: Yes, a very niche topic for someone who specializes sometimes

933
00:43:19,040 --> 00:43:22,319
Speaker 3: in very niche sales. That was so interesting. I'm trying

934
00:43:22,360 --> 00:43:25,480
Speaker 3: to think what my big takeaway is here. I mean,

935
00:43:25,520 --> 00:43:29,120
Speaker 3: I guess the emphasis on how comfortable a lot of

936
00:43:29,160 --> 00:43:32,359
Speaker 3: Silicon Valley actually is with losing money for years and

937
00:43:32,440 --> 00:43:36,000
Speaker 3: years and years and then how suddenly that tap can

938
00:43:36,040 --> 00:43:36,719
Speaker 3: be turned off.

939
00:43:36,960 --> 00:43:39,600
Speaker 2: Well, so I thought your last question and his last

940
00:43:39,640 --> 00:43:43,960
Speaker 2: answer about like sooner the better was really interesting and

941
00:43:44,040 --> 00:43:46,520
Speaker 2: really important, And I just feel like if I were

942
00:43:46,560 --> 00:43:50,840
Speaker 2: a founder of a company, I would never do sooner.

943
00:43:50,880 --> 00:43:53,400
Speaker 2: I would hold out till the very last second, the

944
00:43:53,560 --> 00:43:56,440
Speaker 2: last dollar in my account in order to make payroll.

945
00:43:56,440 --> 00:43:59,319
Speaker 2: I would never call David up until I was absolutely

946
00:43:59,360 --> 00:44:02,520
Speaker 2: forced out of the room. Even though you know, you

947
00:44:02,560 --> 00:44:05,480
Speaker 2: get into a what do they call principal agent problems here, right,

948
00:44:05,560 --> 00:44:09,800
Speaker 2: because you're suddenly operating for yourself as someone who's trying

949
00:44:09,840 --> 00:44:12,560
Speaker 2: to keep your equity in the money in the hopes

950
00:44:12,600 --> 00:44:15,960
Speaker 2: that it can go on. Meanwhile, you're burning through credit

951
00:44:16,040 --> 00:44:19,360
Speaker 2: or cash and probably you know diminishing their recovery value

952
00:44:19,360 --> 00:44:24,360
Speaker 2: by the day. A lot of interesting incentive disalignment potential

953
00:44:24,440 --> 00:44:25,520
Speaker 2: at the end of life there.

954
00:44:25,680 --> 00:44:28,960
Speaker 3: Yeah, And I imagine that the founders of startups that

955
00:44:29,080 --> 00:44:32,880
Speaker 3: might eventually fail, they're probably optimistic by nature, and so

956
00:44:32,880 --> 00:44:35,520
Speaker 3: they're probably sat there thinking they might get a Hail

957
00:44:35,640 --> 00:44:37,880
Speaker 3: Mary at the very last minute, and then it doesn't

958
00:44:37,920 --> 00:44:41,040
Speaker 3: materialize and it's too late and they're scrambling to make payroll.

959
00:44:41,160 --> 00:44:43,360
Speaker 2: I guess this is what the board, right, the board

960
00:44:43,440 --> 00:44:46,600
Speaker 2: is supposed to solve some of these incentive alignment problems,

961
00:44:46,600 --> 00:44:48,960
Speaker 2: and it's like, bro, come on, you gotta give up.

962
00:44:48,960 --> 00:44:52,040
Speaker 2: You got to you gotta begin the liquidation phase, which

963
00:44:52,080 --> 00:44:53,759
Speaker 2: I guess is why the founder in one of his

964
00:44:53,840 --> 00:44:57,080
Speaker 2: stories was taking you know, personal check cashing loans to

965
00:44:57,160 --> 00:45:00,720
Speaker 2: keep it going, precisely because the board or maybe wouldn't

966
00:45:00,760 --> 00:45:02,719
Speaker 2: have let it keep going had they been aware of

967
00:45:02,760 --> 00:45:06,399
Speaker 2: the true financial state of the company. The anyway, very

968
00:45:06,400 --> 00:45:07,840
Speaker 2: interesting conversation.

969
00:45:07,480 --> 00:45:11,040
Speaker 3: Bro, you got to give up, signed the chairman. Yeah, exactly,

970
00:45:11,360 --> 00:45:12,400
Speaker 3: All right, shall we leave it there.

971
00:45:12,480 --> 00:45:13,200
Speaker 2: Let's leave it there.

972
00:45:13,400 --> 00:45:15,760
Speaker 3: This has been another episode of the Oud Lots podcast.

973
00:45:15,840 --> 00:45:19,080
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway and.

974
00:45:19,040 --> 00:45:21,600
Speaker 2: I'm Joe Wisenthal. You can follow me at the Stalwart,

975
00:45:21,960 --> 00:45:25,520
Speaker 2: follow our producers Kerman Rodriguez at Kerman Arman, Dashel Bennett

976
00:45:25,520 --> 00:45:28,680
Speaker 2: at dashbod, and kill Brooks at Kelbrooks. For more Odd

977
00:45:28,719 --> 00:45:31,200
Speaker 2: Lots content, go to Bloomberg dot com slash odd Lots,

978
00:45:31,200 --> 00:45:33,759
Speaker 2: where we have a daily newsletter and all of our episodes,

979
00:45:33,960 --> 00:45:35,879
Speaker 2: and you can chat about all of these topics twenty

980
00:45:35,920 --> 00:45:39,960
Speaker 2: four to seven in our discord discord dot gg slash odlogs.

981
00:45:40,160 --> 00:45:42,319
Speaker 3: And if you enjoy odd Lots, if you like it

982
00:45:42,360 --> 00:45:45,120
Speaker 3: when we talk about how companies die, then please leave

983
00:45:45,200 --> 00:45:49,120
Speaker 3: us a positive review on your favorite podcast platform. And remember,

984
00:45:49,200 --> 00:45:51,759
Speaker 3: if you are a Bloomberg subscriber, you can listen to

985
00:45:51,960 --> 00:45:55,040
Speaker 3: all of our episodes absolutely ad free. All you need

986
00:45:55,080 --> 00:45:57,560
Speaker 3: to do is find the Bloomberg channel on Apple Podcasts

987
00:45:57,600 --> 00:46:00,360
Speaker 3: and follow the instructions there. Thanks for think