new corean online accelerator that promises to help start-ups, has filed for bankruptcy and is now facing bankruptcy amid disgruntled employees and customers.
Dozens of employees of the struggling organization went on strike on May 4 to demand that founder Andrew Ryan step down as chief executive.
Allegedly, Newchip originally started from silicon hill news“Acts as an aggregator of top equity-based deals crowdfunding platform” It later evolved into the current accelerator model. On his LinkedIn profile, Ryan describes Newchip as offering “Through its “Online Global Accelerator and Venture Fund,” entrepreneurs have all the necessary skills and tools to build, scale and fund their startups from launch to exit.
Essentially, Newchip positions itself as an accelerator that helps startups meet with and raise money from investors and grow their companies for a fee. But some employees said the accelerator failed to deliver on many of its promises and left signed founders dangling.
Some founders, in interviews with TechCrunch and at least A public post discussion on LinkedIn, Newchip’s fees — ranging from a few thousand dollars up to as much as $18,000 or $20,000 — were too high to be worth the service. Some insisted that it would be difficult, if not impossible, to get a refund if the accelerator didn’t follow through.
Chief among the long list of complaints from eight former employees interviewed by TechCrunch was Ryan’s “mismanagement.” They allege the executive was routinely aggressive toward individuals in the company through written and verbal communications and made poor decisions in leadership roles.
A former employee, who asked not to be named, told TechCrunch: “He would often hire naive or ‘yes-so-yes’ types of employees, and act like ‘I’m too good to waste my time’ on people. Be absolutely heartless, degrading and demeaning. Be great at it and then yell at people.”
In response to whether he belittles employees, Ryan admits that his leadership style is Based on “military mentality” and “sometimes the line between accountability and conflict has blurred”. He also admitted that, in one particular instance, he could see his response “may come across as demeaning”. Ryan also added that he was “known to leave or end meetings abruptly without an agenda, emphasizing the importance of preparation.”
By email, Ryan said he finally accepted “full responsibility for the Newchip incident.”
He claims to be currently “in discussions with a number of venture capital firms, family offices and private equity firms to develop a continuity plan.”
Newchip, which operates under the Astralabs umbrella, filed for Chapter 11 bankruptcy protection in March, disclosing that it had assets of just $1.7 million and liabilities of $4.8 million. A bankruptcy judge finally moved the case to Chapter 7 last week.This is not surprising, considering that, according to silicon hill news:”While Newchip raised $7.9 million from accredited and non-accredited investors, Crunchbase data reveals a troubling history of financial losses. SEC filings showed a net loss of $197,884 in 2016 and a loss of $748,999 in 2017, and the company reported a $4.5 million tax loss carryforward in its 2020 financial statements. “
Ryan claims that employees recently staged a walkout to protest the fact that the company will be laying off more employees, and was led by Newchip investors. While Ryan did not name the investor, it is believed to be Joe Merrill, who also chairs Newchip’s board. (TechCrunch reached out to Merrill, who did not respond to a request for comment.) Ryan added that the accelerator has undergone several rounds of layoffs over the past six months, from more than 200 employees to about 75 earlier this month.
In an interview with TechCrunch, Ryan said: “We had to lay off the entire team, and there will be massive layoffs (…) Otherwise there would be no money to pay employees, and we would have to cut operations. Although I asked the court for approval to accept capital And we had investors who were going to give us capital, but our lawyers couldn’t make the motion. So we’re basically pushing them to file (a) emergency paper.”
He claimed employees were unhappy with the move and asked him to “shut down the company and basically liquidate everything,” something he said he couldn’t do in Chapter 11 proceedings. Ryan said he went ahead and fired the board.
Of the eight ex-employees TechCrunch spoke to, they denied leaving because they could be fired or not get paid, instead citing Ryan “lacked leadership and mismanagement”.
In their strike letter (which was shared with TechCrunch), employees expressed their concerns about the firing of “key personnel,” saying their “firing has led to an erosion of trust and morale within the organization, creating a toxic work environment.” Employees It called for the reinstatement of the top executives and for Ryan to resign as CEO “effective immediately.”
No one was reinstated.
Via email, Ryan told TechCrunch: “We could be liquidated within half a year due to the takeover attempt and the false charges brought to the courts, and although we had capital commitments to keep us going, unfortunately we ended up being liquidated. forced the closure of the company. Billion dollars, if the courts had just signed it, this would lead to frustration now, many of our 1,200 active companies are rightfully frustrated. My sympathies are with everyone affected and everything is being done possible measures to rectify the situation.”
He also said the company would “bring in a new, more experienced CEO.”
It’s not just employees who say they got burned by Newchip. Andrew Goei, founder of funding platform and fundraising software startup PitchPages, said he wanted a refund months after the project started after he felt he wasn’t getting the services he was promised, especially investor introductions.
In an interview with TechCrunch, Goei recalled Newchip salespeople telling him the accelerator “has a huge network and can introduce us to all these investors.” Funds will be recovered. So his company signed the contract in August of that year.
“After about two or three weeks, we still haven’t heard anything from them, even though we paid,” Goei said. At that time, PitchPages had paid about $6,000 for the project.
During that time, Goei said he met two of the program’s mentors, who expressed concerns about Newchip and advised Goei to get a refund. Goei told us that it took weeks for customer support to respond, and he was eventually told there would be no refunds.
“Obviously, their whole model is ‘start as much as you can. We don’t care who they are. We don’t care what stage they’re at, as long as they pay, that’s all that matters,” Goei said. “They’ll find any way they can and they won’t give any refunds. What’s really sad about this whole thing is that Newchip was founded by this guy from the VC community.”
founder Orri Bogdan also told TechCrunch that a Newchip salesperson told him If he failed to raise funds through the agency, they offered a full refund, but then “sneaked in on extreme regulations with the intention of never refunding anyone.”
Founder of VAE Labs Development of Edible Energy MistBecause of Newchip’s terms, Bogdan said his startup declined to “accept” his company’s offer to join another accelerator instead.
“If we hadn’t gotten into DSHA, we would have accepted and lost $7,500 to $18,000 for sure, with higher prices depending on whether we accepted their $250,000 warrant,” Bogdan said.
Former Newchip employees told TechCrunch that the company “rarely issues refunds.” They also claimed the company paid customers to remove negative reviews.
Ryan disputes both claims. Customer contracts stipulate that no refunds will be made, for example, when the company goes out of business, he said. He also said it was “a very common practice” for customers to use negative reviews to try and get a refund.
“They’re not eligible for a refund, so they leave a review and then email you back and say ‘Hey, give me a refund and I’ll make a note of it,'” Ryan said. “We give about $150,000 a month in refunds. That’s a lot for a business that brings in about a million dollars in taxes — about three times the amount you’d see in any case .”
Ryan also said he “tried to train some of the lower-level marketers” to keep up with aggressive comment moderation, but they “often couldn’t do it.”
Via email, Ryan also claimed that Newchip ““Almost every admission” loses money “due to the high stakes and failure of startups.”
While employee groups have recently made their displeasure public, they claim mismanagement stretching back years, including kickbacks on sales commissions and bonuses Ryan pays himself during monthly financial deficits.
For example, the group said sales commissions were awarded upon signing the contract, but claimed it was later rescinded for being told it was an unsigned contract, even though the client was actively paying.
Ryan disputed the allegation, telling TechCrunch that 200 to 300 contracts were not signed, totaling about $1 million, and that he found some team members “lying to clients” and charging accounts.
“We strictly abide by the principle of paying the enrollment commission after the contract is signed. Unfortunately, during the fourth quarter of last year, we discovered that the violations within the admissions team were concentrated in a small number of individuals, approximately 10% of our team,” Ryan said via email.
At the time, employee groups said Ryan self-appointed as head of sales. When asked if this was accurate, Ryan confirmed it, though he said it was temporary as the company looked for a replacement.
Ryan also told TechCrunch via email that his The first year “earning more than $75,000 since 2016” was 2020, when he received $92,000, $175,000 in 2021, and $287,000 in 2022, “about 1.4% of income.” He added that “approximately one-third of the amount each year is performance-based bonuses.”
At the time of writing, it was unclear what would happen to the entrepreneurs participating in the program, the rest of the employees, and the company itself. The group of former employees said they were reaching out to other accelerators and startup ecosystems to see if they could help founders affected by the liquidation. Ryan said he was “looking for white knights” to support the company and take over its projects.