A tax compliance startup raised millions. Then it abruptly shut down, and the founder cut off contact.

2 months ago

On a Friday morning in September, dozens of employees at ComplYant, a Los Angeles-based tax-compliance startup, logged on to Slack to watch a video their bleary-eyed CEO had recorded in the middle of the night.”I’m coming to you all with some very unfortunate news,” the CEO, Shiloh Johnson, said in the video, a copy of which Business Insider obtained. “I know this comes as a deep shock to everyone, but the company is actually going through a wind-down process, and as a result we were ordered to furlough every employee immediately.”Johnson told employees not to talk to anyone outside the company. She promised they’d soon get their final paycheck and any severance she could offer.It took nearly two months for all employees to be paid, and they never received any severance.”We were all left between a rock and a hard place to make sure our mortgages were paid and we could pay the heating bill for our families,” said Benjamin Matthews, ComplYant’s former engineering manager. “We are still not sure if we were paid everything we were owed.”ComplYant, which raised over $10 million in venture funding, is hardly alone in its struggles. It was just one of over 3,000 startups that closed their doors last year, according to PitchBook. As venture funding has dried up, investors have been warning of a “mass extinction event” for startups.Still, amid the sea of startups closing, ComplYant’s sudden demise has been a much-discussed topic in the tight-knit Los Angeles venture community.The speed with which the firm closed was striking. Even the human-resources firm retained to help employees with offboarding, Tandem, quit soon after the layoffs because it never got paid.Shannon Flynn Bevers, Tandem’s president and founder, said that she tried to help employees but that Johnson stopped responding.”In my career, I’ve never had that happen before,” Flynn Bevers said. “When startups go out of business, they will pay employees their final paycheck. They may not be able to give them severance, but the CEO is usually around to provide answers.”The closure also offers a window into the toll of startup failure on the founder. Venture capitalists have predicted that startup founders will face an unprecedented mental-health crisis this year as an increasing number confront the cold reality of shuttering their firms.Making matters worse, many founders suffer in silence because they have been conditioned not to show weakness to their employees or investors.”The majority of VCs don’t want to hear about a founder’s mental health,” Josh Felser, an early-stage investor, previously told BI, speaking about startups in general. “It’s like, don’t ask, don’t tell.”While employees were still trying to get their paychecks two weeks after the layoff, Johnson abruptly cut off communication. She deleted her accounts on LinkedIn, Instagram, and X after saying she was admitted to the hospital for major depressive disorder.”This has been the hardest thing I have ever had to go through in my life and I am not handling it well,” Johnson wrote in an email, viewed by BI, on October 4, right before she went silent.Johnson did not respond to multiple requests for comment. BI interviewed eight former employees for this story; some requested anonymity because they were worried that speaking out could harm their job prospects. BI also reviewed emails, Slack messages, and other internal documents to better understand what happened.Despite their frustration at how things ended up, those who worked with Johnson say they mostly feel sympathy for her and miss working at a startup where they strongly believed in the mission.”I hate this whole thing because I really, really like Shiloh,” said Aerin Paulo, ComplYant’s former head of marketing. “She was the best boss I’d ever had. She was kind, considerate, and supportive.”After working for nearly two decades as a certified public accountant, Johnson founded ComplYant in 2019. She said she was tired of saving large companies millions of dollars in tax bills while getting little in return. Her goal was to help small businesses navigate the labyrinth of tax regulations from state to state.”At that point I was like, I’m pretty sure I can do this on my own and make way more money,” Johnson told a podcaster last year. She added, “I just wanted to be able to help people, and I wanted to be able to be the master of my own domain.”Johnson invested $50,000 of her own money. She said the company was generating $28,000 in monthly recurring revenue just eight months after launching.ComplYant later raised a pre-seed round from Mucker Capital and Slauson & Co., two LA early-stage venture firms. In 2021, it was accepted into the Techstars LA accelerator.The next year, ComplYant closed a $5.5 million seed round led by Craft Ventures, the top-tier San Francisco venture firm cofounded by the investor and podcaster David Sacks.”Shiloh is a domain expert with a keen product sense on a mission to empower all types of business owners with fiscal guidance,” Michael Tam, a partner at Craft Ventures, said in a press release at the time. “This is the strong combination we look for as investors and we found it in spades with ComplYant.” (Tam, who joined ComplYant’s board, and other investors — Mucker Capital, Slauson & Co., and Fika Ventures — declined to comment for this story.)As a rare Black female CEO in tech, Johnson represented a welcome success story in an industry overwhelmingly dominated by white men. She was featured on BI’s list of 71 Black women who had raised $1 million or more in VC funding since 2021.ComplYant went on a spending spree starting in 2022, growing its head count to over 50 employees and flying them to Colorado for a team-building retreat at the end of July 2023, two months before the company shut down.Employees — many of whom were meeting for the first time because the company was fully remote — kayaked, cycled, did arts and crafts, and took new headshots. At night they ate a steak dinner and roasted s’mores by the fire.”I’ve worked at other startups and never gone to something that nice,” a former manager said. Several other former employees said they found the retreat excessive for a seed-stage startup.Johnson hosted a question-and-answer session and presented a rosy picture of the company’s future. In various presentations last year, she mentioned the company had over $5 million in the bank and was raising a Series A funding round.”It did not appear as if we were facing anything dire by any stretch of the imagination,” Matthews said.But beneath the surface were significant problems.For one thing, former employees say ComplYant never developed a product-market fit. Its features, like helping businesses manually file tax extensions, were decidedly low-tech.Even though its services started at just $9.99 a month, ComplYant never had more than 50 paying users, according to former employees.”The value that we offered for our customers was just not there,” one of the employees said. “We had a few things that people would pay for, but a lot of it was just around providing tax information in a calendar format.”A few weeks after the Colorado retreat, the company missed its payroll, according to Slack messages seen by BI.”Because she was telling us that there were millions of dollars in the bank account, we felt like we were pretty good,” said Ryan Cady, a former software engineer at ComplYant. “My interpretation now is that money just wasn’t there when those paychecks didn’t come through.”Johnson told employees to take a weeklong furlough and blamed the issue on a technical snafu.”I know I’m making a million and one mistakes but I’m learning as I hope we all are,” Johnson wrote in a companywide Slack message after the furlough. “It’ll make for one hell of a book when we exit!”This was not the first time payday came late, multiple employees said.”There were quite a few missed payrolls,” said Lusely Martinez, the company’s former senior technical recruiter. “That was one of the biggest warning signs.”On September 19, a manager received an ominous message after a payment for one of the company’s vendors was declined: “All corporate credit cards for this company are locked.”Four days later, it was supposed to be payday. Martinez logged on to her computer from her home office in New York.”I had all these bills to pay, and so I was waiting for my direct deposit to come through,” Martinez said. “No one’s payroll had gone through at that point, and we were all trying to figure out what had happened.”A short time later, Johnson posted her video announcing it would be ComplYant’s final day.Employees reacted on Slack with a range of emojis – grief, frustration, anxiety, chaos, and a dumpster fire.”To be honest, I had kind of expected something like that to happen at some point,” Cady said, “but it came sooner than I anticipated.”On October 4, nearly two weeks after the layoffs, Johnson reiterated that paychecks were coming.”I owe you all a little over $598k, to which I have access to about $250k, which I also have to pay vendors with as well,” Johnson wrote. “My plan is to liquidate equity on my house, which I am doing now to make up the difference.”She also told employees they could file a claim with their state labor department or hire an employment lawyer.”But contacting investors does not help get anyone paid sooner; it actually slows things down,” Johnson said. “This is not what I had planned and not how I wanted things to go, and unfortunately, you all are casualties in the fallout, but I WILL make it right.”It ended up being another seven weeks before all employees were finally paid.Johnson had cut off all communication, and the HR company, Tandem, had stopped assisting employees after it wasn’t paid either.Johnson’s daughter, Taliah McGuire, formerly her executive assistant, sent a final email on November 20. (She did not respond to messages seeking comment and deleted her LinkedIn profile.)”My only job was to help my mother get the owed money out, and now that I have, I no longer play a part in this situation,” McGuire wrote. “I will be deactivating this info email. I am unaware of what’s going on with severance, but I am now assuming it probably won’t happen due to the lack of money.”McGuire added that her mother was pregnant.”She is still struggling mentally with the loss of her company,” McGuire wrote. “This was very emotionally draining, and we have our finances to figure out the same way you all do.”This year, Johnson, who was married last year and now goes by Shiloh Luckey, reemerged on TikTok, where she answers questions about taxes.Her account doesn’t mention ComplYant; her bio simply says, “Long time CPA.”Former employees were relieved to finally get the three weeks of pay they were owed, but they say some money is still missing.One former employee said she never received over $2,000 in expenses she was owed, while several former employees said they discovered their final 401(k) contributions never reached their retirement accounts.In a March email, seen by BI, a customer-service representative from the company’s 401(k) provider, Penelope, told a former employee, “The 401(k) contributions from your previous employer did not clear.”The former employee wrote back that his former colleagues were considering their legal options, though he later said in an ex-employee Discord channel that it probably wasn’t worth pursuing.”We’ve likely got very little feasible recourse to recoup that money,” he wrote. “It was looking promising for a bit but in the end just another jab for us all.”Making matters worse, because they were wired a lump sum of their final net pay and got no pay stub, former employees still don’t know what happened to withheld taxes.”We don’t know what was given to the government as far as our salaries and what moneys were actually sent and were not sent,” Matthews said, adding that he and his former colleagues found this all the more vexing given that the company’s mission was helping small businesses streamline tax compliance.”The irony is not lost on any of us,” Matthews said.…Read more by Ben Bergman


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