Bench.co acquired after informing staff company was insolvent | Hacker News Reader

Bench.co acquired after informing staff company was insolvent

bench.co

I bet the acquirer got Bench for peanuts. It is worth quite a bit less than if they had made a deal 2 weeks ago, but I bet they paid a tenth.

Employer.com sounds like a brand for something like TriNet, which does payroll. I wonder if they're going to attempt to provide a service like that, and if that's a good business to be in.

They seem to overemphasize the importance of a domain name like that, though. https://x.com/JesseTinsley/status/1861243509006848065 https://en.wikipedia.org/wiki/Business.com

Employer.com is owned by recruiter.com (NASDAQ:RCRT) which itself seems like a holding company of some sort, possibly owned by Nixxy Inc: https://nixxy.com/investor-relations/

From their website: Nixxy acquires cornerstone businesses in established markets and evolves their operations with cutting-edge technology and data-driven insights.

Apparently, Recruiter.com rebranded to Nixxy, Inc. in September [1]. Since then, they have issued a vague press release on their "strategic focus" [2], spun off a company called CognoGroup which "will focus on AI-driven projects aimed at enhancing human potential." [3] and acquired JustGot2HaveIt, Inc., a wholesale gift business that sells things like tote bags and candles [4].

The company lost $13.3M on revenue of $135,886 in Q3 [5].

[1] https://www.nasdaq.com/press-release/recruitercom-group-inc-...

[2] https://www.nasdaq.com/press-release/nixxy-issues-shareholde...

[3] https://www.nasdaq.com/press-release/nixxy-announces-cognogr...

[4] https://www.nasdaq.com/press-release/nixxy-signs-letter-inte...

[5] https://app.quotemedia.com/data/downloadFiling?webmasterId=1...

The holding company may be following the model of IAC, of buying web properties ("brands") and developing them further (thru consolidation or new rev streams), to later spin them off as independent entities.

Exfil all your data and find a new service. Not hard. Cost of business with any start up, be prepared to exfil in 3 mo at any time. Run into this over and over.

I’d argue detailed accounting data is reasonably hard to package up into a nice format to easily import into a new system, especially having confidence that you migrated everything successfully without getting a nasty shock a few months down the line.

We will do this for folks (moving from Bench to QBO) for free: https://pilot.com/bench-qbo-migration

(It's a nontrivial problem but there's at least a reasonable check—"Did the balance sheet, P&L, and cashflow statement generated by both systems match")

This is very cool! Nice to see there is something in the space to unstick some very stressed out Bench customers. Making sure everything reconciles definitely makes sense, I’ve worked on ledger systems in the past so I always look at these problems with a skeptical eye :)

One of my first jobs was writing integration software for different accounting packages, and BOY OH BOY are you correct.

Many (most) packages have an API, but transferring data in and out requires deep knowledge of systems, their special pricing rules, their tax rounding rules (which is also different for every country) and many many other things, it was difficult enough for someone with years of experience in this domain to get right, the chances of even a senior developer doing this properly without field experience is zero.

Selling an insolvent company is pretty common especially in an acquihire situation

Why didn’t they hire an investment banker? If they were going to be acquired for $1 anyway, the muddled and sudden shutdown simply lost a huge number of their customers. This was moronic, they could have at least did an orderly bankruptcy and proceeded business-as-usual. Whoever is running this should never run stuff again. None of my failed businesses failed suddenly, we knew they were going to fail well before they did. We made life saving maneuvers but understood it was likely end-game.

Rumors on twitter are that they got rugpulled by a creditor calling in the debt, under T&Cs, rather than running out of money with predictable timing.

Eg see: https://x.com/pitdesi/status/1873872070331032051

A creditor calling debt because you violated your covenants is not a rugpull. That's how creditors insure they can be paid back before you predictably run out of money.

Well, I can see how it might be a rugpull or it might not. It depends on what the terms were and what the motivation was for invoking them. I don't have a dog in this particular fight.

Did they actually formally file for insolvency before the new buyout? If they did then there eventually should be an impartial report on this, otherwise we might never know exactly what happened.

At this end of the rumour mill, the covenants themselves were not the rugpull. Rather from what I’m hearing two provinces away, it was that SVB issued the debt but National Bank (who acquired SVB’s Canadian debts) called it.

tldr: that $60M series C was actually 37M + 23M venture debt from SVB who called the loan! (That is not a rugpull, that is exactly what the venture debt contract prescribes for this exact situation)

Top tweet reply is Matt Levine’s take (edit: wrong matt levine)

Additionally, fmr SVB employee replies: "SVB Canada’s loans were sold to National Bank who has some tech lending chops but no where close to SVB nor the flexibility."

That's the wrong Matt Levine mate :facepalm:

You posit that venture capitalists and acquirers would never dream of running down the clock?

I’m not sure you should be throwing words like moronic around so easily. It’s hard being a founder. Some emerge okay, others do their best and don’t.

It’s possible but something is very fishy about the whole thing. Absolute destruction of value, it isn’t an accidental event

also it’s a negotiating tactic by the acquirer, VCs do it too - why buy a distressed company today when you can run out the clock and get it for free

So much for accurate financials and peace of mind!

Godspeed to any remaining/returning Bench staff who have to deal with a whole lot of righteously infuriated customers afterward. Ugh. That’s a degree of customer support I’d never want to have to handle.

Customers will likely benefit in the short term as they can likely complete the year with Bench.

Signing up those customers for another year might be.... challenging.

I guess they have a couple months to win back some goodwill though.

I can’t imagine the negative amounts of goodwill incurred from telling all your customers that they won’t be able to file their taxes.

I wonder if there was an opportunity for the workers to buy the company. Even for pennies on the dollar.

Why would they want to? Since it can't afford to keep the lights on, and pay staff, and likely has debts, what possible upside would they be hoping for?

There's this idea that companies would just be fine if it was owned by the workers. The truth though is much more complicated than that.

Companies fail because they run out of cash. Who owns it is immaterial at that point. Are you suggesting the workers should not take salaries while they get it back on its feet?

Secondly, when you buy a company you don't get access to their working capital/ cash reserves. (By definition that's just buying cash with cash). So on top of the cash-free purchase price you still need to chip in working capital, debt payments and so on.

Changing ownership in a company requires a LOT more money than just the sticker price.

Ownership structure affects things earlier. This is too late.

I’ve seen equity financed companies get “bought” by highly leveraged private equity only to be saddled with 9 figure annual interest payments suddenly. Making them unprofitable overnight.

That couldn’t happen with employee ownership unless the majority of employee shares voted that way.

So what's happening there is that the sellers are turning a long-term asset into short-term cash.

The buyer is doing one of two things; either borrowing against future profit (ie taking on debt, then using profits to service the debt - a strategy that works well as long as profits can be maintained)

Or they are fooling a lender into paying off the old owners, selling off the assets, and then leaving the debt unsecured in the failed business. Although typically the debt is secured elsewhere etc. To the (fired employee of the now failed business) it seems like the loan caused the company to fail, but in this scenario the company was purchased to sell the parts. The company had already failed, the owners walked away, and the new owners got to be the bad guys.

Sometimes the lenders are the suckered here, but usually things are structured so the loans are in fact covered.

There are other advantages to taking profit out as interest. So simply redirecting profits into interest isn't necessarily bad for the company or owners.

Cash is an asset like any other, why wouldn't that be acquired when the company is purchased?

It can be, but you pay extra for it. In other words if the company is worth n (with no cash on hand) then it's worth n+c with c cash on hand.

Every transaction is different, but each one I've been involved in the cash part is simply removed from the equation.

To put it another way, cash is somewhat different because the value is so easily determined. $1 costs $1.

I buy a company because I value the asset more than the seller does. I see something the seller does not (or vice versa). So the value to the buyer is more than the value yo the seller. (That includes the notion of asset liquidity.)

So, at a fundamental level you don't "buy cash".

I buy a company because it has something I want. The seller is selling because they no longer want what the company offers.

The price I buy the company at is at least as much as the seller values it, otherwise they would not sell.

If I'm buying a company out of bankruptcy then either I'm taking on both their debts and their assets (including cash), or there's some way to sequester the debts from the assets, which the creditors will not accept.

I agree with all you are saying. None of which negates the point about nor buying cash.

In the case you mention (where the company is bankrupt, it has (by definition) run out of cash. Certainly there's not enough cash lying around to move the needle.

Possibly they could have, but why would they?

The company clearly doesn't work as it is.

So you buy the company and you now need $250,000 in hte next week to make payroll and rent. Where does that come from?

And each 2 week period you require the same cash infusion just to keep your job while you are losing customers due to the chaos of nearly going bankrupt.

Explain your thesis as to why the employees would buy the company and why they'd pay so much just to very tax inefficiently pay the money back to themselves every other week.

Companies don’t work until they do. Thats the new mentality anyway. And you don’t get a Series C with SVB involvement if you’re not working at some level.

I’m familiar with them. Through M&A activity and debt consolidation / refi. Like visiting a proctologist dentist and then having a colonoscopy while your accountant’s scrolling through quickbooks questioning every line item out loud while the nurse is asking how many copies of keys to your house you have.

Count the number of companies that wouldn’t be here today if they had their loan called at any given point.

if they are cash flow negative, that won't really help

> Continuity of Service: Bench customers will continue working with the same expert in-house bookkeepers they know and trust.

Translation: service is going downhill, but we're going to fight to keep you in your contracts.

> Platform Stability: Customers will retain full access to the same powerful, intuitive Bench platform.

See? We're spending money on you. Of course you have to keep paying, even if you hired another firm.

> Data Security: All customer data remains intact, secure, and protected, with no disruption to historical records or ongoing service.

Oh, and by the way, good luck exporting your data.

What an irrational and bitter utterance.

It's not irrational if you keep in mind that Bench had done a hard and sudden shutdown 3 days earlier.

Were there any staffers with founder's stock or other equity who might have been played with this maneuver?

Source

https://techstartups.com/2024/12/31/bench-a-popular-accounti...

https://news.ycombinator.com/from?site=bench.co

[dupe] https://news.ycombinator.com/item?id=42549343

Reply on news.ycombinator.com