Particle lays off 10% staff and co-founder departs after ‘turbulent period’

San Francisco-based startup Particle was one of the rising stars in the Internet of Things space, raising more than $81 million to date on the promise of helping to manage and secure the next generation of connected devices.

But the company is only now emerging from what its co-founder and chief executive Zach Supalla called a “turbulent period,” prompting layoffs and cost-cutting to help stay afloat, TechCrunch has learned.

Founded in 2012, Particle snagged $40 million in its Series C fundraise last October from big industrial investors, including Qualcomm Ventures and Energy Impact Partners, signaling strong support for the company’s mission. The startup pitches its flagship platform as an all-in-one solution to manage and secure IoT devices with encryption and security, but also scalability and data autonomy.

But a recent email sent by Supalla to his staff — obtained by TechCrunch — shows the company is course-correcting after a recent revenue miss.

The email, which the company confirmed was sent by the chief executive, said Particle laid off 14 staff members earlier this month, representing about 10% of the company. The layoffs of both engineering and support staff came just weeks after co-founder and chief technology officer Zachary Crockett quietly departed the company for “unrelated” reasons, said Supalla. (Crockett did not respond to a request for comment.)

According to Supalla’s email to staff, Particle’s revenue goal in 2019 was $16 million, but it ended the year with $10.3 million. Supalla cited, among other things, “operational challenges” with the business that he said kept the company “from executing as well as we could.”

Supalla said the company still has a “flush” bank account with more than $30 million in the bank, but the company’s current burn rate of $2 million per month is “uncomfortably high.”

“We would only have until early 2021 to prepare for the next stage of financing the company,” he said.

The email added that the company is bringing on $10 million in venture debt, but Supalla told TechCrunch that the deal is “still in progress.” Particle is aiming to reduce its burn rate to about $1.6 million per month, which Supalla’s email said would be achievable with the recent layoffs and reducing discretionary budgets, including marketing.

The cost-cutting will “put us in a position of financial strength,” the email said, adding that the company has “no intentions” of further layoffs.

Although the 14 employees have been given severance, one source said that some are still waiting for the payouts — some two weeks after the announcement — which Supalla confirmed in an email. TechCrunch also learned that former staff were asked to sign non-disclosure agreements. Supalla told TechCrunch that these agreements come with non-disparagement clauses, but that anyone laid off that wanted to be released from the non-disparagement terms would be.

Supalla’s email is hardly the death knell for the company, but questions remain about its revenue targets and its efforts to reduce its monthly burn rate. The chief executive’s email said, candidly, that while layoffs can signal financial duress, they’re all too often made too late and “as a last resort.”

“That’s not what’s happening here,” said Supalla. “We have plenty of money in the bank and are making prudent cuts to strengthen the business.”


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