[Founder82836]

Startups often have liquidation preferences in the fundraising contracts. This means investors get paid out first in a liquidity event before anyone else.

Imagine the founders raised $20M in exchange for 50% of the company. The founders make precisely zero if they sell the company for less than $20,000,001 because the investors get first claim to their share up to the amount they originally invested.

If the company goes out of business and the brand could be sold off for $50k, it doesn't really benefit anyone to do it. The VCs have better things to do with their time. They probably spent more than $50k researching and securing the initial investment. They are in the game of chasing 100x returns, not trying up their lawyers trying to reclaim peanuts. Plus, they don't want to sell their failed brands to someone who might sully their name by association. The founders would get nothing anyway from a small sale, so they just move on. The assets end up in limbo somewhere and no one cares enough to do anything with them while they wither and die.