After several years as one of Austin's fastest rising startups, ScaleFactor on Tuesday told its employees it will be shutting down in a few months.
Half of the company's 100 employees were told during a town hall meeting that they'd be laid off immediately, with the rest of the team diminishing by August to about 10 employees who will close things down. Laid off employees will be offered 12 weeks severance and health care coverage until the end of the year.
Forbes broke the story late on Tuesday, and in it ScaleFactor founder and CEO Kurt Rathmann said the Covid-19 pandemic led to the loss of nearly half of its sales.
“Business owners went into fight or flight mode,” Rathmann told the publication. “You don’t necessarily need all the planning tools, high end gadgets. You just get back to the simple ‘pen and paper.’”
In a blog post later, Rathmann said ScaleFactor is suspending a majority of its operations on August 28.
"Despite the positive traction we’ve shown in the last several months, we can no longer reliably forecast the time it would take to complete restructuring," he wrote. "We simply don’t know how long current market conditions will last or what the small business landscape will look like when the market finally recovers. As a result, we have made the very difficult decision to suspend the majority of our operations effective today."
The news follows about 40 layoffs at the startup in February. At the time, the company said it was reorganizing as part of an overhaul called ScaleFactor 2.020, in which they planned to recruit financial professionals to their marketplace to help small businesses with insights.
Rathmann founded ScaleFactor in 2014 to help small- and medium-sized businesses automate back office bookkeeping, among other things. The startup went on to join the 2017 class at Techstars Austin. In the following years, it raised a total of about $100 million in venture funding from firms including Coatue Management, Canaan Partners, Broadhaven Ventures, Citi Ventures, Next Coast Ventures, Flyover Capital and Firebrand Ventures.
ScaleFactor also has satellite offices in the Canadian city of Vancouver and in Denver, where it once expected to have up to 100 employees.
The company is among several in Austin and around the country that have been struggling to manage through the economic downturn caused by the pandemic. Other Austin startups, including RigUp, Outbound Engine, DISCO, The Guild, Yonder and Phunware, have also laid off employees in recent months.
"Today has been a difficult day," Rathmann wrote. "It’s a day that we believed would never come, otherwise why would we dare to challenge the status quo?"
But he said the company faces too much headwind as the pandemic impacts businesses everywhere.
"It’s certainly not the outcome we wanted, but I do believe it is the best course of action," he wrote.
