Jason
Calacanis: (in praise of Zirtual) “I think you’re sitting on a powder
keg”
Maren
Kate Donovan (founder and CEO of Zirtual) : “Thank you”
It was only a week ago that
serial investor and This Week In Startups host Jason Calacanis (an investor in
Zirtual) was singing Zirtual and its founder and CEO Maren Kate Donovan’s
praises on his show but now it must be painful for Calacanis to watch that
episode back as he gave a glowing appraisal to a company that stopped
operations and was quickly acquired just days after the interview.
Calacanis, not exactly one to
pull punches, was relatively Zen addressing the Zirtual implosion during his
popular fan Q&A called “#askjason” (see the video below this article)
choosing to look at the situation as something for him to learn from but it’s
hard to imagine the man who put YouTube on blast while presenting at a YouTube
conference not losing his shit on Zirtual’s founder and CEO via Go To Meeting.
Being a fan of the show, I
found it painful to watch back myself as Calacanis went from one superlative to
the next about the company, its CEO, and particularly it’s potential for growth
as Calacanis tipped the company to reach “unicorn territory”.
While Zirtual’s implosion may
have left Calacanis’s face red with anger and a little bit of embarrassment
after investing in the company, the 400 employees of Zirtual were left pondering
their futures after they were let go by the company via email. However, in
truth, they’re jobs were in jeopardy the moment Zirtual made the wacky decision
to take them on as full employees with benefits and add an incredible 30% to
their costs. This has to be the strangest decision any company can make as there’s
no company on the planet, never mind a 5 year startup planning to scale, that’s
prepared to add 30% to their costs and risk their margin or, in Zirtual’s case,
eliminate it.
Zirtual broke the cardinal rule
that established companies and startups in their market live and die by: never
make contractors employees. Very few companies who use contractors extensively can
take all or even some of them on as full employees and Zirtual, unfortunately for
them, weren’t an exception to the rule. Even Uber that’s currently worth $50
billion are scared to death of any court in the countries they operate in recognizing
their drivers as employees as they simply can’t cover the costs as, according
to a number of reports, they’re already losing a ton of money as it is.
While Zirtual may have got
their numbers fatefully wrong, what they got right was building a service
clients loved and their employees loved to provide which few companies can say
about their business. Wil Schroter, CEO of Startup.co (the company that bought
Zirtual) paid testimony to the commitment of the Zirtual staff as he revealed
that some of the staff is working without pay to keep things going and
commented on their passion for the business as he said ““They’re crazy
passionate. ... They love what they built.””[1].
A company with this much good
will from its employees towards it (despite letting them go via email) can never
die without a fight and, hopefully, under the Startup.co, Zirtual thrives.
[1] C.
Ghose, 2015, Failed S.F startup Zirtual’s fired employees are working for free to
revive services: they love what they built’,
http://www.bizjournals.com/sanfrancisco/blog/techflash/2015/08/zirtual-workers-shutdown-startups-co-maren-donovan.html
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