Zirtual died overnight, laying off 400 employees, with no word from the CEO, Maren Kate Donovan, except for a terse company email. Now it’s been saved by Startups.co and its CEO, Wil Schroter. But what happened? (Zirtual/Current Homepage)
Zirtual, a virtual assistant start-up, shocked customers and employees alike when the company shut down overnight with no warning, laying off 400 employees. Startups.co just announced that it is buying out Zirtual and will have everything back up and running in a couple weeks. But this still leaves the question: what happened to a company whose CEO just wrote an article for Fortune about the importance of transparency?
Here are the facts you need to know.
1. Zirtual Shut Down Overnight, With No Warning to Its 400 Employees
The startup that offered virtual assistant services, Zirtual, shut down overnight, deleting its Twitter, Facebook, and Google+ profiles. The business sent a terse, confusing email to employees announcing that it was ceasing operations, effective immediately. The company changed its website to say it was “pausing operations.” And just like that, it was gone. The business’s 400 employees had no idea what to think or what to do, Business Insider reported. The biggest clue was on Startups.co’s website, the company that’s acquiring Zirtual. The company’s website read: “The brief outage was due to a capital infusion that the company was counting on for expansion.”
On its FAQ page, Startups.co explained the situation in more detail. It said that the CEO, Maren Donovan, believed she could avoid having the company shut down up until the last minute. She kept trying to secure funds, but was unable to do so. Even investors had little warning, with one, @Jason, posting on Twitter that he didn’t have any idea things were going wrong until the Saturday before it shut down on Monday.
2. The Startup Had Received $5.5 Million in Funding and Then Just Disappeared
The startup wasn’t showing any signs of dying off, which was the main reason everyone was so confused. It had recently raised $5.5 million and just 13 hours before shutting down, it was still taking on new clients and accepting money, Business Insider reported. One Twitter user posted screenshots of the company accepting his money for a $1,000/month contract mere hours before it shut down.
3. Startups.co Is Acquiring Zirtual
@saraashleyo i think you missed part of the story http://t.co/GowNqSjA7S #zirtual #acquisition @marenkate @WilSchroter
Startups.co announced on its website that it was purchasing Zirtual and operations under the new company would resume on August 17. The CEO of Startups.co, Wil Schroter, was a Zirtual customer so when he got the news, he immediately went to work on getting Zirtual back online. He said they’re looking at the company structure and will determine how many of ZIrtual’s over 400 employees the company can keep.
On its FAQ page, Startups.co explained what happened:
Over the weekend, Maren worked to exhaust all options to secure funds and waited until the very last minute (start of business Monday) to cease efforts. As a result hundreds of people were caught off guard and disappointed.
4. The CEO, Who Had Just Written an Article About Transparency Three Weeks Earlier, Now Says the Shutdown Was Because of ‘Burn’
From @marenkate in her own words about what happened at VC-backed @Zirtual: “What Happened and What’s Next” t.co/1bBGHN7MEW
Maren Kate Donovan, the CEO of Zirtual, had just written an article for Fortune a few weeks before the shutdown about the importance of transparency, especially during a company shift. She said that employees needed time to adjust to changes because “what employees don’t know could ultimately hurt the entire business.” Donovan’s boyfriend had recently purchased a $1.8-million-dollar home, which some people said was very suspicious. Startups.co posted a message from Donovan on its website:
The decision to pause operations was the most difficult message I’ve ever had to deliver. I have spent every waking hour over the past four years working to build the most vibrant community of empowered workers only to have to let them know at once that we could no longer service them.
On Tuesday, Donovan wrote an article on Medium trying to explain what happened and attributing it to a “burn” that most people in Silicon Valley don’t talk about. She said that although the company had raised $5 million, it was essentially spending more than it was bringing in. Moving from independent contractors to employees played a big role in this, she said, because employees cost 20 to 30 percent more. They couldn’t give more notice, she said, because she was doing everything to try to right the ship. The law required her to fire everyone when they couldn’t make the next payroll, so she had to shut down with no notice. She wrote on Medium:
The outcome breaks my heart — hundreds of our people out of work and thousands of people losing a service they loved, and paid for, overnight… I cry for all the employees we hurt. I cry for all the clients we infuriated. And I cry for the investors we let down.
5. Employees and Customers Alike Were Confused And Shocked
This #Zirtual situation needs attention. It should serve as a lesson for founders that revenue doesnt mean success if you cant manage burn
Employees and clients were confused as to what happened, although grateful the company is being acquired. Business Insider reported that employees felt blindsided when they got the email. In fact, some employees didn’t even know until they tried to log into the Zirtual system, only to find themselves locked out. One employee told Business Insider she didn’t know until a client told her.
Donovan said on her Medium article that all employees will be compensated fully and checks are already in the mail.
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