Zirtual: What Happened and What’s Next

Post by babababa » Wed, Aug 12, 2015, 6:59 PM UTC

Posted this on another thread as well.

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). 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.

Post by jonsterling » Wed, Aug 12, 2015, 7:57 PM UTC

harryh wrote: post #10

cl42 wrote: post #6

"Oops, burn!" is not an excuse. Keeping silent without telling your employees is not an excuse, either. There's a reason so many investors and employees try to promote a culture of transparency at a company... Because to do anything less is a sign of (a) gross incompetence, and (b) greed. It is often extremely uncomfortable to stand in front of your employees and say "Hey, we've got 3 months left unless we hit this m…

This is an easy thing to say, but I can understand why a leader would choose to do otherwise. The risk that employees will give up and bolt thus turning failure from a likelyhood to a certainty are very real. You can't just ignore that.

I am very (twice) familiar with getting screwed because founders don't want employees to bolt while there is still a chance of recovery. The good thing was that they had the good sense to let me go before all the money totally ran out, so I was able to bridge my way to the next job, which I really appreciated.

If your company's in that position, the only ethical thing is for all employees to be well-informed of that, in advance.

Re: Zirtual: What Happened and What’s Next

Re: Zirtual: What Happened and What’s Next