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Startup Wind Downs: How to Come Out on Top

Even a small amount of advance planning when your startup is not in immediate financial distress can put you in a much stronger position.

Startup wind downs are not something founders usually think about until there is no other option. But for founders who find themselves in that position, juggling all the elements of a wind down (aka going out of business) can be tricky both logistically and psychologically. However, if you approach it the right way, there can be positive legal and financial implications.

In his role of VP at Sherwood Partners, Andrew Kitirattragarn, helps founders navigate the best possible route through the wind down journey. He was inspired to do this work after going through a difficult wind down himself at the CPG startup he co-founded, Dang Foods. Andrew has learned that if the wind down is done well, a founding team can gain a sense of closure (and not failure) at the end of the process.

Andrew emphasizes that doing even just a small amount of advance planning when your startup is not in immediate financial distress, can alleviate the risk of having to act hastily or haphazardly if the worst happens.

He shares valuable insights on:

  • Why planning for a wind down at 12 months left of cash runway is key
  • The empowering and positive aspects to the process that can leave in you a stronger financial position
  • How preparing for the worst case scenario can reduce your concerns
  • Support and resources to help you come out the other side ready for the next big thing!

This discussion with Andrew Kitirattragarn of Sherwood Partners comes from our show Startup Success. Browse all Burkland podcasts and subscribe to the show on Apple podcasts.

Episode Transcript

Welcome to Startup Success the podcast for startup founders and investors. Here you’ll find stories of success from others in the trenches as they work to scale some of the fastest growing startups in the world stories that will help you in your own journey. Startup Success starts now.

Kate 00:18
Welcome to Startup Success. Today, we have Andrew Kitirattragarn with us who is VP of Sherwood Partners, and we’re gonna get into Sherwood Partners and the help they provide startups around wind downs later in this episode. But first, I want to welcome Andrew, thank you for being here today.

Andrew K 00:40
Thanks for having me. It’s an honor.

Kate 00:41
We are going to get into Andrews founding experience. He was co-founder / CFO / COO of Dang Foods. Tell us about that experience. Andrew, this is a podcast for founders and we all love hearing the different startup experiences that our guests have had.

Andrew K 01:02
Yeah, it’s wonderful. I mean, I did this for 10 years with my brother, we started in 2012. My brother’s officially the founder. And it was important for me to have him keep that title. But I came on really early. But it was important for me to have him keep the founder title because I wanted him to be the marketing man. Like I wanted people to go to him. And there’s a book called like Traction. Yes, out there. Right. Yeah, that’s exactly right. And they talk about the integrator and talk about me visually. And one thing that is very clear is that the integrator shouldn’t get any of the credit. And the visionary should get all the credit. And I actually think it’s really important for the integrator to know, like, hey, like, it’s actually really good to have one face the company, not multiple faces. So I was very clear early on, like, not get the credit. But I also just knew internally that I was very important to the company, so I was fine with that.

Kate 01:59
Excellent clarification, that makes a lot of sense.

Andrew K 02:03
Yeah. Anyways, I had a little time. So I’ll give a little background. But my longer title was CFO, COO of Dang Foods, and sometimes I say co-founder strategically, like, maybe I should on this podcast. And then I was also the Chief Restructuring Officer, like I pretty much wound it down, like the executive that wound it down, and when we sold off the assets. It was happy but it wasn’t a big time sale, but didn’t make a lot of money. I managed that process. So that’s what I did for Dang from 2013 through 2023. And I did that alongside my brother, I was the integrator. My brother was the visionary. My brother officially started the company in 2012. And then I joined on in 2013. I was actually working for my father at the time. And then we all had a conversation, the father talked to Vinny and effectively said, Hey, I think you should take Andrew. So they effectively traded for me. Like, they’re like, hey, your business is scaling much faster than mine, I think you need Andrew. And I was just like, Yeah, sure. Like, I didn’t know anything about CPG. Except I had an accounting background. And I was just cool. I was happy to start something with my brother and be in the early stages. And I didn’t know what I wanted to do. But it was like he was growing really fast. And that’s fun when things are growing. So that’s how I started.

Kate 03:24
And so tell us about growing really fast and what that was like, because that’s an important distinction.

Andrew K 03:31
Yeah, to be clear. Dang Foods company. So we’re Asian American snack brand. So over time, over the 10 years, we sold coconut chips, we sell these things called Thai rice chips. Both like alternative functional snacks that are somewhat alternative to potato chips. coconut chips are a little bit sweeter, you get a lot of good fats from them. And last year we also came out with the gang bar, which is this nutrition bar, which is a low carb keto friendly bar, which came out in 2019. So that’s a little bit of background.

Kate 04:02
I love how you phrased it that your father traded you over because your brother had started this snack food food company that was growing quickly. What was that like to be part of growing quickly, scaling? Tell us a little bit about that experience.

Andrew K 04:18
It was cool. I appreciate you asking that, like my brother went in early on. And we first of all, to get to the kind of growth we just got. We had the right plan. My brother was kind of in the right place at the right time. And the coconut chips were our first big hero product. And that was really, there was no product like it out in the market in the United States. And so I was actually traveling in Thailand during my vacation from work at the time, and he called me up and I helped get him some samples. We have family over there which gives us a competitive advantage. So we got some samples of the coconut chips and brought it over. And eventually he got some traction and he had been doing this on his own but I was helping out just a little bit here and there before we started. Long story short, we were at a small grocery store and some Safeway executive saw us. And the Safeway executives tried the coconut chips, they were like, This is amazing. And they’re like, We want to bring you into all of our stores. And so all of a sudden, like, we just went from nothing to a $4 million brand. Like, because that one, one decision, which is like, which is just crazy. And it’s funny, if you think about like all these oother CPGs. When I talk to them, they’re like, Oh, we had to grind this out. We had to go door by door. That didn’t happen. We just get really frickin lucky. Sometimes I get asked the question – how much is this like luck or hard work? I think the early days, it was a lot of luck.

Kate 05:42
But being prepared when those luck opportunities came up, right? That’s the distinction.

Andrew K 05:49
Yes, yes. And it’s funny going back on it. I’m like, Oh, we could have been more prepared. And I think maybe I’m an optimizer. I think like that. But yes, I mean, I do think there was a lot of luck there. But when it happened, it was just like, Oh my God this is fun. We’re dealing with problems. And you know what you’re drawing, most people think when you’re growing, the problems are more fun, more fun, more high pressure, but they’re fun to deal with. Anyway, so I didn’t have any background in CPG. I had an accounting background from KPMG. And my brother didn’t have any background. He was actually a Food Research Analyst, and he worked for the government earlier than that. And he was kind of the visionary. He was really trying to find himself because it was like a big part of this company was like an exploration of him, as well. And I literally did everything else like I did ops, IT, finance, accounting, I did a lot of the backend work.

Kate 06:47
I love how you describe that because it resonates with a lot of the early stage startups I talked to – visionary finding yourself. So you’re having these lucky opportunities, you’re having this explosive growth? When did things start to change? What was the catalyst? Because it sounds like the products you described, right on market, you have these opportunities?

Andrew K 07:10
Great question. So around 2013 I joined. We got venture funded in 2016. And around 2018 is when things started to flatten. And I think a big reason for that, you know, hindsight is 2020 It’s easy to say this, we could have done different things. But the big reason for that is I think that the category was starting to be tapped out in terms of like alternative functional snacks that are at a higher price point, like coconut chips and rice chips, like sliced mangoes, like kale chips, chickpea chips, like all those alternative better for your chips, they’re maybe like a, you know, a three ounce bag of them was like $5, that market size is only so big, like you’re gonna have 360 Whole Foods, right, and then it’s going to be a pretty big presence there. But the velocities and how fast they sell on shelf, or just, you’re gonna get capped on that, because it’s not a big category, like potato chips. It’s not a big category, like, I don’t know, pasta or pasta sauces, or something very, very staple. And so we felt like we were getting kind of tapped out and that was part of the reason that our growth started stalling. Because we had already gotten to a lot of these distribution. And a lot of these places, there was not that much more to do. So 2018, that I could tell you about a little bit like 2020 through 2023. But high-level, we wound down the company in 2020. Tto kind of fast forward there, between 2018 to 2021, I personally, I was pretty miserable. I was going through psychological things during that time, it’s hard. When you are a venture backed company and CPG and you’re not profitable, and you’re not growing, it’s extremely hard. You have all these pressures from the investors, like you’re not the hottest new thing on the block. Like you have to manage employees expectations, and then convince them to stay even though they might have better opportunities elsewhere. Like it was a really hard place. And I remember talking to my brother, and like it was in like 2020 2021 We were trying to fundraise a little bit more to like, stay alive. And I remember telling Vince and I was like I don’t want to go out and fundraise. Because I don’t know if I believe in this anymore. Like I don’t know if I like the fundamentals. If I wouldn’t put my own money into this. Why would somebody else put their money into this? So how can I convince somebody else to put their money into this? I don’t think “checked out” is the right word. I don’t like the negative connotation with being checked out. But it was really difficult. And I didn’t know it until 2022, when i did some reflections, but I wanted out, and I had wanted out for a while. It was for really tough years of not growing.

Kate 10:11
Wow, I appreciate you being candid about it. Because I think what you said that really hit me was that you didn’t know if you would invest in it. And it’s not being checked out. But it’s just being true to what you were seeing and feeling.

Andrew K 10:28
It gets difficult, technically, like, and I don’t want to go into too much detail, but interests aren’t aligned if there’s preferred shares that are raised on the downside. That’s a technical thing but it makes things more difficult. It’s not that it can’t be worked through, it is just more difficult to work through. Anyway, that a technical thing. But aside from that, I still felt like, I don’t know if I believe it. And maybe it’s also like, I don’t know, if I want to be here that much longer. And I’m not going to invest in this money to find someone else to do that. I just don’t believe that that can happen. What’s interesting is I’ll go into this more in terms of wind down. But I’m feeling I should say this now. In our society, I think it’s so hard right now for a lot of founders that are struggling, because they have nobody to talk to, right. I mean, founders have other co-founders, right? Founders have other support groups, like entrepreneurs group, or like, YPO. And these are the sorts of situations where founders really need other people to talk to, and the public doesn’t allow it, because our society is all about not giving up. What I want to do is I want to change that perception. Because I don’t feel like I gave up.

Kate 11:50
No, I appreciate you bringing that up. Because when you talk I don’t feel like you gave up. You came to a conclusion. So let’s go there. I mean, let’s talk about the wind down. What is that like, talk us through it.

Andrew K 12:07
High level 2020, we had to cut costs because of the pandemic. We were supposed to grow a lot with our dang bar that had done really well, right? We were supposed to grow. We cut costs, late 2020, early 2021, we got to break even, which is awesome. We’re like, oh my god, it’s amazing. We got to break even. We were about doing about $10 – 12 million in sales,, we’re like celebrating, it’s awesome. Then the nail in the coffin was the supply chain 2021, like two thirds of our supply chain were from Thailand. And freight rates, it’s like you’re nodding your head. Sounds like this resonates with you. And probably your portfolio companies. Two thirds of the product came from Thailand. So the freight rates went from like $5,000 to like $20,000 per container. So that was the nail in the coffin. And then we got the board on board. And then, you know, we continue to try to sell the company during this time and that we weren’t successful, the board recommended that we start looking into options to wind this thing down. And as I started talking to counsel, I just started getting really interested in this process. I thought it was fascinating. In retrospect, and having wound it down now I’m like, what I really appreciated about this industry is like it’s the intersection of accounting, legal, and psychology. Like, what’s interesting about this is that the creditors, and the investors a lot of time on the downside, they don’t know what’s going on. You as a founder, can say ‘No, everything’s gonna be good. Like, this is what’s gonna happen. We had a little bit of bad news, but this this, this this.’ What I loved about this is like, this is the bad news. And that is it. Sorry, yeah. Everything that I’m talking about, I’d spent four years, Kate, being like, ‘and this is how we’re going to fix it’ and not really believing it. And now, four years later, I could say actually, unfortunately, there’s not an easy fix. And if you’re a creditor, we might owe you some money. Here’s our plan. We are so sorry. And if you’re an investor, I’m sorry, this investment didn’t work out for you. I’ll keep you up to date. But like your investment meant the world and this is all the things that happened. If you’re an employee, it’s like, hey, I’m sorry, this happened. We’re running out of money, but we can give you this modest severance that we were able to give. And like I loved doing this, like I loved giving people closure. And I was good at it. And like, I thought about it more. I was like, I don’t think I think the industry needs this. Like I don’t think people are going in to do this. So anyways, that happened to the company. And I had to do what was best at that time for the creditors and communicate everywhere. And I like found a small passion for doing this in the process.

Kate 14:53
I’m sure it was a relief in a sense to start speaking – I don’t want to say the truth. It wasn’t like you weren’t saying the truth before, but something that you had a little more conviction around.

Andrew K 15:05
I’ve talked about this with somebody else. And they put an analogy to it once they’re like, oh, it kind of reminds me that times like you put in your notice at work. And then like, you could say, whatever you want to anybody.

Kate 15:18

Andrew K 15:20
It feels a little bit like that. Yeah, you know, very, in a much more professional way. There was something that was extremely freeing about it. Yeah. And then there’s also, I think, as a founder, I mean, I said, I wasn’t a founder. But in some ways, I was emotionally I was a founder by title. Emotionally, I was a founder in certain ways. And I saw this value. With the four years I put in that I told you about from 2018 to 2022, where I was, we were struggling, I almost felt like I was jailed, because I couldn’t leave. And as a founder if you’re struggling, you can’t just leave or you could just leave, but that’s kind of messed up. Like why would you? Society looks at that as like, like, why would you just like you’re just leaving everyone behind there. And so there’s this internal pressure to stay. I loved the idea of being a free agent. And I think it’s maybe because I have a lot of confidence in my abilities. Like I’ve learned all these things, and I’m going to be fine. And financially I’m doing I have money in the bank. So I’m okay. And I’m in a privileged position to say this. Not everyone can say this, like, if I didn’t have any money in the bank, if I had a family to care for … I can’t just be like, Oh, I’m happy to be a free agent. No, I’d probably be like, Andrew, Go screw yourself. Like, you know, I, I’m in a very privileged situation. But I was like, I love the idea of being a free agent. Because I could dream about what was next.

Kate 16:41
So let’s talk about that. Because you said doing this work, you felt kind of a passion in the sense because you are good at it. But I also think you really get it because you were in this co-founder type position, you do this work. Tell us about your current role, and how, you know, your experience led to this role in what you’re doing.

Andrew K 17:05
What I was grateful for is that it was a very slow wind down with Gang because we had bought a whole bunch of inventory because of the crazy supply chain. So to be sure we bought. So I had like, about a nine month lead time doing part time work for Dang while I was finding my new thing, so I had time to explore. And then you hear about those founders that exit and they take a year off. Like, I felt like I did a mini maybe a half a year off, one of those, but I was like that’s so important. Like, if you’re exiting, if it’s a lot of money, it’s a little money, you just take some time off. It’s like so important. So I did some research into the field. And I saw that one of the firm’s that did these wind downs was Sherwood Partners. They’ve been doing this for a while. I met this very charming 77 year old man, Marty Pinchinson, one of the presidents of the company, and I met him at it’s called a Turnaround Management Association in Boston. I approached him. And I quoted him from one of his podcasts that he was on. And then he didn’t stop talking to me for 45 minutes. And I probably got like, 30 words in the whole time. Like he was just talking to you just like, even in part of his life, like 77 years of life. So happy that I was talking to him. And then I had listened to his podcast. And that’s at the end of 45 minutes he’s like, so what are you doing here? I was like, Oh, I’m, I might be looking for a job. And he’s like, you should join us.

Kate 18:41
I love it. What a connection.

Andrew K 18:44
And so then I interviewed with his colleagues, and then I found the people there to be very sharp. And I was like, if I’m going to learn and grow the most and in learning about this space, like this is the place to do it. And that’s why I joined Sherwood Partners. So we do insolvencies, we do turnarounds, probably the biggest bread and butter is the ABCs. But it really depends on the situation. The ABCs and assignment for the benefit of creditors, it’s effectively an alternative bankruptcy. It’s like a chapter two effectively, it’s a cheaper and a less public bankruptcy. As we’re the trustees, we make the process very smooth, we ensure a smooth landing like that’s what we do. We also do some turn around work, but that’s the main thing that we do.

Kate 19:34
So when do you normally come into the process? If I’m a founder listening, and I’ve been feeling like you were at Dang Foods, the writing starting to come on the wall, right? Like their signs are there. What where do I go? What do I do?

Andrew K 19:50
Great question. Like regardless of whether or not you call me or not, I really wanted to impart this wisdom on to others like so I’ve wound out about 10 companies this year. There are countless others that I’ve talked to that couldn’t afford us or couldn’t afford to hire, even the right counsel, because they were too late. And then those, I don’t know how they ended up, but they were not soft landings. And I’m sure that was much rockier emotionally, psychologically, from a risk standpoint for the management teams and for their investors. Even if you have 12 months of runway left, I think it’ll be good for your management team just to spend a few hours, just thinking about Plan D, just a little bit, you don’t need to do it that much. Just a little bit, thinking about Plan D, talk with your management team, talk with your board, maybe someone your board has some expertise and what that looks like, or just has been there before. Talk to your counsel about that you have a good relationship with counsel, they could refer you to a bankruptcy lawyer to like, or, you know, talk to me, the idea is that I think it’s important for founders and management teams to envision what and plan out plan D, just a little bit, and to see that it’s actually not that bad. I think why that helps is because then you’ll take the right amount of risk, and you won’t be afraid. And you’re reducing the fear. And the decisions that you make.I think it’s really healthy for companies to do that earlier. Right. Now, when you get to six months or less, I think you have to start to hone in that plan just a little bit more. That’s what I recommend. I worked with a lot of founders, and the reason why they are founders. And the reason why they’ve been so successful is that they, especially the most successful ones, is that they have a distorted view of reality.

Kate 21:40
Absolutely. All the founders I’ve worked for…absolutely.

Andrew K 21:45
Like Elon Musk is probably the biggest example of a distorted view of reality. And that’s worked so well, when you’re trying to disrupt something and create something and raising money to change the world. When it comes to winding down a business, you absolutely do not want a distorted view of this. You want to know exactly how much cash you have left, you know exactly who to pay out. Like you want the exact opposite of that. Right. I was always the opposite to my brother. So I always kind of had these skills and not until like I came into this and like, Oh, this is like, where I’m optimizing all of my skills. So if you have six months left, you don’t want to hone that on that in a little bit more. But I’m thinking at the 12 month mark, just like have a conversation about it. You even tell the board like in a worst case scenario, this will happen. And we’ll either go with Sherwood or we’ll go like we have our bankruptcy lawyer and like, this is how we’re going to wind it down. And we’re gonna be okay, anyway. Right?

Kate 22:37
That’s got to feel good. Like you’ve said, to have that conversation and think that planning, I bet a lot of founders listening are thinking now I don’t ever want to go there. But it must feel good to go there and a bit like you have some control.

Andrew K 22:51
Yeah, there’s something I mean, I go to therapy and I’ve done it for a while. And there was an exercise that my therapist took me through when I was scared of something before, like where fear really got me. And she would be like, What’s behind that? And like, what’s, what’s behind that? And she kept on peeling back these questions. And ultimately, it came down to a fear of death. Like, oh, if this happens, like, then my wife will leave me or my brothers. And then like, if that happens, I won’t have any friends. And after that, like, maybe I won’t eat and then there’s all like because of death. And the actual psychological exercise of going through that, like completely eliminated that fear. I think it’s the same thing for businesses. Go through that exercise and what that looks like. That’s not actually that bad. And like, if that happens, like we could call up Andrew, or we could call up for counsel, we call this person, like we have that person. And then I saw psychologically, I think it’s really healthy to do earlier. The other tactical reason too is to have a smooth landing, it does cost a little bit of money. And I’m not trying to push people in that direction. I don’t want people to fail. Like we don’t, I’m not rooting for anybody to fail, we have enough work as it is. But it does cost a little bit of money. And so you need a little bit of cushion. Also like a lot of founders when they say they have six months, they might only have five or four months, because there’s these fiduciary reserves like payroll, like Final 401k payouts like things that you really need to pay it payout or else the board is liable.

Kate 24:33
So go over those milestones one more time. You said 12 months and six months those two I think that I want to Yeah

Andrew K 24:44
Just high level like 12 months I think is a good time to just … in a lot of startups are probably in that situation. So it’s probably most like 90% of the startups that apply this. Listen, call up your counsel, like talk to your management team board and see if you know anybody call me up, if you need to, I’m happy to have quick calls. And just like, explore what that looks like, get some numbers, like see what that process is like, literally just like three hours till you’re board about it like, Hey, this is what could happen in 12 months in a worst case scenario, just FYI. And like your management team should know, I think it’ll be really good for you and your team emotionally just to know that. And strategically. Emotionally and strategically.

Kate 25:23
I think bringing it back to your experience at Dang, don’t you think if you had done that, during that period, you described how much better you would have felt?

Andrew K 25:36
Totally, totally. And by the way, your employees, most of your employees know that 12 months are left are six months left, and they’re probably thinking about their alternative anyway. So if you think you’re not having the conversation with them about what plan D is, that is you’re saving them. You’re not. If anything, if my boss was telling me hey, like, just in a plan D in a worst case, like this happens? I’m like, I love that you’re thinking about that. I love that you thought through Plan A through D, and you’re telling me about it?

Kate 26:09
Yes, absolutely. We’re coming up on time. This has been so fascinating. I really appreciate you being so candid and sharing what you felt and what you went through with Dang, because I don’t think we talk enough about that on this show. We talk about like, persevere, keep trying get through the lows.

Andrew K 26:28
Yeah, you’re like, persevere, keep trying. I’m like, No, give up, give up. Give up but like your entity might have failed. But that doesn’t mean you’re a failure.

Kate 26:36
And I like the really tactical helpful advice around wind downs, and how it would have helped you at Dang, and how it can help founders today, anything else you want to leave us with before we get into where listeners can find you?

Andrew K 26:53
know, I mean, if you’re a founder out there, you’re struggling. Like I’ve been there and I get it. And I hear you and I I want there. I’m doing this because I want there to be more resources for founders in hard times. And if it’s not me, I’m hoping that you can find somebody else that you’re close to or a support group that can help you through these times.

Kate 27:15
I really appreciate that answer because one of the things that’s been coming up a lot lately in my conversations with people is just how hard it is to be a founder or you know, one of those first founding members of a startup and so many people are now talking about mental health and well being founder well being, so I appreciate you saying that to everyone listening where can they find you? Like if they want to learn more about Sherwood Partners and you and your services? Where do you go?

Andrew K 27:45
Yeah, you find us on our website https://www.sherwoodpartners.com. I have my email address. Unfortunately, my last name is really long: akitirattragarn@sherwoodpartners.com. I really do care about this stuff and I’m happy to jump on an intro call with anyone that has a question about this. So you could find me by emailing me or go to the website.

Kate 28:13
Thank you. Thank you for being here today and sharing your story. We appreciate it. Thanks, Andrew.

Andrew K 28:18
Thank you so much, Kate. Appreciate it.

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