{"id":44699,"date":"2023-10-20T15:37:50","date_gmt":"2023-10-20T15:37:50","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/zirtual-pulls-plug-and-sacks-workers-with-1am-email-how-to-avoid-a-similar-startup-fate-startupsmart\/"},"modified":"2023-10-20T15:37:50","modified_gmt":"2023-10-20T15:37:50","slug":"zirtual-pulls-plug-and-sacks-workers-with-1am-email-how-to-avoid-a-similar-startup-fate-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/zirtual-pulls-plug-and-sacks-workers-with-1am-email-how-to-avoid-a-similar-startup-fate-startupsmart\/","title":{"rendered":"Zirtual pulls plug and sacks workers with 1am email: How to avoid a similar startup fate – StartupSmart"},"content":{"rendered":"
\"\"<\/div>\n

A large US startup demonstrated how to abruptly disappear completely last night, and in turn showed companies how not to deal with the inherit state of flux that most startup founders are in.<\/p>\n

 <\/p>\n

Zirtual, a virtual assistant company, appears to have shut down entirely, closing its Twitter, Facebook and Google+ accounts, while a putting a note on the website saying it is \u201cpausing operations\u201d, as Business Insider reports.<\/p>\n

 <\/p>\n

Most striking from this story is the complete lack of notice given to Zirtual\u2019s 400-strong employee base, with an email sent round in the dead of night being the first, and last, notice that their jobs were gone.<\/p>\n

 <\/p>\n

Burning out<\/b><\/h2>\n

Zirtual\u2019s CEO Maren Kate Donovan explained what went wrong in a Medium post on Wednesday, summing it up with one word: \u201cburn\u201d.<\/p>\n

 <\/p>\n

\u201cGrowing up fast caught up with us, and the last seven days have been a spiral like I have never experienced before in my life,\u201d Donovan says.<\/p>\n

 <\/p>\n

\u201cAt the end of the day we grew faster than we could handle. Our burn spiralled out of control even with our high revenues, and that led to the pausing of Zirtual\u2019s services.\u201d<\/p>\n

 <\/p>\n

Most startups are in a constant state of flux, and this often means they have to hire and let staff go with little notice.<\/p>\n

 <\/p>\n

In explaining the abruptness of the announcement, Donovan says she thought the company could be saved with extra funding that never came.<\/p>\n

 <\/p>\n

\u201cThe reason we couldn\u2019t give more notice was that up until the 11th<\/sup> hour, I did everything I could to raise more money and right the ship,\u201d she says.<\/p>\n

 <\/p>\n

\u201cAfter failing to secure more funds, the law required us to terminate everyone when it became clear to us that we wouldn\u2019t be able to make the next payroll.\u201d<\/p>\n

 <\/p>\n

What not to do<\/b><\/h2>\n

Clearly, Zirtual\u2019s very non-transparent method isn\u2019t the right way to go about things, but what is?<\/p>\n

 <\/p>\n

Melbourne HR managing director David Simpson says it\u2019s all about communication.<\/p>\n

 <\/p>\n

\u201cI think Zirtual really did fail on a number of fronts in executing this,\u201d Simpson says.<\/p>\n

 <\/p>\n

\u201cThere were better ways to provide forewarning and to handle it once it occurred. Sending someone an email at 1am in the morning is pretty poor form.\u201d<\/p>\n

 <\/p>\n

\u201cYou would have awareness of it prior, and at some point you should communicate with your employees about what the startup wants to achieve, and that they\u2019ll have to consider shutting down or restructuring if they don\u2019t do this.\u201d<\/p>\n

 <\/p>\n

\u201cThey have a duty of care to employees, and they should have kept them more informed about what was needed to be achieved to make the company grow.\u201d<\/p>\n

 <\/p>\n

The difficult position for startups facing these problems is the need to keep employees motivated and productive, but the competing need is to keep them somewhat informed about how the company is tracking, even when the news is bad.<\/p>\n

 <\/p>\n

\u201cYou want employees to be motivated and see a positive outlook, and if they see something negative that\u2019s immediately going to reduce productivity and retention,\u201d Simpson says.<\/p>\n

 <\/p>\n

\u201cThey have to understand there\u2019s a cliff, and if certain bridges aren\u2019t built, you\u2019ll fall over it. This needs to be communicated with employees.<\/p>\n

 <\/p>\n

\u201cThis is competing with the need to keep employees fully informed, and to not put 400 people out of work in a single night.\u201d<\/p>\n

 <\/p>\n

Scaling too quickly<\/b><\/h2>\n

According to Business Insider, Zirtual went on a hiring spree in the last two hires, increasing its staff from 150 to 400. It raised over $US5.5 million in total.<\/p>\n

 <\/p>\n

\u201cCompanies need to think very hard about how they are scaled, and to not presume straight away that going from 150 employees to 400 is immediately going to get the revenue scaled,\u201d Simpson says.<\/p>\n

 <\/p>\n

These 400 employees were left in the dark over the troubles Zirtual must have been facing, and are now unsure of if they\u2019ll get this week\u2019s pay check, let alone matters of severance and health insurance.<\/p>\n

 <\/p>\n

In perhaps more positive news for some of the employees, startups.co has stepped in and bought Zirtual, with the \u201copportunity to hire some\u201d Zirtual employees back.<\/p>\n

 <\/p>\n

Startups.co says it is \u201ccurrently reviewing the company structure\u201d to determine how many employees can be retained.<\/p>\n

 <\/p>\n

\u201cIdeally we\u2019d like to keep everyone, but given that the previous state of the company was unsustainable, it\u2019s not reasonable to think we can continue to do so,\u201d the startup said in a statement.<\/p>\n

 <\/p>\n

There were many things Zirtual could\u2019ve done to improve this situation, Simpson says.<\/p>\n

 <\/p>\n

\u201cThey\u2019ve shut their people out of their own internal system,\u201d he says.<\/p>\n

 <\/p>\n

\u201cThat\u2019s a really big shame because there was the opportunity there for the company to take a more positive step and allow virtual assistants to negotiate interim work.\u201d<\/p>\n

 <\/p>\n

\u201cThere were a whole range of failures that could\u2019ve been different, leading to a much better result for both their image and employees.\u201d<\/p>\n

 <\/p>\n

Donovan says telling employees that she was shutting down her startup was the \u201cmost difficult message\u201d she\u2019s ever delivered.<\/p>\n

 <\/p>\n

\u201cI 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,\u201d she says.<\/p>\n

 <\/p>\n

\u201cI cry for all the employees we hurt. I cry for all the clients we infuriated. And I cry for the investors we let down.\u201d<\/p>\n

<\/b><\/p>\n

Raising your<\/i> first round of capital<\/i><\/a>? Starting a<\/i> crowdfunding campaign<\/i><\/a>? Want to grow your business<\/i> with Instagram?<\/i><\/a> StartupSmart School can help.<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

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