In the middle of the night, a startup that had raised $5.5 million dissolved and disappeared. It deleted its Twitter accounts, Facebook pages, and Google+ profile. It changed its website to say it was “pausing operations.”
At 1:34 a.m. PT on Monday, Zirtual, a virtual-assistant company, sent an email to all of its employees saying it had ceased operations, effective immediately. A follow-up note to its clients said it was “pausing operations” to reorganize its structure. The news stung because there was no warning from the company, according to several former employees who spoke with Business Insider. The company and its CEO, Maren Kate Donovan, did not respond to requests for comment on this article.
Even 13 hours before it shut down, Zirtual was still accepting sign ups and the money that came with them, according to Aaron Weber, who posted photos of his short-lived run with Zirtual on Twitter.
Donovan, the company’s CEO and co-founder, had just written three weeks ago in Fortune about the need for transparency during a company shift, saying employees needed time to adjust:
Because what my employees don’t know could ultimately hurt the entire business. The sooner your team knows about upcoming shifts in the company—the better.
Additionally, give your employees ample time to adjust, as change in a company can often lead to people feeling unstable in their positions. And be transparent.
Yet Monday’s email was not a warning to employees, but a door slammed in their face. Employees said they felt blindsided and not prepared for the news, according to the employees Business Insider spoke with and the outpouring of shock on Twitter.
“I woke up this morning thinking it was a normal Monday morning. I was going to wake up, have my coffee, and have my weekly morning call with my client,” Carol Murrah, who had worked for Zirtual for two and a half years, told Business Insider. Before Murrah had a chance to read the email, the client broke the news over the phone as Murrah tried to fire up her computer and found herself locked out. “I always knew I was going to get my paycheck, until today,” Murrah said. “I expected to get paid this Friday, and that’s not happening.”
Former employees told Business Insider the company had been on a rapid hiring spree during the past 18 months, ballooning its numbers from around 150 to the 400 employees it laid off Monday.
In an interview on Friday with Jason Calacanis—who is also an investor in the company—on “This Week in Startups,” Donovan said the hardest part of scaling Zirtual was “growth capital.”
“Since we’re employees versus contractors, it’s hiring ahead, building out this stuff,” Donovan said of the challenges, just three days before the startup shut down. “It’s seeing the future and playing the game right now.”
Over the past few months, work had slowed from some of its virtual assistants, but many thought it was because of the summer vacation season. “In the last two months or so, work has slowed down significantly,” Murrah said. “We were pretty confused as to why. We weren’t having client cancellations. We were never once told that was something to worry about.”
For employees, it seemed as if growth was on the up-and-up, according to several virtual assistants we spoke with. Donovan’s monthly “state of the union” emails never hinted at problems, and there was even talk of gradually raising the minimum wage of virtual assistants to $15 an hour from $11. Zirtual was beta-testing a teams product that could allow whole teams to sign up.
“We were looking at it as, ‘Oh, there’s progression, we’re growing,’” Daniell Wells, a virtual assistant who was with the company since February, told Business Insider.
In the end, it’s unclear why Zirtual has shut down, though it’s clear it was in haste. While the company had raised $5.5 million, all of its rounds after seed funding were debt rounds, including one at the end of July.
When it started, Zirtual was a personal, virtual concierge service that charged only $99 a month for unlimited tasks, Donovan said on the show. The company has been loyal to some of those plans, though, and that may have cost it. “A completely unsustainable business model, but we still have some legacy plans that are sticking around,” Donovan told Calacanis. “We grandfathered a crap-ton of stuff.”
Calacanis, who had interviewed Donovan on Friday, said on Twitter he found out as an investor that there were problems only on Saturday, though he hopes it can make a comeback. Calacanis did not immediately respond to requests for comment.
While some may be more positive about a restart, the shock is still fresh for those who lost their jobs. Wells said they had received only the notice of the company ceasing operations, but no other massive direct communication from leadership. Important information regarding things such as severance and health insurance is still unresolved. Former employees said they didn’t know whether Zirtual would even be able to make this Friday’s paycheck for the employees’ last week of work.
Despite the lack of communication from leadership, former employees have created a Facebook group and a Slack team so they can stay in touch and share what little information they have received. They are scrambling to educate themselves on how to be come 1099 contractors, how to get in touch with old clients and how to rebuild their careers.
“There are 400 employees who were given the notice this morning,” Wells said. “They are all available for work. It was a really poor move. I’m at a loss for words.”