Venture Everywhere Podcast: Brendan Mahony with Jenny Fielding

Jenny Fielding, Co-founder and GP of Everywhere VC, catches up with Brendan Mahony, Co-founder and CEO of Sunset.

May 22, 2024

Listen on Apple & Spotify!

Episode 37 of Venture Everywhere is hosted by Jenny Fielding, Co-founder and GP of Everywhere VC, where she catches up with Brendan Mahony, Co-founder and CEO of Sunset, a company that handles all the legal, tax, and operational burdens when a startup is winding-down, helping to avoid penalties and reduce liabilities. Brendan discusses his entrepreneurial journey, from Y Combinator participation to selling his first company. Brendan also shared insights on crucial yet overlooked startup lifecycle aspects, potential growth in the 'end of life' sector, and advice for founders for a structured and respectful exit.

In this episode, you will hear:

Sunset’s approach to dissolutions, including a comprehensive plan and support throughout the process.

Scaling services while preserving quality and reputation in a sensitive market.

Validating business ideas through sales and real-world interactions.

Building partnerships with VCs, accelerators, and law firms as a channel strategy.

The balance between taking calculated risks and ensuring financial responsibility.

If you liked this episode, please give us a rating wherever you found us. To learn more about our work, visit Everywhere.vc and subscribe to our Founders Everywhere Substack. You can also follow us on YouTube, LinkedIn and Twitter for regular updates and news.

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TRANSCRIPT

00:00:00 Jenny: Hi, and welcome to the Everywhere podcast. We're a global community of founders and operators who've come together to support the next generation of builders. So the premise of the podcast is just that, founders interviewing other founders about the trials and tribulations of building a company. Hope you enjoy the episode.

00:00:21 Jenny: Welcome to Venture Everywhere, Brendan, and super excited to have you. So I'd love to kick off by giving us a little bit on your background and how you have decided to do this crazy things.

00:00:34 Brendan: Yeah, so let's see, background. Went through Y Combinator a few years ago, summer of '18. Started my first company called Toybox out of there. Actually before that, I started a t-shirt company when I was 15 years old. Screen printing in the garage, going around in stores in Boston and selling it there. So that's where it all started.

00:00:53 Brendan: But yeah, and then fast forward, went to YC, sold my first company Toybox through there. Started another one immediately after. Definitely should have taken a beat, taken a hot minute to figure it out. So unfortunately, that one couldn't find product market fit and had to wind it down. Bad process. Hated that. That took months. Very expensive. Screwed some stuff up in New York.

00:01:17 Brendan: I had to pay out of pocket a year and a half later, but yeah, I mean, all of that has led to now, which is working on Sunset where we help venture back tech startups wind down, but also a designer, UX designer by trade. So that's what I studied back in the day. Yeah.

00:01:32 Jenny: Got it. So as you were having this horrible experience of trying to wind down your company, were you already formulating the idea for Sunset or you were just trying to get through the process?

00:01:43 Brendan: Oh my God, I was not formulating the idea at all. It took me years. I mean, yeah, the idea came to me from other folks. No, I actually hated the process so much that I just blacked it out and moved on with my life.

00:01:55 Brendan: And fast forward two years, I just started getting texts from different friends, buddies from YC, things like that. Oh my God, I know you went through this. Who do I go to? Who do I talk to? What should I do? And probably by like the third text. That's when I was like, hmm, super weird that tons of folks are going through this, just like I went through it and it was awful.

00:02:17 Brendan: But yeah, there was also a moment too where I was like, do I really wanna start this company? Because this was a terrible, terrible time in my life, terrible process. But yeah, then I felt great to help out some of my friends. So I thought, might feel really good to help out other folks as well.

00:02:31 Jenny: That's good. And so then how did you guys validate it beyond the people that were texting you? Oh, Brendan, help us. You know, did you do kind of wider outreach? Did you think about other sectors beyond the YC community or tech? And just tell us a little bit of the validation part of the story.

00:02:47 Brendan: For sure. I think something that I struggled with a lot with my first two companies was and I feel, like I see this a lot as well where you're just trying so hard to make this bulletproof startup idea, massive market, recurring revenue, and something no one's ever done before. There's all these things.

00:03:06 Brendan: And I just felt that type of thought process never worked out or definitely doesn't work out that much in general. So for this one, I really didn't want to overthink it. Had the idea. This is very interesting, personal experience, deep personal pain.

00:03:22 Brendan: So literally in a day, I wrote up a blog post, my personal story in there. And then at the very end, I made a click-baity, title or whatever. I was like shutting down my startup, is the worst thing that's ever happened to me in my entire life or something. So I wrote that in the very end.

00:03:37 Brendan: I was just, like hey, by the way, if you're going through this and want to chat very open-ended, let me know. So I posted on BookFace, YC's little forum, and I think I got 30 phone calls within about three days. And maybe the fifth phone call, I started selling people at the very end of the call.

00:03:58 Brendan: And I had nothing. I had no lawyers. I had no product. I had absolutely no idea what I was doing. And I mean, going back to my story, I screwed up my dissolution and I worked with lawyers and all these things. So I don't know if I was... At the time, I was Oh my God, what am I getting into? But literally, just asked for money. So I think I sold the three people from that 30, all for one to 2K. And that's how I validated it.

00:04:23 Jenny: That's a great story. Can you just talk about maybe some of the learnings? I mean, you've had a few companies under your belt and you're still so young. You obviously have this serial entrepreneur. So I wanna talk a little bit about the learnings and then also what gave you the confidence and the resolute, I guess, to keep on starting companies. At some point, someone might've said, hey dude, you wanna work with me at JP Morgan?

00:04:45 Brendan: Yeah, oh my God, that would've been nice. Yeah, just be a banker in New York.

00:04:50 Jenny: Or a designer at Airbnb.

00:04:52 Brendan: Sure, sure. Yeah. Well, let's see. So I guess two questions. So the first question was several learnings. I mean, I think one of the biggest learnings is exactly what I just said, where sometimes I get way in my head. And I think a lot of founders do this as well when I talk to them.

00:05:09 Brendan: And you just circle around. The only thing that matters is just can you sell something honestly at the end of the day? And then I think the pieces can come into place from there. I talked to so many founders and they create these crazy plans and they have these crazy ideas and they're just circling around actually getting out there and trying to sell something.

00:05:31 Brendan: And it takes I mean, that's why my second company failed. We built for a year. I got literally just build product for a year. Didn't talk to anybody, didn't validate, didn't charge. And then after a year, you go out and no one cares.

00:05:45 Brendan: And you haven't learned anything and now you're just starting to learn and you're just starting to iterate. And I was tired and I was, this is so far off the mark. So, so far that, we just need to do a complete pivot. So I think some of my learnings really come down to that.

00:06:01 Brendan: And even with Sunset, obviously that's how we started, but that's how we're exploring all these other adjacent problems that come our way so for instance, like distressed asset and finding buyers. We're just playing around with that. Super willy-nilly. We're not building a whole tool. We're not building a whole, none of that.

00:06:18 Brendan: It's just, we found outside tools, outside auction sites. And we're just testing them out and seeing if there's something there. So anyways, I think that's really commonplace startup advice. I mean, I've listened to all the podcasts. I used to hear the same stuff and then you just don't do it because I think at the end of the day, it's fine.

00:06:35 Brendan: You just need to go through it. You need to have that failure. You need to have that thing not work out and go from there. But going back to your other question, yeah, being a banker, I know some days, man. I just listened to podcasts and they're talking about how much bankers in New York make. And I was like, what am I doing?

00:06:53 Brendan: But after the second company, after my second company didn't work out, I went back into the job market. So I consulted for a bunch of founders, different YC's sub-companies, worked with Roger Lee, who started Human Interest. Now he's working at Comprehensive.

00:07:07 Brendan: So I worked with him for a year and a half and he is the smartest guy I've ever worked with, best founder I've ever worked with. I love that guy. He's incredible. So I'm so glad I did that.

00:07:19 Brendan: But there was something really validating about that because I was working at probably the best company I could have been working at with the best people I've probably ever worked with. And I was still nights and weekends. I mean, I played around with so many weird ideas during that year and a half.

00:07:35 Brendan: I had a tea concentrate company. I was doing a bunch of real estate stuff. I just couldn't stop trying to make things. And so that's kind of where I'm at. It just, I can't stop. So unfortunately, I loved it.

00:07:48 Jenny: I love it. You feel it in your bones. So you're not that far into the company, but why don't you tell us a little bit about getting it started and then maybe getting the band back together. Seeing some of your old folks that you've worked with before are part of the team. So what was that like?

00:08:02 Brendan: It's been a very interesting journey. And a lot of that due to what I was saying before, where we're selling stuff. Again, we don't do that anymore. And a lot of those early folks, by the way, I refunded their money and I didn't actually dissolve them because I don't know what I'm doing and I want to make sure we do everything really above board.

00:08:20 Brendan: But for this company, we've been doing everything super manually for a very long time and purposely. But it's interesting, the cons of doing that are scale and this concern of like, hey, are you ever gonna be able to automate this whole thing, things along those lines.

00:08:39 Brendan: The pros though, which I think far outweigh that, is I think one of the biggest things a lot of folks always wonder is what do I build? When do I build it? How do I prioritize it? Blah, blah, blah, blah, blah. It becomes really easy.

00:08:55 Brendan: At this point, we've dissolved 75 plus companies, something like that. It becomes pretty easy once you do 50 manually to know exactly what's worth automating and what's totally not worth automating.

00:09:08 Brendan: So obviously not all businesses can function like that and not all things can be Wizard of Oz-y at first. But if you do have an idea that works like that, I think that's extremely helpful in terms of product building after that. I'm concerned I just lost your thread. I forgot the original question.

00:09:26 Jenny: It's all good. I love the, uh, I love the free flow getting the band back together. You're team.

00:09:30 Brendan: Oh yeah.

00:09:31 Jenny: I know you have your CTO joining as someone that you co-founded another company with. So just tell us what it's like to recruit a team now that you've done a few startups and you really know what good looks like.

00:09:42 Brendan: Yeah. I mean, yeah, I brought Jono back in. He's who I went through YC with originally, started both companies in the past with him. So it's really, really nice to have him back. Obviously just working with someone who you've worked with for many years and they know your strengths and weaknesses, you know theirs and it's a breath of relief, cause when you're just all alone, it's very stressful.

00:10:08 Brendan: But yeah, in terms of building a team, I mean, it's super challenging. I don't know, I wish I'm really still learning so much there. But it's, it's just, it's hard to find folks at such an early stage of a company who are going to have that bone to figure these things out and want to figure them out and want to work hard.

00:10:30 Brendan: And it's just not for, there's nothing wrong with it, but it's really not for most people. This type of environment isn't. And also we're not one of those crazy, we're not an insane startup that's like, oh, you have to work a million hours. But it's just so much uncertainty.

00:10:44 Brendan: So many things are on fire, especially as we've been scaling more and more. And I wish I had more of a words of wisdom, but come back to me in a few months and hopefully I'll have something else.

00:10:54 Jenny: All right. I like it. Well, let's continue on that thread of challenges. Now this is your third or fourth company. What's been some of the biggest challenges?

00:11:01 Brendan: I think this company specifically has a ton of interesting challenges, but comes along with very interesting opportunities. I think one of the biggest things… so also going back in terms of learning for previous companies and you see this tweet, everyone sees this tweet all the time, which is like first time founders care about product and second time founders care about distribution, but it is totally true.

00:11:23 Brendan: Cause then you realize it doesn't matter if you build a great product. Once you build a great product and you realize no one cares at all and no one wants to pay you, that's when you finally realize that the product doesn't matter as much as the distribution. So this company specifically has, very, very challenging distribution question.

00:11:42 Brendan: As you can imagine, we help founders wind down. It's a little bit, potentially a little bit jarring, a little bit challenging to just reach out to founders and do a cold outbound strategy where like, hey, are you dying? Are you not doing that well? Do you want help? That's maybe not the best approach. So for us, it's really been about figuring out how do we get channel partnerships to work.

00:12:06 Brendan: So all of our leads, I guess, as you can call them, come through VC funds, accelerators, law firms, other founders, content that we create. So writing the playbook for go-to-market in a very new market, this is not a typical B2B, SaaS customer AI success tool. You just can't use some of those playbooks that other people have written. That's been one of the bigger challenges. We're still very much in the process of figuring out what that playbook looks like.

00:12:37 Jenny: Awesome. And then on the flip side, some of the opportunities right now. I mean, obviously, unfortunately, a lot of companies are struggling. But what's your why now moment, would you say?

00:12:48 Brendan: Yeah, I mean, like you're saying, I mean, the why now, is a lot of companies are struggling, obviously. So I think that's pretty apparent. But I think as we've been getting more into this space and let's call it the end of life space, we're just seeing so many adjacent problems. So, acquihires and asset purchase sales and distressed assets and bankruptcies and assignment for the benefit of the creditors.

00:13:11 Brendan: And there's just so many interesting things here. And again, most companies have to go through some wind down at some point in their life, right? If you get an acquisition, it's most likely going to be an asset purchase sale and you're going to have a stay behind entity that you need to wind down.

00:13:27 Brendan: So, I think there's just so much opportunity for growth and there's pretty much no one addressing this whole end of life space for startups. But yeah, as I mentioned, the challenge that comes along with it is writing the playbooks and figuring out how to get in front of people.

00:13:41 Jenny: Makes a lot of sense. What keeps you up at night in this business then? Touched on it a little bit, but.

00:13:46 Brendan: Yeah, what keeps me up at night?

00:13:48 Jenny: The long term.

00:13:50 Brendan: I think for probably all other founders out there, my rational things that keep me up at night are, well, going back. Our business, like most businesses, but our business especially is very word of mouth centric and very referral based. So what keeps me up at night, which is totally rational, is like, Oh my God, we're going to screw up this company and then it's all going to go to shit.

00:14:08 Brendan: They're going to hate us and tell all their friends that they hate us. And no one's ever going to use us again. That's my totally crazy irrational thoughts. I think what actually keeps me up at night is we built a company in a way, again, going back to, we try and do everything really above board, and really protect the founders who work with us.

00:14:27 Brendan: So when you work with us, you're working with legal, you're working with tax professionals, you're getting legal advice from legal accounts, you're getting tax advice from tech. These are humans though, and their models are based on hourly fees. And so I think something that keeps me up at night is how do we scale and automate some of that?

00:14:45 Brendan: How do we scale and automate while still providing that level of care and service and protection? That's probably a big thing that keeps me up at night.

00:14:53 Jenny: What's your superpower? If I was to ask Jono or Alana.

00:14:56 Brendan: Oh my God, I don't know what Jono would say. That's a good question. I mean, I think in general, one of my superpowers is, I think there are not that many founder designers out there. This is just a giant UX challenge, right?

00:15:09 Brendan: This is just a service design issue. You can go get your company dissolved with a law firm, an accountant, but the experience is horrendous and you're doing all of it yourself and you're trying to figure it out.

00:15:23 Brendan: So I think my superpower, especially with a business like this, is doing the customer research and really trying to figure out what is that ideal customer experience and how do we get there as quickly as possible. I would say that's probably it.

00:15:37 Jenny: What's one idea that experts in your field say that you disagree with?

00:15:41 Brendan: Oh, man, I've got so many here. One big one, I mean, because we're on, obviously, invested in us. So didn't hear those from you luckily. But oh my God, the amount of calls that I've had where people are like, how big is this market really?

00:15:52 Brendan: Are there really that many companies shutting down? I feel like that one is. So there's over a million businesses in the US that shut down per year. And as I was saying before, almost every company shuts down.

00:16:03 Brendan: The companies that don't shut down are the ones that live forever or IPO, but pretty much outside of that, even if you're getting sold, like I mentioned, you're gonna be winding down the stay behind entity. So I think that's a big one.

00:16:15 Brendan: When I was first starting out too, I was talking to other professionals in this space, bankruptcy people, et cetera. And a lot of them are just, there's no way you can make money with just doing these more standard dissolutions. No one's going to pay for that. You're never going to make any margin, blah, blah, blah.

00:16:32 Brendan: That's obviously not true. Those are probably some of them. Oh, and recurring revenue. People are right. Recurring revenue is awesome, guys. If you've got a recurring revenue business that's going well, keep doing it. I'm jealous.

00:16:44 Brendan: But going back to what I was saying before, SaaS is 15 years old. This is a brand new concept. Most businesses, giant businesses, these are transactional revenue companies. And you can build incredible companies that I'm seeing even through these transactional revenue type models. Is it ideal for us? Not necessarily, but I wouldn't discount them just because you don't think it fits into the general mold.

00:17:14 Jenny: Can you talk a little bit about compliance and the shutdown process? I guess that's something that people would think about. Why should they trust a startup and how thorough you all are? So can you talk a little bit more specifically of how the sausage is made?

00:17:28 Brendan: Yeah, for sure. I mean, again, compliance to us is huge. As I was saying before, when folks work with us, they do sign engagement letter with legal counsel, they do sign engagement letters with tax professionals, every document you upload, every plan that's created, every waterfall that's generated, literally anything, any comms that you send out on behalf of the company, everything is reviewed by legal and approved.

00:17:54 Brendan: And obviously when you work with legal, there's all these limitations of liability, there's malpractice. So when you work with us, again, we want to make sure that founders are extremely protected. And those are the different pieces that we've spent a huge amount of time and so much money with other lawyers trying to figure out, right?

00:18:15 Brendan: It's not super simple to have a setup like that with a corporation and legal firms and all these things. But that's, in essence, how we ensure compliance and everything is done properly.

00:18:27 Jenny: Got it. And then just walk us through how it works. So I want to shut down my company. Who do I call?

00:18:34 Brendan: If you just go to our website or you can email me, brendan@sunsethq.com. We have conversations with every single person and we'll probably continue doing that. But yeah, we really like to meet the founder, understand what's going on and definitely gather information about the company.

00:18:50 Brendan: From there, we send over a proposal, our best model, we charge a one-time flat fee. We do that to give founders peace of mind so that they know exactly how much this is going to cost. They're not concerned about asking us questions like they are with lawyers and things like that.

00:19:05 Brendan: And our fees include the legal fees, they include the accounting fees, they include the filing fees. They really include almost everything within a wind down except for paying taxes. But yeah, once we have a conversation when folks want to work with us, we gather all their information.

00:19:19 Brendan: So previous year tax returns, investment agreements, bylaws, articles of incorporation, all that stuff, contracts. And then again, our team, our legal team creates a really comprehensive plan of dissolution. So just literally all the different steps involved.

00:19:35 Brendan: And then there's a point person on our team who will literally help these founders manage and execute as much of the dissolution process on their behalf as possible. Our whole goal is to allow founders to move on to what's next as quickly as possible, get that next job, travel, start a new company.

00:19:55 Brendan: That's all I wanted when I was shutting down. I just wanted to move on and that's really what the value we're trying to provide and just get that overall peace of mind.

00:20:05 Jenny: This is a funny question, but what would you suggest to founders when they're getting started to make the shutdown process easier should that happen to them? Are there any tips, you know, the incorporation and the states and the filings that you, when you look retroactively, you're like, oh, if they had done that, it would have been a lot easier.

00:20:25 Brendan: Oh, man, we've seen a lot of interesting stuff. Highest level, most important stuff is, I'm torn here again as a founder, right? You hear all these fantastic stories of, oh, my, the Airbnb story. I had a binder full of credit cards. I was filling up personal debt obligations with tens of thousands of dollars. And it's cool and they made it work.

00:20:47 Brendan: But unfortunately, we talked to a lot of folks that it does not work out and they drive the company to zero or they drive the company to have hundreds of thousands, not millions of dollars in debt. And all I'll say is, the dissolution process is very complex when you're solvent.

00:21:07 Brendan: When you're insolvent, you have creditors, it becomes astronomically complex, potentially highly litigious, extremely time consuming. I think one of the biggest things is just really know your burn rate, really know your runway and you should be reserving thousands of dollars to wind down.

00:21:27 Brendan: Whether or not you work with us, you should have thousands of dollars to properly wind down your company and you need to make sure you pay your employees. There are certain things, again, this conversation, not legalized, but there are certain things that could pierce the corporate veil. Unpaid wages, that is a big one. So just make sure you have enough money to pay your employees and definitely try your best and not drive the thing to zero.

00:21:52 Jenny: Yeah, it's interesting. In certain markets that we work in outside of the US, founders need to reserve that in advance, shutdown costs. So super interesting, right? And so if you hit that certain threshold, your investors or the government will make you shut down even if you're not insolvent yet. So it's interesting that we don't have that here but you always have to be thinking about it.

00:22:14 Brendan: That's so interesting. I actually didn't know that. I just learned something really cool today.

00:22:18 Jenny: Yeah, in LatAm, In Brazil. Yeah, Brazil.

00:22:20 Brendan: That's amazing. Yeah, I think the more, it's just more education, right? I think founders, a lot of founders we've talked to, they don't know how much these things are gonna cost and they have no idea that if you rack up huge debt obligations that things can get really tricky.

00:22:36 Jenny: For sure. All right, we're gonna end this with our speed round. So tell us a book you're reading or podcast or something in the media that you enjoy.

00:22:44 Brendan: Podcasts. I love My First Million. I also love Turner's podcast, Banana Capital. I feel he doesn't get enough love and he's got really interesting people on, very good stuff.

00:22:53 Jenny: I feel like he gets great love, that guy.

00:22:55 Brendan: Oh, okay, good. I'm glad he gets good love. I don't know. It's a really great. It's a good one. Books. I've done all the business. I haven't done all of the business books. I've read a lot of business books and then you get to page a hundred and you're like, oh my God, there's 400 more pages. Like what are we doing here?

00:23:12 Brendan: So I often read a lot of sci-fi and fantasy now and use that as an escape. So I'm reading a book about weird dragons, where, I don't know embarrassing stuff.

00:23:24 Jenny: All right. Well watch the space. Cause I have a book that's going to make you not hate business books. But that's all I can say.

00:23:31 Brendan: Oh my God, I'm very excited. Yeah, I mean, definitely send it to me. I'll obviously read it.

00:23:36 Jenny: Yes. So if you could live anywhere in the world for one year, where would it be?

00:23:41 Brendan: Japan, for sure.

00:23:42 Jenny: Favorite productivity hack?

00:23:44 Brendan: Oh, that's a good one. I block out, I don't take meetings unless they're, I don't have my Calendly link or anything like that. No one can book a meeting with me until 12 p.m. unless you have to ask and it has to be important and then I'll slot you in. Like this podcast, for instance.

00:24:02 Brendan: But yeah, I really protect my calendar. I just have basically back to back meetings from one to whenever. But before in the morning, I just keep that just for focus time.

00:24:13 Jenny: Glad we snuck in. All right. Where can listeners find you?

00:24:17 Brendan: They can find me on Twitter, bmaho2211, and then LinkedIn. And then you can find Sunset at sunsethq.com.

00:24:29 Jenny: I love it. All right. Well, you're an incredible guest. Thanks for joining us and good luck with Sunset.

00:24:35 Brendan: Thanks, Jenny.

00:24:37 Jenny: Awesome.

00:24:39 Scott Harley: Thanks for joining us and hope you enjoyed today's episode. For those of you listening, you might also be interested to learn more about Everywhere. We're a first check pre-seed fund that does exactly that, invests everywhere. We're a community of 500 founders and operators, and we've invested in over 250 companies around the globe. Find us at our website, Everywhere.VC, on LinkedIn and through our regular Founder Spotlights on Substack. Be sure to subscribe and we'll catch you on the next episode.