11 ms·

Startups.co to Acquire Zirtual, Service to Resume

dpiers 11y ago
This is an ideal outcome for a situation where the failure of one person to do their job resulted in 400 employees losing theirs. As CEO, it's your responsibility to understand your runway and know whether your business can afford to be operating in a month or two. If it can't, you need to reduce your burn. Depending on a last minute cash infusion to avoid telling your employees things are looking rough means you failed to do your job and run a sustainable company.
- einarvollset 11y ago
  This is an incredibly naive view of how SV works. See e.g. http://techcrunch.com/2015/07/25/startups-and-the-big-lie/ http://techcrunch.com/2015/07/25/startups-and-the-big-lie/
  - pbreit 11y ago
    Not as naive as yours is overly cynical.
    - einarvollset 11y ago
      Perhaps, but experience does that ;)
      - pbreit 11y ago
        Well, I've been around the SV block once or twice.
  - dpiers 11y ago
    I have a rather enlightened view of how SV works. I was the primary engineer on Uber's promotion and referral system for most of last year and ended up transferring to the internal audit team. I have a knack for risk identification and management. There is a difference between a well-run company with manageable burn that must raise capital to continue growing, and a company where the realistic prospects of a capital infusion are slim and the financial situation is dire. I used to work in the game industry, and both studios I worked at ended up gradually laying people off and eventually shutting down. Layoffs are the expectation for a struggling company - sudden shutdown is a sign of poor executive leadership.
    - einarvollset 11y ago
      Honestly no offense intended; however, even if you're the VP of risk management for Uber currently - a company with 9K employees having raised $6.9B - that in no way what so ever gives you any insight as to the usual way in which young (series A say) companies operate. None. Zero. Zilch.
      - dpiers 11y ago
        I'm not arrogant enough to claim to be an expert, but I have had a decent number of experiences for someone my age. I grew up in a small family-owned sandwich shop (which failed in 06 after 20 years). I worked for multiple mid-sized game development studios before I moved to SF to work for a post-series A 13 person YC startup that I watched grow to 50 people. I spent some time at BitTorrent, which has had its share of financing and staffing fluctuations over the years. I've been a part of a number of companies as they've succeeded and failed, and I've learned the difference between doing so gracefully or incompetently.
- cl42 11y ago
  Thank you for writing this. As a startup CEO with 12 employees, I have a daily reminder of how much cash is in the bank. It is absolutely unacceptable and ridiculous for a CEO to mismanage a company and then write a blog post saying "Oops, burn!"
  - pbreit 11y ago
    Also considering that "burn" is one of the very few things that is wholly within your control.
    - themartorana 11y ago
      At first I thought "this statement is madness!" Then I thought about our burn, what the spreadsheets look like, how we estimate runway, and so on, and I realize this is uninformed madness. If you believe this, then you understand that 400 people losing their jobs is the definition of the wholly controllable burn.
      - pbreit 11y ago
        I'm not sure I follow.
  - rokhayakebe 11y ago
    Let us wait until you have 400 employees.
    - cl42 11y ago
      400 employees will mean I still have a spreadsheet that tracks my cashflows and ensures I run a regular town hall to inform employees where we are. At what point does one not have such a spreadsheet/dashboard/report? Heck, a 400 you should have a part-time or full-time CFO who manages much of that for you to avoid such situations.
      - nedwin 11y ago
- doomspork 11y ago
  I often wonder/worry that these sort of "bailouts" and acquisitions reward founders for poor decision making.
  - cvgraham 11y ago
    I am guessing the founder in this case is going not going to be rewarded at all. Sounds like the company had a lot of debt and the "acquisition" was an asset sale. This means that they startups.co bought the assets and left the original company with the liabilities (aka millions of dollars debt). The Zirtual company will likely have to go through a chapter 11 which will be painful. She might get a little bit of extra salary from consulting for the new company but I'm guessing that's it. Overall I am guessing this is a horrible experience for her.
    - toomuchtodo 11y ago
      > Overall I am guessing this is a horrible experience for her. You either succeed or you learn.
    - doomspork 11y ago
      Thanks for the reply cvgraham!
- chermanowicz 11y ago
  I can't say I'm surprised. I watched her speak at a conference once and was alarmed at how incredibly ill-prepared she was to run a business
7Figures2Commas 11y ago
> According to Schroter, “We were happy to step up to keep Zirtual in operation. So many companies depend on their services to keep their businesses running smoothly, and with over $11 million in earnings in the last year alone, the acquisition made sense... "Earnings" is a measure of profit. Zirtual claims it had an $11 million annual revenue run rate but, as we now know, was not at all profitable. It's amazing that in startupland folks still can't seem to use basic accounting terms properly, especially in situations particularly sensitive to their misuse.
wilschroter 11y ago
This is Wil Schroter @ Startups.co. I was a customer like many who got the same email and was disappointed. This is a great company that made some bad moves. I'm not defending that. But I will tell you - it is still a great business, although obviously with some serious challenges. Will this be an incredible uphill battle? Of course. But I believe in the company and I think it's worth it.
- doomspork 11y ago
  Will Maren Kate remain in her role as CEO?
- nhangen 11y ago
  I'm baffled that so many people claim to have had a great experience. Every single interaction I had with their team, be it management or ZA's, was a poor one. They didn't attempt to understand our business at all, and kept falling back on Zirtual related systems and lingo. Beyond that, when I found out what they were actually paying ZA's, compared to what we were paying, I was appalled.
bruceb 11y ago
Here is Zirtual's founder Maren Kate post on the situation https://news.ycombinator.com/item?id=10045423 https://news.ycombinator.com/item?id=10045423
beedogs 11y ago
"Zirtual"? Really scraping the bottom of the barrel for names these days. Edit: Really, guys? It's a terrible name.
taytus 11y ago
They should change their name :/
birken 11y ago
I did a double take at this headline because I just listened to the This Week In Startups episode [1] about this company yesterday. You wouldn't have gotten the impression the company could have gone out of business in a week after listening to that. 1: http://thisweekinstartups.com/maren-kate-donovan-zirtual/ http://thisweekinstartups.com/maren-kate-donovan-zirtual/
Lazare 11y ago
http://www.businessinsider.com.au/zirtual-suddenly-laid-off-400-employees-via-email-2015-8 http://www.businessinsider.com.au/zirtual-suddenly-laid-off-... This is weird as hell.
- spiffyman 11y ago
  > all of its rounds after seed funding were debt rounds, including one at the end of July This surprised me. They burned through a round in just a few weeks? And looking at their funding history[1], they closed $2.6M back in June. So that's $3.25M in less than 60 days. It looks like the July round was targeting $3M and they only got $650k[2]. Maybe an expected deal didn't go through and it was just as much a shock to the management as the employees. This could just be a case of unrealistically high fundraising expectations, with unfortunate consequences for everyone. OTOH, assuming they hit the end of their runway, they had a burn rate of at least $1.6M/month, so I don't know how that last round was supposed to help for long. Anyway, this is all armchair speculation. I hope their CEO can take some time and then share her experiences. It would probably serve as a good lesson for others. [1]: https://www.crunchbase.com/organization/zirtual/funding-rounds https://www.crunchbase.com/organization/zirtual/funding-roun... [2]: http://www.sec.gov/Archives/edgar/data/1566557/000089706915000411/xslFormDX01/primary_doc.xml http://www.sec.gov/Archives/edgar/data/1566557/0000897069150...
oldgregg 11y ago
Acquired all the assets?!? This seems really off, who is left holding the bag here?
- deleted 11y ago
  [deleted]
- toomuchtodo 11y ago
  Creditors of the failed company, as is traditionally the case when liquidation occurs.
BinaryIdiot 11y ago
Whoa; I literally JUST finished listening to her interview on TWiST, which aired on Friday. It sounded like a growing business even to the point that Jason claimed it could be another "unicorn". Then for it to simply implode on Monday? Absolutely amazing in the worst way, especially with the CEO constantly talking about the need for being transparent; this obviously wasn't something that snuck up on them. Edit: The CEO gives more information here: https://medium.com/@marenkate/zirtual-what-happened-and-what-s-next-f9bd493ecc49 https://medium.com/@marenkate/zirtual-what-happened-and-what... Waiting until the 11th hour to let people know you're out of runway? Absolutely terrible, in my opinion. Personally I think you need to give people notice 6 months out. Then constant updates thereafter with what you're doing, the risks, etc. Springing this on them like this is just incompetence.
- gojomo 11y ago
  6 months' notice would be absurd, and enforcing that (either legally or as an industry norm) would mean a lot of otherwise promising businesses would have to die prematurely "out of an abundance of caution". It's a speculative startup in a new category. Most of them fail. You won't get 6 months' notice when they do.
  - BinaryIdiot 11y ago
    > 6 months' notice would be absurd Why? What's wrong with "here are our numbers; as you can see we're at about 6 months left of runway but we have X, Y and Z that we believe should take care of it without issue"? Seems like being transparent in the finances would be a good thing. To me at least; I know as an employee I feel much more comfortable when I know how the company is doing. It at least let's me know I have some solid time left should the worst happen.
    - gojomo 11y ago
      Management must of course be honest. And, especially at inflection points like initial hire, new financings, or major changes in burn/strategy/etc, it should share with employees an optimistic-yet-plausible projection of the business prospects. (Attentive employees should ask; management should answer.) But once that's done – and perhaps in somewhat coarse, conditional, speculative terms – a running detailed 'soap opera' of the sustaining-funding-hunt can be destructive. Many employees would honestly not want to be distracted by a play-by-play: "that prospect fell through but we've got more meetings next week! drop dead date is still 152 days away! next update tomorrow morning!" Employees also don't want their most-jittery (but possibly still key-role) coworkers to depart early: making the worst-case scenario incrementally more likely. The balancing will always be tough: is a believed 80%-chance of uninterrupted operation enough to keep sending a cheery, full-speed-ahead message? Or must you alert, "20% chance of failure!", to everyone? (Which, of course, causes some to assume the risk is even worse, and might derail the 80% chance of success.) It's the idea of a firm, quite-long threshold – and in a startup domain that's inherently uncertain – that I find absurd. ("6 months" is three times larger than the 60-day federal law for notice of mass plant layoffs, by giant well-capitalized corporations.)
bruceb 11y ago
How is this different than Tesla? http://blog.sfgate.com/energy/2014/02/28/tesla-from-the-brin.. http://blog.sfgate.com/energy/2014/02/28/tesla-from-the-brin.... It was near death yet Musk is now a SV hero?
- adventured 11y ago
  Tesla didn't fire its workers, and had a plan to keep the business operating by selling to Google for billions of dollars (which apparently Google was on board for). When selling proved unnecessary, Musk stopped discussions with Google. It was a very different situation: Musk didn't cause the business to shut down, and had a plan for dealing with their runway running out.
rokhayakebe 11y ago
Honestly I would refrain from blaming her. There are just too many variables, many of which we can't talk about, to judge someone. Perhaps offering support, direction, and a way to rectify what is "seemingly" a mistake is more helpful.
- adventured 11y ago
  She was the CEO and particularly deserves credit for the abrupt nature of the shut-down and having not given employees warning. It was an extraordinary mistake, one that any CEO should get lambasted for. There are not too many variables when it comes to her responsibilities on that matter. It's crystal clear that she made the wrong choice in how to deal with the situation.
  - rokhayakebe 11y ago
    How is this different from say Microsoft or Yahoo giving a pink slip to 1,000 employees on a friday afternoon?
rokhayakebe 11y ago
Consider: how many businesses would be in business tomorrow if they announced today to all their users and customers how much cash they had left on hand. How about the ones that are operating in the red, should they all tell everyone? In the end I respect that they stop it at the very moment they could no longer pay instead of owing everyone one hour of work. Without more information, I would say they handled it okay.
- hipsterelitist 11y ago
  Maybe you wouldn't, but this is why financial reporting is important and often a requirement. These people bet on someone else's gambit and lost, but according to all the signs they could see, things were sparkling.
  - rokhayakebe 11y ago
    I am not saying I would not. I would have probably acted 180 degrees differently, but that does not mean she did not make the best decision for everyone involved.
ThomPete 11y ago
I have said it before and I will say it again. I really feel for the 400 employees who lost their job, but I am happy to see a sense of reality being forced into some of these companies. Building a business on people rather than tech is a much much tougher thing to do both execution wise and financially. And so the real innovation if someone wants to "change the world" without trying to cheat the system is to find a way to make a profitable business with a huge part of the business being used to pay salaries. This as we can see is a very hard thing to do. And so I applaud them for trying. For many entrepreneurs who are used to thinking about business as something which is based on software, servers and an internet connection, this is completely uncharted territory. You don't reap the benefits of scaling your business as if it's just a matter of adding more servers. The primary challenges with these kind of business if they are to be built on a solid foundation is. 1) Patience – It takes a long time to scale an employee based business up to anything worthwhile and sustainable 2) Selective – You have to be smart about which sectors actually have enough money and need for your service to make a proper ROI 3) Employee satisfaction. You can't just treat your people as if they are freelancers without giving them freelance opportunities. Instead you have to really care about your people and make them want to work for your company and do a great job.
nhangen 11y ago
Based on what I've read, clients were charged up until the last minute. I wonder how this affects them? Will Startups.co help to reimburse them in order to earn those customers back?
babababa 11y ago
It's important that one of the key lessons here is that the CEO of Zirtual, AND their investors, failed in their responsibilities during this whole fiasco. The CEO: Jack Dorsey has a fairly good description of what the CEO's role is - that of an editor (http://www.quora.com/What-is-the-role-of-a-CEO http://www.quora.com/What-is-the-role-of-a-CEO). The CEO should do 3 things: - Build and nurture the team - Communicate internally and externally - Make sure there's money in the bank It looks like Zirtual's CEO screwed up all three of these - it's inexcusable and ludicrous to think she didn't know how much money was in the bank, and the burn rate. She probably knew exactly what was going to happen, she saw the writing on the wall, and tried her best to figure out an outcome for the company and team. It could be that the Startups.co acquisition was the perfect thing to do, but to do it after missing payroll, breaking user and employee trust, and in such a ham-handed way is ridiculous. She played chicken with cash flow, and she lost. 400 employees who thought they had a job had to suddenly go through a stressful shake up, and start worrying about bills, insurance, and their livelihood, right before school season starts. The Investors: According to Crunchbase, this company raised $5.5M from VCs like Mayfield. Don't these investors have an obligation/responsibility to their Limited Partners to invest their money wisely? Don't these investors ask the CEO for monthly or quarterly financial statements (or something simpler like - "How much money in the bank? What's your Accounts Receivable? What's your monthly burn rate?"). Why didn't someone say something 6 months ago? Why didn't someone say something 1 month ago, so that there could have been a more orderly pause in the business while trying to sell it? What's the point in simply investing in deals and not spending any time to advise/help start-ups? The CEO of Zirtual could be super talented, but she's not run a start-up before. Shouldn't investors spend some time with her making sure things don't go off the rails? It's events like this which erode trust in start-ups, investors and founders.

This is an ideal outcome for a situation where the failure of one person to do their job resulted in 400 employees losing theirs. As CEO, it's your responsibility to understand your runway and know whether your business can afford to be operating in a month or two. If it can't, you need to reduce your burn. Depending on a last minute cash infusion to avoid telling your employees things are looking rough means you failed to do your job and run a sustainable company.

einarvollset 11y ago
This is an incredibly naive view of how SV works. See e.g. http://techcrunch.com/2015/07/25/startups-and-the-big-lie/ http://techcrunch.com/2015/07/25/startups-and-the-big-lie/
- pbreit 11y ago
  Not as naive as yours is overly cynical.
  - einarvollset 11y ago
    Perhaps, but experience does that ;)
    - pbreit 11y ago
      Well, I've been around the SV block once or twice.
- dpiers 11y ago
  I have a rather enlightened view of how SV works. I was the primary engineer on Uber's promotion and referral system for most of last year and ended up transferring to the internal audit team. I have a knack for risk identification and management. There is a difference between a well-run company with manageable burn that must raise capital to continue growing, and a company where the realistic prospects of a capital infusion are slim and the financial situation is dire. I used to work in the game industry, and both studios I worked at ended up gradually laying people off and eventually shutting down. Layoffs are the expectation for a struggling company - sudden shutdown is a sign of poor executive leadership.
  - einarvollset 11y ago
    Honestly no offense intended; however, even if you're the VP of risk management for Uber currently - a company with 9K employees having raised $6.9B - that in no way what so ever gives you any insight as to the usual way in which young (series A say) companies operate. None. Zero. Zilch.
    - dpiers 11y ago
      I'm not arrogant enough to claim to be an expert, but I have had a decent number of experiences for someone my age. I grew up in a small family-owned sandwich shop (which failed in 06 after 20 years). I worked for multiple mid-sized game development studios before I moved to SF to work for a post-series A 13 person YC startup that I watched grow to 50 people. I spent some time at BitTorrent, which has had its share of financing and staffing fluctuations over the years. I've been a part of a number of companies as they've succeeded and failed, and I've learned the difference between doing so gracefully or incompetently.
cl42 11y ago
Thank you for writing this. As a startup CEO with 12 employees, I have a daily reminder of how much cash is in the bank. It is absolutely unacceptable and ridiculous for a CEO to mismanage a company and then write a blog post saying "Oops, burn!"
- pbreit 11y ago
  Also considering that "burn" is one of the very few things that is wholly within your control.
  - themartorana 11y ago
    At first I thought "this statement is madness!" Then I thought about our burn, what the spreadsheets look like, how we estimate runway, and so on, and I realize this is uninformed madness. If you believe this, then you understand that 400 people losing their jobs is the definition of the wholly controllable burn.
    - pbreit 11y ago
      I'm not sure I follow.
- rokhayakebe 11y ago
  Let us wait until you have 400 employees.
  - cl42 11y ago
    400 employees will mean I still have a spreadsheet that tracks my cashflows and ensures I run a regular town hall to inform employees where we are. At what point does one not have such a spreadsheet/dashboard/report? Heck, a 400 you should have a part-time or full-time CFO who manages much of that for you to avoid such situations.
    - nedwin 11y ago
doomspork 11y ago
I often wonder/worry that these sort of "bailouts" and acquisitions reward founders for poor decision making.
- cvgraham 11y ago
  I am guessing the founder in this case is going not going to be rewarded at all. Sounds like the company had a lot of debt and the "acquisition" was an asset sale. This means that they startups.co bought the assets and left the original company with the liabilities (aka millions of dollars debt). The Zirtual company will likely have to go through a chapter 11 which will be painful. She might get a little bit of extra salary from consulting for the new company but I'm guessing that's it. Overall I am guessing this is a horrible experience for her.
  - toomuchtodo 11y ago
    > Overall I am guessing this is a horrible experience for her. You either succeed or you learn.
  - doomspork 11y ago
    Thanks for the reply cvgraham!
chermanowicz 11y ago
I can't say I'm surprised. I watched her speak at a conference once and was alarmed at how incredibly ill-prepared she was to run a business

7Figures2Commas 11y ago

> According to Schroter, “We were happy to step up to keep Zirtual in operation. So many companies depend on their services to keep their businesses running smoothly, and with over $11 million in earnings in the last year alone, the acquisition made sense... "Earnings" is a measure of profit. Zirtual claims it had an $11 million annual revenue run rate but, as we now know, was not at all profitable. It's amazing that in startupland folks still can't seem to use basic accounting terms properly, especially in situations particularly sensitive to their misuse.

wilschroter 11y ago

This is Wil Schroter @ Startups.co. I was a customer like many who got the same email and was disappointed. This is a great company that made some bad moves. I'm not defending that. But I will tell you - it is still a great business, although obviously with some serious challenges. Will this be an incredible uphill battle? Of course. But I believe in the company and I think it's worth it.

doomspork 11y ago
Will Maren Kate remain in her role as CEO?
nhangen 11y ago
I'm baffled that so many people claim to have had a great experience. Every single interaction I had with their team, be it management or ZA's, was a poor one. They didn't attempt to understand our business at all, and kept falling back on Zirtual related systems and lingo. Beyond that, when I found out what they were actually paying ZA's, compared to what we were paying, I was appalled.

bruceb 11y ago

Here is Zirtual's founder Maren Kate post on the situation https://news.ycombinator.com/item?id=10045423 https://news.ycombinator.com/item?id=10045423

beedogs 11y ago

"Zirtual"? Really scraping the bottom of the barrel for names these days. Edit: Really, guys? It's a terrible name.

taytus 11y ago

They should change their name :/

birken 11y ago

I did a double take at this headline because I just listened to the This Week In Startups episode [1] about this company yesterday. You wouldn't have gotten the impression the company could have gone out of business in a week after listening to that. 1: http://thisweekinstartups.com/maren-kate-donovan-zirtual/ http://thisweekinstartups.com/maren-kate-donovan-zirtual/

Lazare 11y ago

http://www.businessinsider.com.au/zirtual-suddenly-laid-off-400-employees-via-email-2015-8 http://www.businessinsider.com.au/zirtual-suddenly-laid-off-... This is weird as hell.

spiffyman 11y ago
> all of its rounds after seed funding were debt rounds, including one at the end of July This surprised me. They burned through a round in just a few weeks? And looking at their funding history[1], they closed $2.6M back in June. So that's $3.25M in less than 60 days. It looks like the July round was targeting $3M and they only got $650k[2]. Maybe an expected deal didn't go through and it was just as much a shock to the management as the employees. This could just be a case of unrealistically high fundraising expectations, with unfortunate consequences for everyone. OTOH, assuming they hit the end of their runway, they had a burn rate of at least $1.6M/month, so I don't know how that last round was supposed to help for long. Anyway, this is all armchair speculation. I hope their CEO can take some time and then share her experiences. It would probably serve as a good lesson for others. [1]: https://www.crunchbase.com/organization/zirtual/funding-rounds https://www.crunchbase.com/organization/zirtual/funding-roun... [2]: http://www.sec.gov/Archives/edgar/data/1566557/000089706915000411/xslFormDX01/primary_doc.xml http://www.sec.gov/Archives/edgar/data/1566557/0000897069150...

oldgregg 11y ago

Acquired all the assets?!? This seems really off, who is left holding the bag here?

deleted 11y ago
[deleted]
toomuchtodo 11y ago
Creditors of the failed company, as is traditionally the case when liquidation occurs.

BinaryIdiot 11y ago

Whoa; I literally JUST finished listening to her interview on TWiST, which aired on Friday. It sounded like a growing business even to the point that Jason claimed it could be another "unicorn". Then for it to simply implode on Monday? Absolutely amazing in the worst way, especially with the CEO constantly talking about the need for being transparent; this obviously wasn't something that snuck up on them. Edit: The CEO gives more information here: https://medium.com/@marenkate/zirtual-what-happened-and-what-s-next-f9bd493ecc49 https://medium.com/@marenkate/zirtual-what-happened-and-what... Waiting until the 11th hour to let people know you're out of runway? Absolutely terrible, in my opinion. Personally I think you need to give people notice 6 months out. Then constant updates thereafter with what you're doing, the risks, etc. Springing this on them like this is just incompetence.

gojomo 11y ago
6 months' notice would be absurd, and enforcing that (either legally or as an industry norm) would mean a lot of otherwise promising businesses would have to die prematurely "out of an abundance of caution". It's a speculative startup in a new category. Most of them fail. You won't get 6 months' notice when they do.
- BinaryIdiot 11y ago
  > 6 months' notice would be absurd Why? What's wrong with "here are our numbers; as you can see we're at about 6 months left of runway but we have X, Y and Z that we believe should take care of it without issue"? Seems like being transparent in the finances would be a good thing. To me at least; I know as an employee I feel much more comfortable when I know how the company is doing. It at least let's me know I have some solid time left should the worst happen.
  - gojomo 11y ago
    Management must of course be honest. And, especially at inflection points like initial hire, new financings, or major changes in burn/strategy/etc, it should share with employees an optimistic-yet-plausible projection of the business prospects. (Attentive employees should ask; management should answer.) But once that's done – and perhaps in somewhat coarse, conditional, speculative terms – a running detailed 'soap opera' of the sustaining-funding-hunt can be destructive. Many employees would honestly not want to be distracted by a play-by-play: "that prospect fell through but we've got more meetings next week! drop dead date is still 152 days away! next update tomorrow morning!" Employees also don't want their most-jittery (but possibly still key-role) coworkers to depart early: making the worst-case scenario incrementally more likely. The balancing will always be tough: is a believed 80%-chance of uninterrupted operation enough to keep sending a cheery, full-speed-ahead message? Or must you alert, "20% chance of failure!", to everyone? (Which, of course, causes some to assume the risk is even worse, and might derail the 80% chance of success.) It's the idea of a firm, quite-long threshold – and in a startup domain that's inherently uncertain – that I find absurd. ("6 months" is three times larger than the 60-day federal law for notice of mass plant layoffs, by giant well-capitalized corporations.)

bruceb 11y ago

How is this different than Tesla? http://blog.sfgate.com/energy/2014/02/28/tesla-from-the-brin.. http://blog.sfgate.com/energy/2014/02/28/tesla-from-the-brin.... It was near death yet Musk is now a SV hero?

adventured 11y ago
Tesla didn't fire its workers, and had a plan to keep the business operating by selling to Google for billions of dollars (which apparently Google was on board for). When selling proved unnecessary, Musk stopped discussions with Google. It was a very different situation: Musk didn't cause the business to shut down, and had a plan for dealing with their runway running out.

rokhayakebe 11y ago

Honestly I would refrain from blaming her. There are just too many variables, many of which we can't talk about, to judge someone. Perhaps offering support, direction, and a way to rectify what is "seemingly" a mistake is more helpful.

adventured 11y ago
She was the CEO and particularly deserves credit for the abrupt nature of the shut-down and having not given employees warning. It was an extraordinary mistake, one that any CEO should get lambasted for. There are not too many variables when it comes to her responsibilities on that matter. It's crystal clear that she made the wrong choice in how to deal with the situation.
- rokhayakebe 11y ago
  How is this different from say Microsoft or Yahoo giving a pink slip to 1,000 employees on a friday afternoon?

rokhayakebe 11y ago

Consider: how many businesses would be in business tomorrow if they announced today to all their users and customers how much cash they had left on hand. How about the ones that are operating in the red, should they all tell everyone? In the end I respect that they stop it at the very moment they could no longer pay instead of owing everyone one hour of work. Without more information, I would say they handled it okay.

hipsterelitist 11y ago
Maybe you wouldn't, but this is why financial reporting is important and often a requirement. These people bet on someone else's gambit and lost, but according to all the signs they could see, things were sparkling.
- rokhayakebe 11y ago
  I am not saying I would not. I would have probably acted 180 degrees differently, but that does not mean she did not make the best decision for everyone involved.

ThomPete 11y ago

I have said it before and I will say it again. I really feel for the 400 employees who lost their job, but I am happy to see a sense of reality being forced into some of these companies. Building a business on people rather than tech is a much much tougher thing to do both execution wise and financially. And so the real innovation if someone wants to "change the world" without trying to cheat the system is to find a way to make a profitable business with a huge part of the business being used to pay salaries. This as we can see is a very hard thing to do. And so I applaud them for trying. For many entrepreneurs who are used to thinking about business as something which is based on software, servers and an internet connection, this is completely uncharted territory. You don't reap the benefits of scaling your business as if it's just a matter of adding more servers. The primary challenges with these kind of business if they are to be built on a solid foundation is. 1) Patience – It takes a long time to scale an employee based business up to anything worthwhile and sustainable 2) Selective – You have to be smart about which sectors actually have enough money and need for your service to make a proper ROI 3) Employee satisfaction. You can't just treat your people as if they are freelancers without giving them freelance opportunities. Instead you have to really care about your people and make them want to work for your company and do a great job.

nhangen 11y ago

Based on what I've read, clients were charged up until the last minute. I wonder how this affects them? Will Startups.co help to reimburse them in order to earn those customers back?

babababa 11y ago

It's important that one of the key lessons here is that the CEO of Zirtual, AND their investors, failed in their responsibilities during this whole fiasco. The CEO: Jack Dorsey has a fairly good description of what the CEO's role is - that of an editor (http://www.quora.com/What-is-the-role-of-a-CEO http://www.quora.com/What-is-the-role-of-a-CEO). The CEO should do 3 things: - Build and nurture the team - Communicate internally and externally - Make sure there's money in the bank It looks like Zirtual's CEO screwed up all three of these - it's inexcusable and ludicrous to think she didn't know how much money was in the bank, and the burn rate. She probably knew exactly what was going to happen, she saw the writing on the wall, and tried her best to figure out an outcome for the company and team. It could be that the Startups.co acquisition was the perfect thing to do, but to do it after missing payroll, breaking user and employee trust, and in such a ham-handed way is ridiculous. She played chicken with cash flow, and she lost. 400 employees who thought they had a job had to suddenly go through a stressful shake up, and start worrying about bills, insurance, and their livelihood, right before school season starts. The Investors: According to Crunchbase, this company raised $5.5M from VCs like Mayfield. Don't these investors have an obligation/responsibility to their Limited Partners to invest their money wisely? Don't these investors ask the CEO for monthly or quarterly financial statements (or something simpler like - "How much money in the bank? What's your Accounts Receivable? What's your monthly burn rate?"). Why didn't someone say something 6 months ago? Why didn't someone say something 1 month ago, so that there could have been a more orderly pause in the business while trying to sell it? What's the point in simply investing in deals and not spending any time to advise/help start-ups? The CEO of Zirtual could be super talented, but she's not run a start-up before. Shouldn't investors spend some time with her making sure things don't go off the rails? It's events like this which erode trust in start-ups, investors and founders.