Distressed VC-backed Startup Turnarounds

Rebecca Szkutak Turnaround Venture Capitalists See Opportunity In The Current Downturn

Distressed Startup Turnaround & Recap Fund – One-Pager

1. Overview

• Concept: Acquire or recapitalize venture-backed startups that have failed to reach venture-scale, are near the end of their runway, or are suffering from founder/investor fatigue.
• Objective: Rapidly restructure and pivot these companies to sustainable profitability within 12–18 months, leveraging specialized operators and a streamlined cost structure.

2. Rationale

• Market Gap: Up to 90% of VC-backed startups fail or become “walking dead.” These companies often possess salvageable IP, data, or niche customer bases that remain underutilized.
• Opportunity: Investors and founders are motivated to exit or recap quickly to clear cap tables, recover some value, and move on. We can step in as a “friendly” buyer/partner.

3. Acquisition Criteria

• Stage: Seed to Series B (or sub-$10M revenue), with existing tech and some proof of market need.
• Distress Drivers: Short runway, exhausted founding team, pivot issues, or inability to raise further VC.
• Value Indicators: Proprietary tech, strong domain expertise, active user base or customer contracts, potential to reach break-even quickly.

4. Turnaround Strategy

• Operational Overhaul: Cut unnecessary burn, focus on core revenue-driving features, and re-align the team or bring in new leadership.
• IP & Data Reuse: Identify hidden assets—datasets, brand goodwill, or specialized technology—to monetize or pivot.
• Execution Bench: A pool of “fixer CEOs” and functional experts (marketing, sales, product) who specialize in quick restructuring.

5. Deal Structure

• Recapitalization: Acquire a controlling interest at or near liquidation value, often via equity swap plus a small cash infusion.
• Founder/Investor Retention: Offer a minority stake (5–20%) to keep them aligned with potential upside.
• Flexibility: Each deal tailored to the startup’s cap table and any outstanding liabilities.

6. Why Partner With Us

• Win-Win Exit: VC funds and founders salvage value (instead of a total write-off).
• Specialized Expertise: Our team and network have proven track records in HR Tech and SaaS turnarounds (tailor here with your experience).
• Streamlined Process: Quick diligence, minimal legal friction, immediate operational resources to reduce burn and find a viable revenue path.

7. Our Ask

• For VCs: Introduce us to “zombie” or at-risk portfolio companies that can’t raise another round.
• For Operators (CEOs): Join our bench of specialized operators to lead short-term projects or interim executive roles.
• For Founders: If you’re burnt out but still believe there’s potential, talk to us—let’s structure a deal that gives you some upside without the ongoing grind.