Sunset - Helping Startups Wind Down

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This week’s Startup feature is sunsethq.com. Sunset is a leading startup shutdown company that helps simplify the gruelling process of winding down unsuccessful businesses.

Company & Team Introduction

Sunset is a leading company wind-down startup built to save founders thousands of dollars, hundreds of hours, and endless headaches. The company was founded by a pair of serial entrepreneurs, Grant Rheingold and Brandon Mahoney, who are well acquainted with the nightmare of shutting down a startup. Before Sunset, Mahoney founded three startups, including YC-backed software company Toybox, which was acquired in 2020, and Contrast, a Figma tool that was shut down after a little over a year. After Contrast, Brandon and Grant teamed up to build Second Spoonful before shutting down the company a year later. The duo quickly realized how daunting the process of winding down a company was, riddled with complexity, expenses, and unclear processes. Mahoney was already at a low point in his life, burnt out from putting everything into the business; to say the least, he was eager to put the failure behind him. Over 7 months later, he found himself still trapped in the dissolution process, with each setback knocking him down even further. He knew there had to be a more effective way to shut down a company, so he teamed up with Grant again to help other struggling founders close their businesses easier. Rheingold graduated from Princeton before moving on to roles at various top companies, including Goldman Sachs, Oscar Health, and trading platform Mojo, before starting Second Spoonful with Mahoney. The company is based in New York City, New York, and they have scaled their team to ~5 people.

Product Overview

Sunset gives businesses closing their doors an all-in-one solution for winding down the company as efficiently as possible. The dirty truth about startups is that 90%+ of them fail, but information on how to shut down the business is a bit of a taboo topic without much information/expertise about it; it turns out people aren’t super excited to talk about their failures. By leveraging software, industry knowledge, and creating repeatable processes, Sunset simplifies this mundane process, helping startups wind down for a fraction of the price and time it takes via traditional unguided methods. Sunset’s all-in-one solution starts by integrating with all your tools to understand the business before their team of financial and legal professionals builds a custom wind-down plan. Sunset then manages the entire wind-down process and completes the majority of time-consuming tasks like tax and accounting compliance, legal reviews and filings, vendor termination, capital redistributions, liquidation/asset sales, and state withdrawals on your company’s behalf. Even after the company is gone, Sunset gives the ability to keep storage of necessary filings, documents, and financials in case they’re needed in the future.

Total Addressable Market

According to their main competitor, Simple Closure, around ~1M businesses fail in the US, and legacy shutdown solutions can already cost struggling startups as much as 75k, in addition to the strenuous process that takes 9 months to complete on average. Using these numbers as extremely rough guidelines to calculate the total addressable market for Sunset, 1M * 75k = 75B. In addition to the already massive market opportunity for Sunset, the industry should see an uptick in shutdowns due to the ZIRP funding environment of 2021, where VCs deployed 329B across all stages of startups, which saw massive declines after interest rates began to rise. By 2023, VC funding had contracted by a whopping 48% to 170B. The repercussions of 2021’s excessive funding are starting to occur, with statistics from the US Administrative Office stating that business insolvencies in the US rose by a staggering 40.4% YoY in 2023.

Business Model & The Numbers

Sunset doesn’t offer self-service pricing due to the complexity of its service. Pricing is based on various factors, including the amount of money the company has raised, the number of employees, monthly IT/cloud computing spend, which foreign states the company is registered in, insurance clauses, and how far along the company is in the dissolution process, among others. Since coming out of stealth late last year, the company has already generated hundreds of thousands of dollars in revenue, allowing the business to be less reliant on Venture Capital dollars to grow. Sunset saw an astonishing 9x quarter-over-quarter revenue growth rate and a 65% customer growth rate between November 2023 and January 2024.

Traction

Sunset has already helped dozens of VC-backed startups close their doors so they can move on to the next thing, whatever it might be. The company has forged some early partnerships with key industry players in the startup/software industry, like leading startup acquisition marketplace Acquire.com, which gives founders all the tools required to quickly and easily wind down and move on from their business. The founder of YC21 startup buzzle.ai, Bhairav Mehta, thought his startup shutdown would take ~2 weeks and 10 simple steps; next thing he knew, it was 8 months later, and he was still navigating countless confusing tasks. “Sunset’s all-in-one offering could have saved me 100+ hours and let me move on with my life.” Mehta stated.

Competitors

With the traditional 90%+ startup failure rate coupled with the coming rise in shutdowns due to the 2021 ZIRP funding environment, there is a clear need for company closure businesses in the market, which has brought in formidable competition. Here are Sunset’s main competitors:

SimpleClosure - Founded in 2023 by Nimrod Ram and Dori Yona, SimpleClosure offers a similar product to Sunset and is also experiencing explosive growth. SimpleClosure covers everything from state paperwork, board resolutions, to investor distributions through software and streamlining processes. The company has raised a total of $5M across two rounds of funding from VC firms such as Cambrian Fintech, Infinity Ventures, Vera Equity, Foxe Capital, and Anthemis. Since their launch in early 2023, the company has seen its revenue and customer numbers grow 14x and 6x, respectively. The company is headquartered in Los Angeles, California and has grown its team to ~10 employees.

Carta - Founded in 2012 by Henry Ward, Carta is a cap table management solution for company’s looking to have a centralized dashboard to easily track their investors ownership of the company including essential information such as timing and pricing of shares issued. The company recently released Carta Conclusions, a competing product to Sunset and SimpleClosure that will be sold as a value-add service to Carta customers if their company doesn’t succeed. Carta is valued at a massive $8.5B, and with ARR north of $300M/year, they have a large existing customer base to sell into, as many Carta customers struggle in the current cost-cutting and low funding environment. Carta is based in San Francisco, California and has ~1500 employees.

Funding

Sunset has only raised one initial funding round after launching late last year. The company raised a small seed round of $1.5M from a laundry list of notable investors like NYC-based Everywhere Ventures, Codie Sanchez (Founder, Contrarian Thinking Capital), Ryan Hoover (Founder, Product Hunt), Hiten Shah (Founder, Nira), Sahil Lavingia (Founder, Gumroad), Eric Bahn (GP, Hustle Fund), and Lenny Rachitsky (Founder, Lenny’s Newsletter) among participant in the round. Sunset’s investors have strong networks within the VC and startup communities, which should aid the company’s distribution, partnership building and validation of Sunset’s brand.

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