Odd Lots Podcast – Episode Summary

Podcast: Odd Lots (Bloomberg)
Episode: This Is What Happens When a Startup Dies
Date: August 20, 2025
Hosts: Joe Weisenthal & Tracy Alloway
Guest: David Johnson, Managing Principal at Resolution Financial Advisors

Episode Overview

This episode delves into the underexplored but much more common side of startup life: failure. While much attention is given to dazzling successes, IPOs, and billion-dollar exits, the majority of startups quietly disappear. Joe and Tracy sit down with David Johnson, whose firm specializes in the often messy, unexpected, and occasionally bizarre process of winding down failed companies—especially in the series of events, decisions, and quirks involved in monetizing and liquidating their remaining assets.

Key Discussion Points & Insights

Survivor Bias in Startup Culture ([01:22]-[02:57])

• Success Stories vs. Overlooked Failures: The episode opens by contrasting the abundance of narratives about big startup wins (IPOs, acquisitions) with the vast number of companies whose failures go unreported.
  • “You never hear about the scores of other ones that always fail.” — Joe Weisenthal [01:24]
  • Tracy points out this is survivor bias: we only hear from winners, because the failed startups no longer have a voice.

Anatomy of Insolvency and Alternative Wind-Downs ([04:05]-[06:41])

• Traditional Bankruptcy: Guest David Johnson outlines the two codes most often referenced: Chapter 11 (restructuring) and Chapter 7 (liquidation).
• Better Alternatives: For most startups, costly bankruptcy court isn't warranted. Instead, Johnson’s firm specializes in less expensive, more controlled alternatives like the "Assignment for the Benefit of Creditors" (ABC).
  • “For the companies we’ll be talking about today, it’s not a wise use of money. Especially when you don’t have an expected outcome where there will be a sale or restructuring. You simply want to shut down.” — David Johnson [06:29]

Esoteric Assets & Value Recovery ([07:25]-[13:38])

• Not All Assets Are Tangible: Many failed startups, especially in tech and biotech, own “esoteric” or difficult-to-value assets like patents, specialized software, medical samples.
• Finding Buyers: Johnson describes a rapid, highly targeted process—he calls it a “mini investment banking process”—to get the asset in front of those most likely to pay for it, often within 8 weeks, not months.
  • “There’s no benchmark for that. There’s no open outcry auction system…You’ve really got to find the right buyers, narrowly tailored, and conduct an effort to monetize those assets.” — David Johnson [07:25]

Memorable Example: Proteogenics ([12:22]-[15:19])

• Bizarre Assets: Johnson recounts liquidating a biotech whose main asset was vats of frozen vaginal fluid stored in a laboratory, alongside research data and samples.
  • “Is there a secondary market for vaginal fluid?” — Tracy Alloway [12:43]
  • Johnson explains they did sell it (and related IP) for about $2 million, mainly to repay secured lenders, though the company had originally raised $50 million.
  • Anecdote: Nearly lost the company’s backed-up technical data when the $2M intellectual property was left in a trash can during the clearance process. [15:19]

Human Psychology and Incentives during Corporate Death ([17:03]-[21:28])

• Disengagement at the Endgame: Founders, board members, and employees typically check out emotionally and practically after realizing the game is up.
• Johnson’s Role: He steps in as the impartial assignee (often through ABCs), takes over, and lets directors “never have to talk to us again.”
  • “The board generally resigns that same day,” after passing assets over to Johnson’s team. [19:43]
  • “Are you paid to be yelled at?” — Tracy Alloway [21:25]
    “I am paid to be yelled at.” — David Johnson [21:28]

The Logistics & Legalities of Unique Corporate Assets ([25:13]-[27:42])

• Strange Inventory: Stories include dealing with cosmetic surgery companies (human heads left in freezers), hazardous lab waste, nuclear material—even pawn shop gold teeth.
  • “As we were moving out, we found four or five human heads in the freezer.” — David Johnson [26:45]
  • “I divide the world into two sections. Things that are my problem, things that are not my problem. And I find that I’m much happier that way.” — David Johnson [27:43]

Creative Deals and Rapid Sales ([28:21]-[30:56])

• Unexpected Recoveries: Johnson describes a case where a company with a failed $50M sale still netted $15M in an ABC process, allowing a senior lender to be paid in full—rare in these situations.

Technology’s Role in Liquidation ([31:35]-[32:38])

• AI & Research Tools: Johnson shares that while his database and targeted outreach are crucial, contemporary AI tools (like Perplexity) help expand and refine the buyer search—especially for arcane or grisly assets.
  • Tracy tries Perplexity mid-show to find buyers for human heads, finding (real) niche companies like Skulls Unlimited. [32:01]-[32:38]

Old Economy, New Economy — All Have Baggage ([33:01]-[36:58])

• Wide Scope: From tech startups to furniture stores, to pawn shops and scooter fleets—a failed business often leaves a wake of strange, awkward, or even hazardous physical leftovers that someone has to process.

Case Study: Scooter Company Liquidation ([34:30]-[36:58])

• Outcome Variability: In Europe, Johnson’s team managed to sell a failed scooter company’s assets to a new backer, but US scooters remain languishing, abandoned and unpowered.
  • "Those scooters are still sitting on the corners of Los Angeles and Washington D.C. and maybe at the bottom of the river." — David Johnson [36:50]

Legal and Ethical Questions ([37:13]-[40:03])

• Liability for Orphaned Assets: If companies leave scooters (or other dangerous items) in public, who is responsible? If the company is gone, lawsuits become moot.
• Data Privacy: Johnson describes retreading privacy ground in tech failures. With companies like 23andMe, who owns the sensitive data—who has the right to sell? For most, that mandates formal bankruptcy court, not a quick assignment for creditors.

Determining Value for “Priceless” Things ([40:09]-[43:20])

• No Benchmarks: Johnson explains that with many startup assets, there is “no liquid market.” He contacts as many plausible buyers as possible; if multiple offers arrive, market value is set. Sometimes, no one bites.
  • “Something is worth what someone else is willing to pay for it. ...If I shop it to all of the people who should know what it is and how to value it, and they say, sorry, I'm not interested, then I can be pretty sure it's got no market value today.” — David Johnson [40:45]

Best Advice for Founders and Boards ([43:41]-[44:37])

• Time is Leverage: “Coming to us earlier rather than later is always wise.” A longer runway means more options, better value recovery, and a more orderly wind-down. Most founders wait until it’s too late.
  • “If you have six months’ worth of cash instead of six weeks ... I can do a more thorough search. ...The more time we have, the better.” — David Johnson [43:41]

Notable Quotes & Moments

• On value destruction: “It is often surprising to me that the destruction of value is so great. If you told me $50 to $100 million was invested in X and there's nothing to show for it...where does the money go? That's a very good question... I don't really have a good answer for that.” — David Johnson [17:03]

• On bizarre asset management: "As we were moving out, we found four or five human heads in the freezer." — David Johnson [26:45]

• On dealing with stakeholders: “I am paid to be yelled at.” — David Johnson [21:28]

• On optimism and failure: “I imagine that the founders of startups that might eventually fail, they're probably optimistic by nature, and so they're probably sat there thinking they might get a Hail Mary at the very last minute. And then it doesn't materialize and it's too late and they're scrambling to make payroll.” — Tracy Alloway [46:25]

Key Timestamps

• Survivor Bias & Failure Rates: [01:24]–[02:57]
• Bankruptcy vs. Alternatives Overview: [04:05]–[06:41]
• Esoteric Asset Liquidation Process: [07:25]–[13:38]
• Proteogenics Story (Vaginal Fluid): [12:22]–[15:19]
• Late-Stage Incentives & The ABC Process: [17:03]–[21:28]
• Human Heads & Hazardous Lab Cleanup: [25:13]–[27:43]
• AI Helping Find Buyers: [31:35]–[32:38]
• Scooter Company Case Study: [34:30]–[36:58]
• Liabilities, Lawsuits, and Orphaned Assets: [37:13]–[40:03]
• Establishing Value for Unique Assets: [40:09]–[43:20]
• Advice for Founders: [43:41]–[44:37]

Tone & Takeaways

Throughout, the tone is hands-on, occasionally darkly humorous, and refreshingly honest about the weird, messy realities of shutting down a startup. Johnson’s stories, from vats of vaginal fluid to abandoned scooters and pawn shop gold teeth, make clear: most failures are not clean, and someone always has to deal with the peculiar leftovers.

Critical insights: Most startups do fail. Liquidation and value recovery for failed ventures is complicated, unglamorous, but crucial. The earlier professional help is engaged, the better the outcome—emotionally and financially—for those involved.

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