ConsenSys Plans to Spin out Most of its Startups, and it’s Going to Mean Layoffs

Layoffs are coming to ConsenSys, the Ethereum-focused startup incubator and blockchain technology conglomerate. According to sources at the company, ConsenSys is quickly spinning out startups that it previously supported, which will drastically impact its workforce and leave an uncertain fate for one of the blockchain world’s most ambitious and well-funded startups.

ConsenSys runs an internal incubator called ConsenSys Labs that houses startups — “spokes,” in company parlance. ConsenSys Labs incubates around 36 spokes, according to an email sent by Shawn Cheng, a partner at Labs. Spoke team sizes range from 5 employees to as many as 50, says a source familiar with the spokes, who also speculates the total number of employees who will be let go could be as high as 50 to 60 percent of ConsenSys’ approximately 1,200-person workforce.

A term sheet reviewed by The Verge and given to at least two incubated startups within the company showed that ConsenSys is beginning to spin out its large portfolio of blockchain projects, often without the financial support they’d need to find outside funding and succeed. When reached for comment, a representative for ConsenSys did not deny that layoffs were impending, and only said that the company is speaking with every spoke and project to “determine a path forward, whether that will be internally as a part of ConsenSys 2.0, or as an external entity.” The vast majority of people working at spokes are ConsenSys employees, and many spokes don’t yet have a revenue-viable product.

The news comes just a month after the company laid off around 13 percent of its staff. ConsenSys’ founder, the cryptobillionaire Joe Lubin, announced a restructuring to “ConsenSys 2.0,” an attempt to streamline the company. But two sources say the company is actively looking for investment. “They’re using the 13 percent announcement I would imagine to give comfort to potential investors about the small-scale downsizing,” one source says. Lubin has been open about looking for external funding in the recent past.

ConsenSys was founded in late 2014 by Lubin to “boil the ocean,” as one industry insider put it — to create a second, entirely decentralized internet that wouldn’t need institutional oversight to function. It was the culmination of an idea that had haunted him since the financial crisis that began in 2008, which he thought then was the harbinger of the end of the modern world as we know it.

Lubin is credited as the co-founder of Ethereum, a decentralized platform for applications and a cryptocurrency based on Ethereum, Ether, that was introduced in a 2013 paper by Ethereum co-founder and programmer Vitalik Buterin; its value rose 13,000 percent in 2017, with the price of a single ETH token hitting a record high of $1,417.38. That incredible rise made Lubin one of the richest men in crypto, with a net worth of between $1 and $5 billion, according to Forbes. He had been using his fortune to fund ConsenSys, but as the price of Ethereum has fallen sharply this year — it’s currently trading at $102.44, a drop of around 93 percent since January — the future of ConsenSys has fallen into doubt. As Forbes also reported, ConsenSys has a burn rate of around $100 million per year.

“The world has not collapsed as [Lubin] planned, and so he needs to pivot his company because it was orchestrated for a vision only where Ethereum would be $10,000,” says the source.

Through ConsenSys Labs, the company hoped to populate Lubin’s new internet with the creation of its own decentralized applications (“DApps”). Now, the source says, the Labs program is also being revamped; it will cease to be an incubator for a range of startups and will instead act as a more traditional investor. Most of the spokes will be forced out, says the source — aside from those that are deemed “core Ethereum tools,” those developer-facing products that make it easier to build DApps on the Ethereum network.

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