Bitwise firm idles entire workforce, citing failed or ‘unfavorable’ transactions
Bitwise Industries furloughed all 900 of its employees Monday after running into a financial crunch just four months after the Fresno-based workforce training, software and real estate company announced an $80 million round of investments.
On Tuesday morning, tenants came and went with no Bitwise employees in sight at the company’s two-building office complex in downtown Bakersfield, where high-end amenities and ambitious plans never lived up to expectations. Messages left with executives and company phone numbers were not returned, and it remained unclear when or whether workers would return to their jobs.
Together with news reports and posts to social media, the picture emerged of a startup buoyed by initial success in Fresno even as the company appeared to run out of time and money before it was able to gain significant traction in any of its nine expansion cities, including its first: Bakersfield.
Bitwise cultivated a Silicon Valley-like air of benevolent modernity as it signed workforce training contracts with local government and poured millions of dollars into property overhauls, all while leaving local peers somewhat mystified as to what the company actually did.
“It was kind of like the land of Oz,” Bakersfield marketer Matt Munoz said Tuesday. He noted friends of his who had been recruited by Bitwise — and left good jobs in the process — were suddenly “freaked out.”
“It all sounded too good to be true,” he said, “but we were all cheering on Bitwise.”
Signs of trouble have mounted in recent weeks, but there were indications of problems last year. The Californian reported in September the company’s coworking space downtown remained largely empty, which the company brushed off as unrepresentative of its success.
Then, in late winter, Bitwise listed two of its Bakersfield buildings and its last Fresno property for sale. The company told The Californian the offering was routine and that sale revenues would be reinvested locally.
Then in May, the San Joaquin Valley Sun reported Bitwise was late in paying property taxes as it faced litigation filed by its building and construction partners. The Sun also published a story about a senior executive reportedly seeking seven-figure loans at interest rates as high as 50%, even as the company insisted it was “confident in its financial position.”
It all sounded too good to be true, but we were all cheering on Bitwise.” — Matt Munoz, Bakersfield marketer
GW Wire reported Friday Bitwise’s payroll would be processed on paper instead of direct deposit, which until then had been standard.
On Monday, co-founder and co-CEO Jake Soberal told The Fresno Bee a decision was made during an emergency meeting earlier the same day to furlough Bitwise’s workforce. He referred to undisclosed problems that had arisen in a “very short period of time.”
“Several critical (financial) transactions either did not materialize or materialized unfavorably, and the quantum of that is quite large,” Soberal told the newspaper.
A mix of reactions surfaced on Twitter, with one accountholder by the name Bri posting online that her “heart is broken.”
“Never have I ever believed in, cherished or was willing to ride for a company like I was for Bitwise,” Bri wrote. “We were doing it. We were making a difference. And I was 100% all the way in.”
Another Twitter user, lead Bitwise software developer Derek Payton, posted that Monday was a “very hard day” as anxiety levels among company associates went “through the roof.” He expressed hope the furloughs were “short-lived so we can all get back to work soon.”
As recently as March, while Bitwise was touting having trained more than 10,000 people, 80% of whom had reportedly gone on to tech employment, Kern officials pointed to progress on the county’s workforce development contracts with Bitwise.
The county said eight people had graduated from the six-month, paid internships it partnered on with Bitwise to teach new skills and professionalism. It said six other workers were also being trained, not including seven people who had gone through a separate training program that had 15 others in classes.
Bakersfield city government similarly contracted with Bitwise, but details were not available when The Californian asked for them in March. Separately, the city granted the company two $50,000 grants for property work at H and 18th streets in 2020 and 2021.
Investors saw great promise in the company’s reassurances it could replicate its Fresno success in training tech workers who had come from low-income and minority communities.
It March, Bitwise announced securing $80 million from investors including a Goldman Sachs asset management fund focused on social equity. Among other things, the money was to be used to open a new location in Chicago’s South Side. The company previously reported receiving $50 million from JPMorgan and others in 2021, after having already taken in $20 million from Kapor Capital and New Voices Fund in 2019.
While the pandemic idled many companies, it appeared to lift Bitwise, which responded by offering remote workforce training. But the coronavirus crisis also kept tenants away from its office properties, and when finally the company opened its Bakersfield coworking center in April 2022, the facility was limited to half-capacity.
A promised taproom and wine bar, with an attached patio space for special events, never opened to the public.
Last year, Bitwise bought Bakersfield process outsourcing company Stria LLC. Representatives of Stria did not respond to requests for comment Tuesday.
Soberal appeared to blame pressure from venture capitalists for some of the company’s problems.
“Building a company as fast as we have over the last 10 years is by design unsustainable,” he told The Bee. “Venture-backed companies inherently carry risk in their effort to do something novel so quickly, and Bitwise is included in that.”