High profile Patch of Land suffers mass layoffs

Company releases 3 key executives and junior staff. Historically transparent company has not publicly acknowledged that the layoffs occurred.

June 13, 2016 BY IAN IPPOLITO

Patch of Land, has always been known for its transparency. For example, while competitors like Fundrise have been accused of grossly inflating their transaction volume, Patch of Land has been applauded for accurately releasing its total transaction volume. Additionally, their legal structure has been one of the most transparent and openly evolved in the industry.

So it was extremely disappointing to learn that Patch of Land was not only forced to lay off a significant portion of their workforce, but that it did not make a public statement that it occurred (let alone, explain to investors why it happened).

According to sources, the layoffs occurred several months ago and included some of the most senior staff as well as junior staff. Among the casualties were the Chief Financial Officer, the Head of Underwriting, and the Chief Legal Counsel. As of this date, these empty key positions do not appear to have been replaced with new hires.

Startups typically don’t undergo massive layoffs, unless forced to by significant financial distress. Without any additional information from Patch of Land, it puts investors in an uncomfortable position of guessing what’s happening. If they are suffering financial problems: were these moves sufficient to stop all the bleeding? And will the patient make a full and complete recovery? Or was this a desperate emergency room operation, and is the patient just barely hanging on via life-support?

I was hoping this news would be followed by announcements from Patch of Land detailing a new source of funding, and explaining that the key positions will be refilled. Since that didn’t happen, I continue to be a bit concerned.

Patch of Land doesn’t release detailed information about their funding and balance sheet state. However, we do know that they raised $23.6 million in venture capital funding last year. That may sound like a lot, but in my opinion it’s actually not a huge stash of cash for a company that has to pre-fund all of its investments, and still pay staff and keep the lights on.

According to reports, their funding came primarily from fintech (financial technology company) venture firm SF Capital, and Prosper President Ron Uber. That information might be a clue to what’s happening.

 

In 2015, Uber and SF capital were flush with money and flying high, along with the entire fintech market. But fintech has suffered a horrible reversal in 2016. The poor performance of public fintech stocks and the desertion by institutional investors, has caused the entire sector to be shunned by Wall Street. This has led to mass layoffs at Ron Uber’s Prosper, and the trend has unfortunately been reinforced with the discovery of financial fraud at Lendingclub.

Every VC funded fintech company is experiencing serious financial stress right now. Perhaps Patch of Land had it worse than most, since its backers have been hammered harder than almost anyone. It’s very likely that they were not willing to pony up the money in an expected follow-up round. When that happens, it’s difficult to find new investors in good circumstances, let alone in one where the industry is suffering multiple issues.

I’ve asked Patch of Land to reply to this article, and they chose not to respond publicly. I’m hoping that they change their policy of silence in the near future, talk openly and transparently about what happened, and address investor concerns about their new financial state and their future. 

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About Ian Ippolito

Ian Ippolito is an investor and serial entrepreneur. He has been interviewed by the Wall Street Journal, Business Week, Forbes, TIME, Fast Company, TechCrunch, CBS News, FOX News and more.

 

Ian was impressed by the potential of real estate crowdfunding, but frustrated by the lack of quality site reviews and investment analysis. He created The Real Estate Crowdfunding Review to fill that gap.

   

 

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