Photo by Artem Beliaikin on Unsplash
This story starts with Dori Yona being upset that his friend had gotten the exact same jacket he had, but for $65 cheaper. He vaguely remembered there was a “price protection” mechanism on his credit card and contacted them to have the difference refunded. Many calls and even a fax later, he did get that money back, but he thought there had to be a better way. Earny was born.
The proposition was fairly simple: Earny would handle all the hard paperwork Dori went through and keep 25% of whatever was refunded. What made that possible was actually quite complicated. Earny had to track prices across whatever you were buying, so they needed access to your emails and receipts to find out which products you were buying. Then they had to monitor those prices across different retailers, which could sometimes be complicated by dynamic pricing. They also had to know the policies of the various credit card companies.
Despite how challenging it was to build the machine for Earny, it worked. They picked up $14M in funding while attracting 3.5M users. The credit card companies hated them for exposing a policy that they liked to advertise but didn’t really like to fulfill. One of the major banks told them that Earny sent them more volume of requested refunds in one day than they had received in a year.
Turning Point
But despite this success, one of the main investors was unhappy with the company’s growth trajectory and demanded a shutdown plan: “We don’t see you growing, and we don’t think you can get more investment, so we would like to see a shutdown plan.”
Dori had two other founders, and they wrestled with this devastating news. They had spent six years building and scaling Earny, but now they had to follow the directions of the investors, the people who were funding the business, and come up with a shutdown plan. Dori did end up developing that plan over the next 30 days, and the investors signed off on it. They also began making strategic cuts and layoffs.
But, at the same time, they had a consumer insights and trends business that was really taking off. Because they had SKU-level data through monitoring purchases of their millions of customers, big players like Procter & Gamble were sniffing around. This was not Earny’s core business, but it was its fastest-growing product line, and before they knew it, Dori and his founders had received a cash and equity offer, which they accepted.
What Happened Next
Dori took about 18 months off, but during that time, he went back to the pain of shutting down and realized there might be a market for helping others shut down. He found out that four million companies shut down every year, which is a very good market to address. Simple Closure was born to help companies shut down efficiently and legally, avoiding headaches and penalties in the years to come. One of Simple Closure’s products is Asset Hub, which serves as a clearinghouse for the IP and other assets these former companies still held that had value and could be sold.
Frequently Asked Questions
- Dori said that his advisor told him during the sale that there are three types of exits: car-changing, house-changing, and life-changing. The Earny exit was a car-changing exit. He has no regrets, and indeed, the seed for his current company was planted during the toughest days at Earny.
- Dori noted that the most important asset for any entrepreneur is time: what is the opportunity cost of working on this project instead of another? The stress of the request for a shutdown meant that the founders had to come to grips with where each of them was on their own journeys, reminding everyone that while founders can start together, after years of working on a project, alignment can fray and break.
- What were the details of the exit? Due to legal agreements, Dori wasn’t able to share too much beyond the “car-changing” remark above. It was a cash and equity deal, though he and his founders were able to get better vesting schedules because there were competing offers. All three of them had left the new company by the end of nine months.
As always, we are here to help you on your business journey, whether you are buying or selling a business. Reach out today.