Wind-Down

The orderly closure of a company, selling its assets and distributing any proceeds to creditors and shareholders in order of priority.

Example

A startup sells its equipment and software for 1,500,000 after deciding to close.

Creditors and preferences are paid first, so common shareholders commonly receive nothing.

Liquidation value — What the assets would realise if the business stopped operating and everything were sold, after settling what is owed.
Liquidation Preference — A contractual right for preferred shareholders to receive a stated multiple of their investment back before common shareholders receive anything, in a sale or wind-down.
Creditor — Someone who has lent money and is owed repayment, ranked ahead of equity holders if the borrower runs into trouble.

Acquisition, listing, secondary sale or wind-down - most exits are the first and the last — Private investments return money through a sale of the company, a public listing, selling shares to another investor, or a wind-down. Public listings are the most visible and among the least common outcomes. (9 min)
Selling early means accepting a discount; a wind-down usually means preferences take what is left — A secondary sale can return cash before a company exits, typically below the latest valuation. When a company winds down, creditors and preferences are paid first, and common holders commonly receive nothing. (11 min)
How a founder handled a failure tells you more than whether they failed — Previous startups, including failures, are strong evidence about a founder. Diligence looks at what happened, how investors, employees and customers were treated, and what the founder learned. (9 min)
Deciding a position is worth nothing is a decision, and it should be made explicitly — Companies rarely announce their own failure clearly. Setting criteria for writing a position to zero keeps records honest and stops dead holdings from consuming attention. (10 min)