Ethereum incubator Consensys is to cut 50 to 60 percent of its employees. The blockchain software company has already laid off 13 percent of its workforce in order to survive the bear market. According to one source, lack of product, wild ideas and an inability to sell technologies has made Consensys’ position financially precarious. As a result, Consensys will need to make further cuts.
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Consensys Spinning Projects Without Financial Support
Consensys co-founder and crypto billionaire Joseph Lubin is aiming to transition the firm into “Consensys 2.0”, a scaled down version of the company believed to have had around 1,200 employees until recently. The Verge reports it has reviewed term sheets showing that at least two incubated startups within the company show Consensys is beginning to spin out its large portfolio of blockchain projects without the financial support they require to find outside funding and succeed.
The current bear market has been difficult for many firms. The key question is what else may have contributed to the downfall of Consensys – careless planning? Mismanagement? Overzealousness? According to one source, for all the money Consensys raised, its lack of marketable products, overly ambitious ideas, and attempt to sell technologies that were not yet fully realized may all have hastened its downfall.
“Raising Money for Projects Proved to Be an El Dorado”
Ștefan Neagu, the co-founder of Persona, said: “Back in 2013, I was in Silicon Valley, trying to raise funds for a project I’ve been working on. I was talking with Tim Draper and he was willing to invest $500,000 in our project at the time. The due diligence was in the range of months, with cap table, pre-money valuation and a lot of legal work. There is no such thing that exists within crypto projects. Raising money for crypto projects proved to be an “El Dorado”, in which every project was over-funded.”
In 2017, projects started to spend Consensys’ money with reckless abandon. “In my opinion, we reached this moment when projects are shutting down because of a combination of lack of skills or inexperienced management and a lot of overspending,” opined Neagu. “There were projects funded that were decentralizing everything, from bananas to sending the North Korean President into space. I think that this “purge period” is similar to the dotcom crisis, and only those projects that have a real value proposition and represent ‘a win for the masses’ will succeed to survive.”
As further evidence of the downsizing trend, Steemit has also recently laid off 70 percent of its staff. Harsha Cuttari, CTO of AQUA Intelligence, says that the layoffs at Consensys are not out of the ordinary when considering the steep shift in prices for cryptocurrencies amid the recent fork. Cuttari believes the situation is similar to the 90s dot-com boom and subsequent decline, leaving companies like Consensys at the mercy of market forces.
Do you think that Consensys mismanaged funds? Let us know in the comments section below.
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