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The redundancies are coming to ConsenSys, the startup incubator focused on Ethereum and the blockchain technology conglomerate. According to the company's sources, ConsenSys is rapidly spreading the startups it had previously supported, which would drastically affect its workforce and leave an uncertain fate for one of the most ambitious and well-funded start-ups in the blockchain world.
ConsenSys manages an internal incubator called ConsenSys Labs that hosts startups – "spokes", in company language. ConsenSys Labs incubates about 36 rays, according to an email sent by Shawn Cheng, a partner of Labs. The size of the spoken team ranges from 5 to 50 employees, says a familiar source with the spokes, which also speculates on the total number of employees who will be fired could reach 50-60 percent of the approximately 1,200 employees of ConsenSys workforce.
A term sheet reviewed by The Verge and given at least two startups incubated within the company, he demonstrated that ConsenSys is beginning to expand its broad portfolio of blockchain projects, often without the financial support they would need to find external financing and be successful. When a comment was reached, a ConsenSys representative did not deny that layoffs were imminent, and only stated that the company is talking to each spoke and project to "determine a path forward, both internally as part of ConsenSys 2.0 , or as an external entity. "The overwhelming majority of people working on spokes are ConsenSys employees and many of these do not yet have a profitable product.
The news comes just a month after the company fired about 13 percent of its staff. The founder of ConsenSys, the criptobillionaire Joe Lubin, announced a restructuring of "ConsenSys 2.0", an attempt to simplify the company. But two sources say that the company is actively looking for investments. "They are using the 13% ad that I imagine can give comfort to potential investors on small-scale downsizing," says a source. Lubin has been open to finding external financing in the recent past.
ConsenSys was founded at the end of 2014 by Lubin to "boil the ocean", as an industry insider said, to create a second entirely decentralized Internet that would not need institutional supervision to work. It was the culmination of an idea that had haunted him since the financial crisis that began in 2008, which in his view was the forerunner of the end of the modern world as we know it.
Lubin is credited as co-founder of Ethereum, a decentralized application platform and a cryptocurrency based on Ethereum, Ether, which was introduced in a 2013 paper by Ethereum co-founder and programmer Vitalik Buterin; its value increased by 13,000 percent in 2017, with the price of a single ETH token that hit the all-time high of $ 1,417.38. That incredible increase has made Lubin one of the richest men in the crypto, with equity between $ 1 and $ 5 billion, according to Forbes. He had used his fortune to finance ConsenSys, but since the price of Ethereum dropped sharply this year – it is currently trading at $ 102.44, a decline of around 93% since January – ConsenSys' future is in doubt. Such as Forbes also reported, ConsenSys has a burn rate of around $ 100 million in the year.
"The world has not collapsed like [Lubin] planned, and therefore he needs to rotate his company because he was orchestrated for a vision only where Ethereum would have been $ 10,000, "says the source.
Through ConsenSys Labs, the company hoped to populate the new internet in Lubin with the creation of its own decentralized applications ("DApps"). Now, says the source, the Labs program is also renewed; it will cease to be an incubator for a number of start-ups and will instead act as a more traditional investor. Most of the rays will be ejected, says the source – apart from those that are considered "essential tools of Ethereum", those products that develop the developers that make it easier to create DApp on the Ethereum network.
According to the source, these key tools include Infura (which allows access to the Ethereum network), Metamask (brings access to the Ethereum network to browsers), PegaSys ("enterprise level blockchain", according to their website web), Alethio (an analysis of network blockchain tool), Kaleido ("Bringing businesses together through blockchain to create more meaningful and beautiful results"), and Truffle (a service of smart contracts). Many of the other spokes should leave ConsenSys, in what the company calls "accelerated spin-outs": management offers incubated startups or two months of liquidation or a share of almost 10% is a convertible note which would represent approximately one month of the burn rate of a beam as part of a spin out agreement, according to the term sheet.
"They are asking us to take a million dollar rating for less than a month and a half of the track," says the source. A private Slack thread examined by The Verge tells a similar story. "These rays are now closed without the possibility of obtaining external financing (for example, CS does not want to invest anymore) to obtain the 2 month separation package and COBRA", wrote a developer in the thread. Some rays, however, were given until February to decide whether to extract or take the separation. "Regardless of whether your Spoke is crushing him or showing minimal traction, each team will need to take a closer look at their business and examine how their strategies will be more competitive on the market," he wrote. Cheng's e-mail in part.
These days, the atmosphere of ConsenSys is squalid; It's clear that the freewheeling days of spending $ 14,000 in two weeks or buying Emirates' business-class day tickets are over, says a source. And according to an e-mail sent by Frithjof Weinert, who works in finance at ConsenSys, the company is "trying to reduce expenses that are not absolutely necessary for business success", starting from travels and events ; even some assumptions have been suspended.
"The office is empty, people are only finding out who was fired because they try to send Slack messages and they are not there," says a source. "ConsenSys will not create a list [of the projects that are being spun out] or send something in writing because they are afraid of everything that happens to the press. "The source added that, before that day, all the leads had a meeting with Cheng and Ron Garrett, who also runs ConsenSys Labs; they asked, they were not in agreement in creating or supplying a list of races or what would happen to them.
"It was so shady," says the source. "They were firing people who had been hired two weeks ago, they were firing people who were pregnant, whose wives were pregnant."
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