San Francisco-based Starcity, once a promising startup that was hoping to launch a new way of living for a younger cohort hungry for communal accommodations, is officially gone. The remaining two entities of the company, Starcity Properties and Starcity Ventures, filed for Chapter 7 bankruptcy earlier this week in the United States Bankruptcy Court for the Northern District of California. The act marks perhaps the final act of administrative effort by an organization that just 18 months ago was able to raise a B round of $30 million ($51 million in total since its founding).
Liquidation under Chapter 7 is a common form of bankruptcy designed for businesses that choose to terminate their enterprises. The filing provides relief to the debtors regardless of how much money is owed or whether the debtor is actually solvent. However, an appointed trustee of Chapter 7 liquidation will work to convert the debtor’s assets into cash and distribute them among the creditors.
Starcity’s two filings on October 6th outline the company’s assets and provide details about the claims various enterprises have made against the company. It is likely that few, if any, of those claims will see any compensation from the assets that remain in the two entities, mostly because the majority of the assets are tied up in accounts receivable, and collecting those funds may also prove to be a challenge.
In total, the two organizations have around $8 million in assets, of which around $5.2 million are in accounts receivable. The remainder sits in deposits and prepayments, around $583,000, and another $2.2 million is in investments.
Against the assets of Starcity Ventures, which total $4.8 million, there are three creditors who have secured claims that total over $6.8 million. All three are disputed, but they include AMZ Group of Brooklyn, NY, which claims just over $5 million of debt, C2K Architecture of Rancho Cucamonga, CA, which is owed $1.5 million, and Silicon Valley Bank, which has a claim of roughly $290,000.
Nonsecured creditors include Alrai Holdings of New York, which claims an unsecured promissory note in the amount of $1.5 million, and San Francisco-based Webcor, which is owed $335,042.
Starcity Properties assets total around $3.2 million with liabilities totaling $9.8 million. Most of the assets here are also tied up in accounts receivable in the amount of $2.6 million, and most of it aged over 90 days. Secured property creditors are AMZ Group, which claims just over $5 million, Celtic Bank, which has a claim of $167,000 of secured short-term capital, Fundbox of San Francisco, which claims $45,000 of debt, and Silicon Valley Bank, which is owed around $290,000. These four total just over $5.5 million.
Unsecured claimants include three founders of the company, Jesse Suarez, who is owed $55,000, Jon Dishotsky, who claims $27,500, and Mohd Skrani, who claims $55,000. These three have priority claims.
Non-priority creditors include a number of trade partners, professional services firms, and in some cases lenders of various debt. Global engineering talent agency Andela is owed $149,000, leasing CRM provider Anyone Home claims $9,667 of debt, the landlord of the company’s headquarters is short $343,000, and credit card Brex is owed over $105,000. Business Wire and Costar are owed $12,000 and $7,000, respectively, and data analytics firm Looker is hoping to regain $30,000 of debt. Commercial construction company Pankow is owed $62,909 for its work, and a number of law firms have their claims listed, as well. In total, these creditors are seeking $4.3 million, which they will likely have to completely write off.
Unfortunately, the founders, Jesse Suarez, Jon Dishotsky, Josh Lehman and Mo Sakrani, are also listed as co-debtors against a number of claims, which could bring their personal assets into play. On top of that, there are eight breach of contract cases filed against Starcity Properties, which are all pending at the moment.
Binder & Matler of Santa Clara is helping Starcity with the filing, and the law firm was compensated in advance for its services. It received two payments that total $35,338 for the service of filing the Chapter 7 bankruptcy and providing financial analysis and assistance in winding down 16 separate affiliated entities, as well as providing an analysis of alternative liquidation.
Starcity has also defaulted on a loan that was secured by its property located at 199 Bassett Street in San Jose, according to reporting by the Mercury News. The company was planning to build an 800-unit co-living building at the site. The loan was used in part to acquire the site from Cupertino-based KT Urban, which also provided an additional $6 million in financing in form of a promissory note. KT has since sued Starcity for failure to pay on that loan, as well.
In just five years since its founding in 2016, Starcity was able to sell select property and development services agreements to Common Living for an undisclosed price. A number of employees associated with those properties and a group of engineers and administrative staff also joined Common. According to a transfer document attached to the Chapter 7 filing, the transfer of these was issued with the expectation that Starcity’s creditors and shareholders would receive shares of Common’s stock in the amount of $750,000 with an early out of up to $6.5 million.
However, due to a need to cut staff, the agreements were transferred prior to the finalization of the asset purchase agreement, according to the document. None of the Starcity entities have entered into a formal agreement with Common or received explicit consideration for the transfer.
During the summer of 2021, when Starcity and Common announced their merger, former Starcity CEO, Jon Dishotsky, stated in a LinkedIn post, “Excited to share our news today Starcity + Common joining forces. We have been huge admirers of Brad Hargreaves & the team since the early days! Words don’t do what we’ve built justice. I have said it before, and I’ll say it again: I am honored to have had the privilege to build Starcity. I’m looking forward to the next 5+ years with Brad and Common.”
Dishotsky has since left Common, according to a source, although his LinkedIn profile states that he’s presently there. He maintains, according to LinkedIn, a part-time position as a venture partner in Giant Ventures and is an angel investor with Draft Capital.