Digital Asset, a blockchain startup that nabbed millions from the likes of JPMorgan, Goldman, and Citi, has lost at least 25% of its staff since April
Category : entrepreneur
- Digital Asset, a blockchain startup that raised $115 million from big banks like Goldman Sachs, JPMorgan, and Citi, has seen at least 25% of its staff depart since April.
- Business Insider spoke to five former employees of the once-buzzy startup about the exodus of employees, which stemmed largely from a pivot away from the distributed-ledger platform it originally built its brand around.
- It’s not the only upheaval the fintech has faced over the past 12 months — its high-profile CEO Blythe Masters stepped down in December, much to the surprise of many of those inside the company.
- A Digital Asset spokesperson told Business Insider in a statement that over the past year the firm “concentrated its effort on the parts of our business where we can deliver the most value to our customers and the market at large, which is DAML smart contracts.”
- The change in increased focus on DAML, its programming language for smart contracts, “is the result of years of planning, engineering work, and careful evaluation of the market opportunity rather than a reaction to perceived failures,” the spokesperson said.
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A once-buzzy startup deemed a key player in Wall Street’s adoption of distributed-ledger technology has seen significant employee departures, signaling the difficulty of building a business in the once-sexy tech.
Digital Asset was founded in 2014 in the midst of the finance industry’s growing obsession with blockchain and raised over $115 million in funding from the likes of Goldman Sachs, JPMorgan, and Citi.
Departures have been a combination of people leaving on their own accord as well as staff reductions, former employees said. Since April, at least a quarter of its workforce across varying levels of seniority and divisions has left the startup, according to an analysis on LinkedIn.
Business Insider spoke to five former Digital Asset employees, all of whom had left the company within the last year but declined to speak on the record due to non-disclosure agreements or fear of retribution, about their time at the startup. The common theme was one of a company struggling to sell the distributed-ledger technology platform it had originally built its brand on, leading to a shift in its business approach over the past year as it looked to find a more viable business route.
At its core, one of Digital Asset’s biggest missteps came from pitching a product many of its competitors were willing to offer for free. As the company realigned to find a viable business model, it was forced to shed a significant amount of its workforce.
Further complicating the switch was the change in leadership Digital Asset faced following its high-profile CEO, Blythe Masters, stepping down in December 2018 to the shock of many, including those at the company.
The changes at Digital Asset represents the difficulties in building out a business in the distributed-ledger space. The technology, once viewed as the future of how Wall Street conducted business, has yet to move beyond pilots and initiatives amongst most financial firms, who still seem unsure, or unwilling, to completely implement the tech in day-to-day operations.
A Digital Asset spokesperson told Business Insider in a statement over the past year the firm “concentrated its effort on the parts of our business where we can deliver the most value to our customers and the market at large, which is DAML smart contracts.”
“The execution of our strategy is the result of years of planning, engineering work and careful evaluation of the market opportunity rather than a reaction to external pressures or perceived failures,” the spokesperson said.
Digital Asset struggled to sell its DLT platform to big companies
In many ways, Digital Asset served as an initial benchmark for Wall Street’s interest in the potential of the blockchain. In 2016, it nabbed $60 million in funding from 15 of the largest financial and technology firms, including Goldman, JPMorgan, Citi, and IBM, on the belief its technology could disrupt how the world’s financial markets operate.
However in the three years since, adoption of the startup’s distributed-ledger technology platform was limited. The Australian Stock Exchange, which announced in late 2017 it was working with Digital Asset to replace CHESS, its equities clearing and settlement system, is the only established Wall Street firm to take significant steps towards moving beyond a proof-of-concept or pilot stage with Digital Asset’s original DLT platform.
By 2018, Digital Asset found itself burning cash on long, expensive pitches to financial firms that weren’t leading to business, according to one former employee. The source said the issue the startup constantly came up against during pitches was the fact competitors were offering similar blockchain platforms for free via open source.
A second former employee said the company originally maintained a mindset of wanting to own its proprietary technology and not collaborating with others, an ideology that didn’t work with how most of those in the DLT space approached things.
“We were at a huge competitive disadvantage because most of the other people were giving this shit away for free and saying, ‘Yea, you can maintain it yourself,'” the first former employee said.
“That became a real expensive proposition for us. … Competition in these multi-month, if not multi-year, RFP processes is expensive, especially when you are losing every one of them,” the source added.
The company faced another significant change in the past 12 months. Masters, a former JPMorgan executive credited with creating credit-default swaps, announced her resignation as CEO of Digital Asset, sending shockwaves through the company, and the wider industry.
The departure of Masters, who joined Digital Asset in 2015 and had grown to be the face of the nascent technology, was viewed by many as another sign of Wall Street’s apathy for the tech. Masters remained on the company’s board of directors, a position she still holds.
Internally, Masters leaving also came as a surprise, according to former employees, who said many had come to Digital Asset because of her and her vision of disrupting Wall Street. No further explanation was given internally about why she had left beyond what had already been said publicly — she was stepping down due to “personal reasons.”
“Blythe Masters is a superstar,” a third former employee said. “In terms of pure charisma and magnetism she’s — in my opinion — irreplaceable.”
However, in April, when speaking to Business Insider, Shaul Kfir, co-founder and chief technology officer at Digital Asset, downplayed her departure and any significance it had around the company’s future.
“Blythe is one person in a company of 180,” Kfir said. “The company wasn’t just Blythe, and her departure didn’t really change anything in these plans.”
Masters’ immediate replacement came in the form of AG Gangadhar, a former engineering executive at Amazon, Google, and Uber who had joined Digital Asset’s board of directors in April 2018.
The decision to name Gangadhar acting CEO and chairman raised some eyebrows within the rank-and-file at the company, according to a fourth former employee. While Gangadhar had an impressive resume from his time at some of the biggest, most innovative tech companies in the world, he also came with his own set of baggage. At Uber, he ran an engineering department that was plagued by controversy over how it handled sexual harassment complaints.
Gangadhar headed up the Uber engineering department that included Susan Fowler, the engineer who penned a blog post outlining her experiences facing sexism and sexual harassment at the ridesharing startup that eventually led to widespread changes, including the eventual resignation of cofounder and then-CEO Travis Kalanick.
Gangadhar had come to Digital Asset after a short stint as CTO at Cruise, GM’s self-driving car division. Following his appointment in November 2017, Cruise faced public criticism, including some from Fowler herself. By March 2018, only six months after he had joined, Gangadhar and Cruise agreed to part ways.
His time at the top of Digital Asset would also be short lived and, according to the fourth former employee, uninspiring. Under Gangadhar’s purview, uncertainty remained around the direction of the company with employees unsure of what their day-to-day responsibilities were, the source added.
In April, Digital Asset began focusing solely on DAML
In March, Yuval Rooz, a Digital Asset cofounder who had served as COO and CFO, was appointed CEO with Gangadhar remaining on as executive chairman.
Plans Digital Asset had around another portion of its business went into hyperdrive with a slew of public announcements.
The following month, DAML, a programming language for developing so-called “smart contracts,” was open sourced. A week later, a partnership with software company VMware and its blockchain project was unveiled as part of a new initiative for DAML to work with a variety of blockchains as opposed to only Digital Asset’s. Integration with DAML onto blockchain projects run by Hyperledger, R3 and Amazon would follow in June.
While DAML had always been a part of Digital Asset’s plan, with an announcement back in August 2016 to eventually open source it, a fifth former employee said the decision to allow it to be used on other blockchains was a big one.
“The time was right to accelerate the execution of our strategy, which involved open-sourcing our smart contract language (DAML) and integrating it with other ledgers,” the Digital Asset spokesperson said.
Meanwhile, building out Digital Asset’s own distributed ledger platform for large companies was no longer the priority.
A combination of resignations and staffing cuts would soon follow the announcements, sources said, as the company focused all of its efforts and resources on DAML and building out the developer community around it and away from the blockchain platform it had failed to gain traction with.
As for ASX, in August the exchange signed a three-party memorandum of understanding with Digital Asset and VMware to join forces for projects including overhauling CHESS and supporting DAML.
People who had been brought on to develop and sell platforms to large businesses now had completely new mandates, sources said.
While some employees were forced out as part of layoffs in the spring and summer, others left on their own accord.
“With the strategic re-shift, it’s just like alright, we are playing in a different space now. Now we are in the selling to developers game. Now we are in the selling a language game and building a community game,” the second former employee said. “This wasn’t interesting to them, this new strategy. Also, I think the new strategy wasn’t really conducive to a big workforce.”
As of Friday, Digital Asset has six job postings for its New York office on its website, along with seven other openings across its London, Zurich, Budapest, and Sydney office.
The second former employee said the desire to raise additional investments for Digital Asset this year was partial motivation for the company to focus on DAML.
“The initial feedback from investors was, ‘Look, you guys are just doing too much without a product in the market,'” the second former employee said.
Following its initial $60 million venture round, Digital Asset had raised $7.2 million from ASX and then a $40 million in a Series B round led by Jefferson River Capital, the family office of Blackstone’s executive vice chairman Tony James, in October 2017. Since then, however, there has been no announced fundraising.
Over the same time, there was no shortage of money being invested into fintechs. Venture capital firms were forking over a record amount of cash to those looking to disrupt Wall Street in 2018 and 2019.
To be sure, all the former employees agreed a change in approach was required for Digital Asset. The initial approach it had taken wasn’t panning out, they said, and a switch was needed.
Since the announcements around DAML in April, Broadridge, an investor in Digital Asset, publicly explained its plans to use the programming language as part of a DLT-based repo platform it was building out. Swiss bank UBS also discussed an initiative using DAML for some structured products in Asia.
That being said, the new business model isn’t a sure thing, sources said. The fifth former employee with knowledge of the DAML strategy said the change in focus put Digital Asset on pace to be “much more useful, valuable,” however, an open-source strategy made it difficult to assess profitability.
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