Silicon Valley December 4, 2008, 5:00PM EST

Venture Capital's Liquidators

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Lately, that's a lot of assets. On a recent afternoon, Pichinson shows off a gallery of broken dreams that he and his 25-person staff call the Graveyard. It's an area behind his unassuming office building, across the street from Microsoft's (MSFT) Valley outpost and near a mobile home park where old men walk their dogs. Inside a 5,000-square-foot warehouse and two trailers are floor-to-ceiling stacks of computers, phones, patent filings, and employee records and tax returns that Sherwood keeps for legal requirements. The names on the storage boxes add up to a litany of once-promising startups whose demise or sale in some cases stretches back years: Caspian Networks, SunRocket, NeoScale, HeyAnita.

Back in his office, which features a glass case containing Barry Bonds' 500th home run bat, Pichinson explains why he's the go-to guy for tech firm shutdowns. For one thing, Sherwood has adapted a process called "assignment for the benefit of creditors" to venture-backed companies. With ABCs, a company's assets are signed over to a party such as Sherwood, which then handles asset sales, tax returns, and other minutiae, returning money to creditors. In contrast to bankruptcy, this out-of-court process is faster and cheaper, relieving boards and executives of their work duties in weeks instead of months.

VULTURE IN "A WHITE HAT"

Sherwood charges upward of $50,000 plus a success fee of 4% to 10% of the assets it sells. It also charges for other services such as providing an interim CEO. Pichinson understands the emotional impact of a company's demise, too: He used to bring in an FBI consultant specializing in hostage negotiation to work with shell-shocked or resistant executives. "Even though he's Dr. Death, he's considered to wear a white hat," says George Hoyem, managing partner at the venture capital firm Blueprint Ventures, who has worked with Pichinson on startup restructurings. "He's a very calm guy in the storm."

In the current economic tempest, Pichinson is working 13-hour days that often start at 6:30 a.m. That's a big switch from the period between 2002 and 2008, when he coasted along with two or three deals a month. Since last spring, when tech began feeling the economy's chills, he has been getting about three new deals a week. And as things get worse, he's likely to get even busier. Says Hoyem, none too happily: "There's going to be massive business for Marty."

Not all of that work is shutting down companies. About a third of Pichinson's business is in helping companies cut costs or renegotiate debt ahead of a new financing. His eyes light up as he mentions a VC who had called him the day before to shut a company down. "I think we're going to save it," he whispers conspiratorially. Even if he doesn't, he and his partners will make out just fine.

Hof is BusinessWeek's Silicon Valley bureau chief.