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uBeam Lay Off Around Half of the Employees?

Over the last week I've heard from a number of people as to some significant events at uBeam - last Monday the 10th June around half th...

Tuesday, June 18, 2019

uBeam Lay Off Around Half of the Employees?

Over the last week I've heard from a number of people as to some significant events at uBeam - last Monday the 10th June around half the employees had been laid off. No notice, no severance, no vesting, no farewell party, and the last day of employment at uBeam for them had been Friday the 7th June. The first emotion I heard from any of them was shock, that this was unexpected both in its suddenness and harshness. It seems the team that have been let go, around 13 of the 25 or so total, are most of the engineers who would have been doing actual product development (with an exception for some electronics/visualization work), as well as the product manager, so as clear a signal as possible from uBeam that there will not be a product coming from them (to no surprise for anyone who has read this blog).

While founders and CEOs get the press coverage and public sympathy, it's always the regular employees that take the brunt of the pain in situations like this. Startup founders are more likely to come from backgrounds of financial stability, CEOs the last to go even if their decisions led them along this path, but your regular employees are just trying to do their job, pay the rent, and then one day they find that the paycheque, and health insurance, won't be coming. If anyone reading this blog has positions or knows of places hiring especially in the LA area in tech companies, you should look to contact them (most are on LinkedIn) or I can get you in contact for a few of them.

While I'm hearing slightly different stories, what's consistent is that they were told the company had very little runway, a few weeks at best, and the board declined to put in more money to keep things on the current path. Rather, a drastically reduced budget was given, and half the staff had to go. Given who was let go, it seems there is no product in the future, and rather they will focus on selling, licensing, or otherwise extracting revenue from whatever IP currently exists. Tech staff that are left might be viewed as those who can make sure a physical demo actually works, and the tech people senior enough to impress potential purchasers. I personally don't see this as a route to revenue, without a product the IP has limited value, the transducers we've seen from them (called "uBeam's most critical component" in the prior fundraising round) look to follow the same basic design as the industry standard Murata type, leveraging width-mode piezo vibrations and a speaker-like cone. I can't see any advantages over the Murata, but I struggle to see them beating the leader on price, and both have sizes that are large relative to wavelength that make them unsuitable for phased array use (basically, they will send out energy in unwanted directions). In however long they have left, I don't see them selling the IP for anything above bargain basement prices (look for "for an undisclosed sum") and even that I think is a longshot. 

It's something of a surprise though this happened right now. The company's last raise was at the very beginning of 2018, and while numbers like $25 million were discussed, I have always felt that was a combination of the new raise and the prior convertible note round and the new money was more in the $11 to $14 million range (still not shabby!). It didn't appear uBeam hired any significant new staff (losing the CEO, COO, and CTO in 2018 while not replacing the CEO until Jan 2019), and had abandoned the production model in favour of licensing, so expenses should not have been that high. I had thought they would be halfway through the money by now, and looking at a cashflow issue somewhere between the middle and end of next year. That it happened now is very interesting and there are some possible explanations.

I think a likely scenario is that the prior round was tranched - that is they didn't get all of it in one lump sum but rather released by the board only on completion of certain milestones. One option would be that the money would be split into 2 equal tranches with half the money needing to get them to a milestone of a product or a licensing deal. Without either on the horizon, the board may have had little confidence in the future of the company, and decided to cut losses and squeeze whatever money they can out of what is there. It's a strategy I don't think will work, I noted last year I thought the best return to investors would have been to give the staff 60 days notice, shut the company down, and hand the remaining money back to the investors. Seems an aspect of that has been followed, but regular staff apparently don't merit consideration. This does not surprise me, when I was there employees let go were terminated on the day with no severance, despite encouragement from the senior engineering side to pay at least 2 weeks - it's the right thing to do (unless the employee is let go for cause), but also goes some way to alleviating concern in the remaining employees that they can be out with no money any day, never a good situation. 

Something I do wonder is if the money is tranched, whose money got spent? I was guessing that the round was pretty much 50/50 between OurCrowd and UpFront, around $6m or so each. If 50% got spent, was it split 50/50 or did the OurCrowd money go first, which would be unfortunate for the large number of individual small investors in the OurCrowd group but good for the LPs at UpFront. Or vice-versa? If anyone has any greater understanding of the situation or alternate scenarios, I'm interested to hear.

How long have they got? I don't know, but I can't see significant money being put in so perhaps 3 to 6 months at most? It's a terrible negotiating position to be in, as any buyer knows that waiting a month will likely result in effective downward pressure on price. Morale among remaining employees will not be good and if I were them I'd already be looking for new work. It would make sense to offer them a significant bonus should they stick out a set time period, but in a cash strapped company the likely bonus isn't going to be big enough to make up for a month or two gap in income when the end comes. If my experience of the company still holds, there was never thought nor attention paid to the needs of staff, they were simply expected to do what the company required and be grateful for the opportunity. While no longer CEO, Perry will still likely have significant board presence and will need to have been at the board meeting where this decision was made. A tweet from Perry on the 5th June might indicate that's when it happened, and may signal she accepts that it's game over.

Notice no public announcement, they want to keep the pretense of a viable company going, but also no press attention either - the corporate end of uBeam may be months away, but it seems to be dead as far are press are concerned.

It is a bit of a kick in the teeth for the new CEO who has not even had 6 months to get the company turned around. Even if it were possible (and I don't think it was by that stage) it's hard to make a turnaround in hardware so fast where that timeframe may be only one development cycle. Still, he gets to say he tried and it wasn't his fault, what could he do, and perhaps collect a healthy paycheque along the way. 

The website had recently been updated, with images showing them powering everything from tablets medical equipment, and home appliances (never going to happen) while showing pictures of babies and pets in a subliminal attempt to say "We're safe" along with the more overt "ultra-safe" marketing lines, the very carefully worded "no verified risk", a claim of full regulatory compliance (hmmm, I'd love to see the paperwork there), and third party studies proving safety (let's see them then). It looks somewhat like the Energous website, seemingly not only do all the at-distance wireless power companies follow the same trend of massive performance specs at first (TVs, cars, cellphones, multiple meters, faster than a wire!), to trickle charge, to IoT, but the websites look the same as well. They had also been advertising for a Chief Revenue Officer, and that ad seems to have disappeared - either plans there were shelved or someone is in the role and had a really crappy first week. A few pictures from the website are below:

It's frustrating as there were things that could have been done, changes that could have been made earlier to develop technology useful in a number of areas and a total of between $25 and $40 million spent to generate IP that might sell for 2% of that, if at all. I know several hardware companies with solid products and tech where $1 to $3 million would be a massive boost for them, and ten such companies worth of initial funding just disappeared. It's a shame that the two most senior engineers didn't sit down with a board member almost 4 years ago and let know issues at the company and the likely trajectory, while suggesting possible changes/pivots to make it all viable. Though if they had they may have been treated as second class employees from then on, motives questioned, never trusted for having 'snitched' on a member of the elite...

Another uBeam Anecdote
The situation does remind me of an incident from my time at uBeam. Normally there was supposed to be a meeting with myself, the other VP Eng, and CEO Perry at 9.30 each morning, though our bet each day was on how many minutes after 9.30 we'd get a text from the PA letting us know the CEO would be late. We'd watch her walk in usually looking tired at ~9.45 and it was maybe another 30 minutes before our meeting would start (damn whatever else you might have tried to do in that time, she was there, so the meeting starts now), but she was at least teeming with energy by then. This morning in question was different. The CEO was in her office already when the other VP and I walked in, with the new CFO while super-excited and energetic. "Great news" she tells us "My friends told me last night that Virgin Galactic is going out of business!". We look at each other knowing it was going to be one of those mornings, and could see where this was going. Perry was a self-described space-nut and was always trying to get us to hire people from Space X or similar, even though we kept telling her that the typical skillset was vastly different between companies. And so it came - "We can hire all their engineers!" and trying to head things off we immediately tried "That's interesting we can have recruiters try to target the likely employees". Perry scoffed at our feeble engineer approach, and informed us she would be mailing the CEO himself to find out who to hire, showed us the email, which read (and while from memory is confirmed with the other attendee, is pretty close)

"Dear [VG CEO]. I hear that your company is going out of business. Can you tell me who your best engineers are so I can hire them?"

Now we were in a fix. We couldn't let this go out, but neither could we tell Perry this was a dumbass idea, an insult to the VG CEO, and impractical for us, as any attempt to indicate she may be on a non-optimal path almost always resulted in the "I'm the CEO" response where she had to "show leadership" by not changing and instead doubled down (our eternal Catch 22). These situations were tricky and so at first tried the "If true he would have bigger issues let's give him a few days" line in the hope we could delay enough she'd forget and move onto something else, but no, she clicked send. The whole conversation was between 5 and 10 minutes maximum, and like many things at uBeam we could see the action being taken that would result in predictable (to us) consequences hours, days, months down the line and nothing we could do about it.

Later that day we asked if there had been a reply, and amazingly there had been. The response was (and again, from memory) "Dear Meredith, VG is not going out of business, in fact we recently raised a significant financing round. Please inform whoever told you this that it is not true and ask them to stop spreading the rumour". Perry just shrugged and carried on as if nothing had happened, and to be fair that type of bizarre event was pretty much the norm at uBeam. 

So I chortled to myself when thinking of this and imagined sending the email "Dear former-CEO Perry. I hear that your company is going out of business. Can you tell me who your best engineers are so I can hire them?" I'm sure she'd understand.

But back to the most important point - if you want to hire solid engineers, there's a few looking for a solid employer right now.

Update: I wrote a brief update and link to the promo video that matches the website here. It also asks when co-founder and former CEO Perry actually left the company.

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