Describing Boxed's Chapter 11 filing, co-founder Jared Yaman validated the saying that bankruptcy happens 'slowly, then all at once.' The process was a gradual series of breached covenants and forbearance requests that created a turbulent environment before a sudden, rapid collapse into bankruptcy.

Unlike debt-laden startups, tech giants are funding AI buildouts with cash and can weather a downturn. They fully expect smaller, leveraged competitors to go bankrupt, creating a strategic opportunity to purchase their data center assets for pennies on the dollar, thereby reducing their own future capital expenditures.

To sell a company from a position of weakness, first secure a strategic partnership. This creates dependency and leverage, reframing the eventual acquisition talk around a proven, shared success rather than a failing business.

A significant shift has occurred: private equity firms are no longer actively pursuing acquisitions of solid SaaS companies that fall short of IPO scale. This disappearance of a reliable exit path forces VCs and founders to find new strategies for liquidity and growth.

Unlike public companies, highly leveraged SaaS firms bought by PE face a brutal reckoning. With no growth to pay down debt, they must slash headcount and R&D. This leads to a long, nasty grind of declining quality and market relevance, even if customer inertia keeps them alive for years.

By creating a separate company, Spex Inc., for its AR glasses, Snap can attract external, high-risk capital specifically for that venture. This financial structure, also used by Alphabet for Waymo, allows a public company to fund ambitious projects without diluting the core business.

For years, founders of profitable but slow-growing SaaS companies could rely on a private equity acquisition as a viable exit. That safety net is gone. PE firms are now just as wary of AI disruption and growth decay as VCs, leaving many 'pretty good' SaaS companies with no buyers.

Private equity firms are no longer acquiring legacy B2B SaaS companies, even those with strong revenue ($50M-$200M+). Without a compelling AI-driven growth story, this once-reliable exit path for founders and VCs has effectively closed, leaving many companies unaware of their limited options.

Jeff Aronson reframes "distressed-for-control" as a private equity strategy, not a credit one. While a traditional LBO uses leverage to acquire a company, a distressed-for-control transaction achieves the same end—ownership—by deleveraging the company through a debt-to-equity conversion. The mechanism differs, but the outcome is identical.