For more than a decade, venture capitalists and founders have clung to the belief that if a high-growth startup runs out of cash, its proprietary technology will retain enough value to soften the blow. An administrator can sell the company’s code, platform, or data to a strategic buyer and recover at least part of the investment. It is also often wrong.
When a tech startup fails, its assets are worth only what a buyer can legally use. Delivery trucks depreciate. Custom software can become a liability. If a company’s data practices, licences or regulatory compliance are flawed, even technology developed at significant cost may become unsaleable. In insolvency, regulatory compliance, rather than intellectual property, often determines whether any value remains.
Why data privacy is the ultimate gatekeeper
Every consumer-facing technology company regards its customer database as one of its most valuable assets. That assumption has shaped startup valuations for years, as user data is seen as the foundation for future revenue. When United States retailer RadioShack filed for bankruptcy in 2015, its database of 65 million customer profiles was widely regarded as one of the few assets with significant value. Without it, the brand itself was considerably less attractive.
