A report on Thursday that blockchain venture studio ConsenSys was kicking underperforming projects to the curb and preparing to axe half of its workforce may have been overblown. The report raised alarm and sowed consternation among ConsenSys employees, many of whom were aware of the restructuring but had received no indication it would be so severe.
Now a source at the company with knowledge of the situation says the article’s most dramatic claim—couched as the speculation of an unnamed insider—is untrue. The idea that 50 to 60 percent of ConsenSys employees might be laid off “is entirely not correct,” he says. But he confirmed that some project teams—he pegged the number at about seven—have indeed been presented with a stark choice about their future, one which may leave little opportunity to remain part of ConsenSys.
The downsizing is an abrupt reversal for ConsenSys, the many-limbed concern building a new internet on the Ethereum blockchain. The company’s growth over the past 18 months mirrored the stratospheric rise in the value of ether, which reached a high of nearly $1,400 in January, and in the net worth of CEO Joseph Lubin, an Ethereum cofounder, who has funded most of the conglomerate’s approximately 50 projects out of his own crypto riches. (Full disclosure: Lubin is one of four cofounders of BREAKER’s parent company, SingularDTV.) Throughout the 2017 crypto boom and beyond, ConsenSys seemed to defy ordinary business logic, incubating dozens of projects and growing its workforce to 1,200 employees.
But as ether fell to a recent low just above $80 and consumers proved slow to adopt the sort of decentralized apps, or dapps, which ConsenSys was making its stock in trade, reality set in. The company’s burn rate, which Forbes estimated at more than $100 million a year, made layoffs unavoidable.
For some critics in the blockchain industry, ConsenSys has become a byword for putting crypto-utopianism ahead of responsible management. “It was never a business,” says one longtime industry insider. “It was just a bunch of kids at summer camp.”
The idea that 50 to 60 percent of ConsenSys employees might be laid off "is entirely not correct."
A shift began at the end of November, when CEO Joseph Lubin sent a company-wide letter to ConsenSys employees laying out his vision for the next phase of the company. That phase would be marked by cost-cutting and an emphasis on efficiency and profitability, he wrote. He exhorted his staff to return to “the lean and gritty startup mindset that made us who we are.” Soon after, ConsenSys announced that 13 percent of its staff was being let go.
As ConsenSys Labs, the arm of the company that incubates startups, retools to become more like a traditional venture investor, the projects it has nurtured—many of which are far from being profitable—will be held to stricter performance standards than in the past. Some will be spun out entirely. The founders of the projects will be allowed to choose their own fates.
According to the source, projects that are unlikely to generate revenue in the near future have a few options. They can elect to remain under the ConsenSys umbrella and work toward being profitable on a short timetable, pivoting or combining with other teams if necessary; they can spin out and keep developing on their own, perhaps with one final cash infusion from ConsenSys; or they can take a severance package and shut down.
“As part of the evaluation promised with our transition to ConsenSys 2.0, our Labs team is engaging in ongoing conversations with every project, and in some instances, has provided options for them to determine their path forward,” a ConsenSys spokesman said in an emailed statement. “Next steps differ, with spokes having autonomy to decide about their own staffing.”
Other projects have a brighter outlook. Rather than being given an ultimatum, they will be expected simply to hit certain milestones and show meaningful progress as part of the focus on efficiency and revenue.
What isn’t changing is the company’s commitment to core Ethereum tools. ConsenSys employs 50 developers who work on the Ethereum protocol, contributing to the open-source project alongside core developers like Ethereum cofounder Vitalik Buterin who work with the nonprofit Ethereum Foundation. “We’re doubling down on the protocol,” the source says.
As for consumer-facing applications, the outcome for any given project—and for the company as a whole—is uncertain. The source says he expects the fog to lift in early 2019, at which time the company will be ready to share a clearer picture of what lies ahead.
But for now, there is confusion and turmoil. “I have no idea what ConsenSys will look like in six months,” he says.
This story has been updated to include the fact that Joseph Lubin is one of four cofounders of BREAKER’s parent company, SingularDTV.