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The company is over a decade old and was not cheap to use, I don't think they could have suddenly run out of money as customers typically pay upfront and are in

The company is over a decade old and was not cheap to use, I don't think they could have suddenly run out of money as customers typically pay upfront and are in long term contracts. Could it be staffing issues? Corporate misbehavior? Data loss? Ransomware? Has a member of their team gone rogue? Misappropriation of funds? We were bench customers until a few months ago, paying thousands of dollars per year for what could only be described as hundreds of dollars worth of service. The service was not very good so moving away was an easy choice but on a per-customer basis they must be making money hand over fist. I expect we'll find out more eventually, hopefully employees will leak some insight. For now, this is inexplicable.

porter 2y ago
what service did you move to?
ezekg 2y ago
I'd guess staffing issues, since my bookkeeper would change every month. I'm still not sure how they couldn't afford to hire better staff, though. You're right that it could be something nefarious. Where did you move to?
- encoderer 2y ago
  Ah sorry to hear you were caught up in this. Cronitor uses pilot. It was a little crazy at first but the last year+ feels like they have stabilized operations.
- lotsofpulp 2y ago
  > I'm still not sure how they couldn't afford to hire better staff, Because they never figured out how to automate enough of the process to scale revenue up without scaling expenses. All the investments in these VC funded companies is a bet that the companies will develop automation that will allow them to not hire staff, period (relative to the growth in customers).
  - aitchnyu 2y ago
    Which companies have actually succeeded at becoming a profitable and break-even human-less $ESTABLISHED_INDUSTRY?
paxys 2y ago
Why do you think it wasn't possible for them to run out of money? It's not like a 10 year old business is immune to failure. The simplest explanation is usually the correct one.
- aimazon 2y ago
  Anything is possible and running out of money is the most probable explanation but it seems so hard for this type of business to get itself into this type of situation. Customers pay thousands of dollars per year, usually upfront. That’s the type of revenue predictability that most of us would love for our businesses because it makes forecasting so much easier. They must have known months ago that they were running out of money. Failing to become sustainable and going through layoffs is one thing, shutting down overnight with zero warning is another. But yes, you’re probably right, it’s just hard to imagine how they could have imploded like this.
  - BehindBlueEyes 2y ago
    And yet, it's as simple as money ran out. They never turned a profit, investors ran out, the last round of funding was a loan with strings attached that led to a bunch of cost cutting and other poor decisions that explain the poor service quality. A few staff guessed it might close 3 weeks ago at best though everything was very uncertain, but most of the accountants probably didn't see this coming either. source: I know a few former employees.
    - toomuchtodo 2y ago
      There’s an accountant shortage, so I imagine it wasn’t hard for those folks to prepare to bail, if they did.
    - bryanrasmussen 2y ago
      >but most of the accountants probably didn't see this coming either. I would expect this was the kind of thing an accountant should see coming though.
beepbopboopp 2y ago
Im betting secured debt was called. Given the "instant" nature, it likely means a debt covenant was broken, that is one of the few things that can shut a company down in 24 hours. Doubley so if the business isnt really profitable.
- theanonymousone 2y ago
  Sorry but is there some source about this for a lame person?
  - adastra22 2y ago
    "I'm betting"
  - conductr 2y ago
    I’m a CFO and was a layperson on this until I started having to deal with it. I don’t have any resources other than my work experience with a few companies that have debt covenants. First, they can be rather arbitrary as they’re literally made up for each deal and meant to align somewhat to the growth story that’s being “sold” to the lender during the debt issuance; they’re negotiated between lender/borrower so take a lot of different shapes. The ones I’ve seen are usually 1) a reporting requirement 2) monthly/quarterly/annually frequency is negotiable 3) usually have some financial metric or growth metric that the company should be hitting by a certain time. So, I’ve seen EBITDA margin, gross margin, cash flow, and revenue growth stats as these metrics. But again, it could be anything. As GP said, usually if the covenant isn’t being met but the company is profitable or has a good excuse the lender will not call the debt. They’ll work with you. I’ve seen tons of flexibility here from lenders. Usually the lender will start having more questions about the strategy and current forecasts if the metrics are underperforming and you’ll (CEO/CFO) will have to start being a bit more transparent than required or maybe just more frequent check in meetings to discuss status. In most cases, if you actually have a good story and have a healthy partnership the lender doesn’t want to call the loan and wants to see how they can help (within tolerance) get you back on track. The moment the lender calls the loan typically, in startup land, there’s no cash reserves to pay off the debt and so the company is instantly insolvent and operations cease. This is why the lender is flexible, calling is typically a nuke for the business. But also, it can be a bit of a stop/loss. Meaning the cash in the bank can at least be recouped.

porter 2y ago

what service did you move to?

ezekg 2y ago

I'd guess staffing issues, since my bookkeeper would change every month. I'm still not sure how they couldn't afford to hire better staff, though. You're right that it could be something nefarious. Where did you move to?

encoderer 2y ago
Ah sorry to hear you were caught up in this. Cronitor uses pilot. It was a little crazy at first but the last year+ feels like they have stabilized operations.
lotsofpulp 2y ago
> I'm still not sure how they couldn't afford to hire better staff, Because they never figured out how to automate enough of the process to scale revenue up without scaling expenses. All the investments in these VC funded companies is a bet that the companies will develop automation that will allow them to not hire staff, period (relative to the growth in customers).
- aitchnyu 2y ago
  Which companies have actually succeeded at becoming a profitable and break-even human-less $ESTABLISHED_INDUSTRY?

paxys 2y ago

Why do you think it wasn't possible for them to run out of money? It's not like a 10 year old business is immune to failure. The simplest explanation is usually the correct one.

aimazon 2y ago
Anything is possible and running out of money is the most probable explanation but it seems so hard for this type of business to get itself into this type of situation. Customers pay thousands of dollars per year, usually upfront. That’s the type of revenue predictability that most of us would love for our businesses because it makes forecasting so much easier. They must have known months ago that they were running out of money. Failing to become sustainable and going through layoffs is one thing, shutting down overnight with zero warning is another. But yes, you’re probably right, it’s just hard to imagine how they could have imploded like this.
- BehindBlueEyes 2y ago
  And yet, it's as simple as money ran out. They never turned a profit, investors ran out, the last round of funding was a loan with strings attached that led to a bunch of cost cutting and other poor decisions that explain the poor service quality. A few staff guessed it might close 3 weeks ago at best though everything was very uncertain, but most of the accountants probably didn't see this coming either. source: I know a few former employees.
  - toomuchtodo 2y ago
    There’s an accountant shortage, so I imagine it wasn’t hard for those folks to prepare to bail, if they did.
  - bryanrasmussen 2y ago
    >but most of the accountants probably didn't see this coming either. I would expect this was the kind of thing an accountant should see coming though.

beepbopboopp 2y ago

Im betting secured debt was called. Given the "instant" nature, it likely means a debt covenant was broken, that is one of the few things that can shut a company down in 24 hours. Doubley so if the business isnt really profitable.

theanonymousone 2y ago
Sorry but is there some source about this for a lame person?
- adastra22 2y ago
  "I'm betting"
- conductr 2y ago
  I’m a CFO and was a layperson on this until I started having to deal with it. I don’t have any resources other than my work experience with a few companies that have debt covenants. First, they can be rather arbitrary as they’re literally made up for each deal and meant to align somewhat to the growth story that’s being “sold” to the lender during the debt issuance; they’re negotiated between lender/borrower so take a lot of different shapes. The ones I’ve seen are usually 1) a reporting requirement 2) monthly/quarterly/annually frequency is negotiable 3) usually have some financial metric or growth metric that the company should be hitting by a certain time. So, I’ve seen EBITDA margin, gross margin, cash flow, and revenue growth stats as these metrics. But again, it could be anything. As GP said, usually if the covenant isn’t being met but the company is profitable or has a good excuse the lender will not call the debt. They’ll work with you. I’ve seen tons of flexibility here from lenders. Usually the lender will start having more questions about the strategy and current forecasts if the metrics are underperforming and you’ll (CEO/CFO) will have to start being a bit more transparent than required or maybe just more frequent check in meetings to discuss status. In most cases, if you actually have a good story and have a healthy partnership the lender doesn’t want to call the loan and wants to see how they can help (within tolerance) get you back on track. The moment the lender calls the loan typically, in startup land, there’s no cash reserves to pay off the debt and so the company is instantly insolvent and operations cease. This is why the lender is flexible, calling is typically a nuke for the business. But also, it can be a bit of a stop/loss. Meaning the cash in the bank can at least be recouped.