- SimpleClosure recently raised a $1.5 million pre-seed funding round from Rex Salisbury and Vera Equity.
- The startup uses AI to automate legal and procedural tasks after the startup closes.
- The startup industry is predicted to be on the brink of a ‘mass extinction event’.
In early 2017, Ernie co-founder and COO Dori Yona was presenting financial information at a quarterly board meeting. The numbers weren’t looking good for the fintech startup, so an investor asked him to write a shutdown proposal.
“I went home that evening thinking I needed to do homework, but I Googled and couldn’t find any meaningful information and was frustrated because there were no resources to help,” Yona told Insider in an interview. He added that when he contacted Ernie’s attorney and accountant, both told him they could not help close the company and referred him to other companies.
Jonah had yet to dive into the world of business disruption himself and hope that what he did next would turn out well.
“I sat with that experience for years,” he said. “It’s painful and it doesn’t make sense that it’s so easy to open a business, but it’s hard to close.”
Thankfully Jonah never had to go through with his shutdown plan — Ernie raised a $7 million Series A later that year and was acquired in 2021. But after talking to other startup founders who shared similar fears and frustrations about properly shutting down failing businesses, he eventually founded SimpleClosure, a startup that uses AI to automate the startup-shutdown process.
The startup announced Wednesday that it has raised $1.5 million in pre-seed funding, co-led by Michael Vaughn and John Pomeranz of Vera Equity and Rex Salisbury of Cambrian Ventures.
While he hopes founders succeed, Yona said the reality is that most startups fail — about 90%, according to failed, a newsletter platform that focuses on failed startups. And when a business closes, a botched wind-down process can lead to an insult in the form of fines, fees and defaults that can also affect customers and investors.
“Founders tell me it’s the worst thing they’ve ever done, but a botched closing can cost a lot more when it comes to fines and penalties years later,” Yona said.
That’s where SimpleClosure comes in. Sitting at the intersection of fintech, legal technology and AI, the startup creates and executes company-specific dissolution and closure plans and resolves residual liabilities with customers, government agencies and team members.
Since launching in June, Yona said the startup has experienced rapid growth — all through word of mouth. He declined to share details but said that in one case, a founder-customer posted about SimpleClosure on a startup-focused Slack workspace, and “a dozen or more” new companies reached out to help in the next few days.
The appetite for SimpleClosures’ automated shutdown help comes as the tech industry On the brink of a ‘mass extinction event’ Which will cause many young startups to fail. After raising massive amounts of money at eye-popping valuations in 2021, many startups are running towards the end of their run and no additional funding is in sight.
Yona said his company estimates there are 40,000 startups that raised pre-seed, seed or Series A two years ago and haven’t raised since — an indicator of a flood of closings that will soon need SimpleClosure’s services.
“Things are going to accelerate in the next few months,” he said. “I don’t want companies to fail, but if they do, we’ll be here as seamlessly and simply as possible.”
As SimpleClosure grows, Yona says he’s focusing not just on failed startups, but the entire ecosystem around them that is affected when a company closes.
“Angels, VCs, accountants, attorneys, the IRS, vendors and customers – this company is much bigger than a closing service,” Yona said. “We’re working to meet the needs and wants of everyone in the ecosystem.”