Bankrupt Unicorns by Szymon Janiak


The post was originally published in Polish on Szymon’s LinkedIn profile. Szymon kindly agreed to republish what we think is of great value to our readers.

Szymon Janiak, Co-Founder & Managing Partner at Czysta3.VC

When a company runs out of money, there is no more space for further pivots. The founders utter an epic ‘that’s enough’ and just close the company – and another adventure awaits. At least, that’s what most people may think, theoretically. However, in order to actually complete such an operation in Poland, you need to have capital – because formalities cost money. Most often, when I talk to founders, I hear that, in the worst-case scenario, they will file for bankruptcy and the startup will no longer be their concern. Few people realize that a company may be too poor to fail. In practice, this means that the court, after considering the application, rejects it because the assets of the entity are too small to cover the bankruptcy proceedings. Going further, this amount can be up to tens of thousands PLN. The assets of startups ending their adventure at an early stage usually boil down to their intellectual property rights, or to put it simply, to the code. The fact that its value can reach hundreds of thousands or even millions PLN, but this asset is difficult to sell. Apart from that and several computers at the office, there is nothing, – and here the problem begins. Of course, there are several ways to ‘close’ a company – for example, liquidation or selling all shares. It is always worth fighting as long as possible. The key is to be aware of the possible financial consequences and prepare accordingly, not step on a landmine in the end.

From the other side of the table, there are more and more money offers from VC funds on the market. For a price, you can buy bankrupt unicorns, i.e. intellectual property or shares of companies that have failed to commercialize products. This is quite a specific situation, because the subject of the transaction are entities where often from 1 to 3 million PLN were spent on the construction of products that could not be sold. What is left, however, is the code – that is, intellectual property that can turn into a stream of real revenue, in the right hands .

To create a similar solution, e.g. an algorithm, at today’s IT prices, you would have to spend several million PLN. At the same time, buying a finished product for a fraction of this amount, even assuming that it needs to be developed further, with a number or errors corrected (or maybe you can even use only a fraction of that code), you can make a lucrative deal. Scaling will be curious, because we have historically had mostly pre-seed investments, – so at the same time, assuming that 80-90% will fall, there will be a place to go shopping.

There is still no place where such assets can be easily monetized, however. I wonder if we hope to see ‘Polish GitMarket’ soon, a place to shop for software products or code/algorithms that remained after the collapsed Polish startups.

The comment section has to add:

At the end of the day, a startup is a business. Like any business, it has a legal/formal framework making it subject to specific rules – both legal and economic. Founders often forget about this – which is not so surprising. What is surprising is how investors sometimes forget about it. Capital requirements, the ability to settle liabilities, which translate directly into the responsibility of management boards and the possibility of leaving by filing an EFFECTIVE bankruptcy application, as well as runway or burn rate, should be monitored as meticulously and systematically as other purely business KPIs. Otherwise, we expose ourselves to the risk of an alternative exit from the project and all the risks associated with it.

Sebastian Kapel, Finance Controlling Manager at BRB International B.V.

At the same time, taking over the code (even of a medium-sized project) without any support from its creators may turn out to be very time-consuming or even impossible. Tribal knowledge, unjustified architectural decisions, lack of documentation or examples of operation, – and a disaster is ready. You might as well burn millions more just to ‘understand how it works on the inside.’ It’s not a car that someone else can just get in right away and drive on.

Tomasz Dudek, Solutions Architect / MLOps, Data and Serverless at Chaos Gears

It is difficult, expensive, and risky. When I hear someone say that the lack of documentation or technical debt is a problem, I agree with them 100%. And then comes a moment of reflection on whether such a code can actually be used for something.

In my opinion, this is only possible if the software development process was organized at the highest level. Only if all of it was properly documented – starting from the requirements, through architecture, testing, and all the way to the deployment. Only really solid startups realize how important it is and build their software.

Moving further, one can also assume that if they approached the software production process so well and yet they failed to make a business out of it, something must have gone wrong. Maybe not this time? Maybe they didn’t hit the market? Or maybe they didn’t know how to sell?

If someone asked me for advice, I would honestly advise against buying intellectual property for the software of a failed company.

Maciej Kotok, Managing Director at Advisero

I’d rather this code went into the public domain, into open source. This way it could power many new projects.

Michał Łaszczewski, Chairman of the Board at the Institute for Strategic Readiness


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