In a letter sent to employees, the Las Vegas-based company said on Thursday that it was forced to downsize after “sudden and unforeseen circumstances.” The letter was shared on Twitter by local publication Vital Vegas. The startup’s CEO, Adam Rogas, abruptly left the company last week, according to Forbes.
Employees were informed during an all-hands Zoom meeting on Tuesday that the Securities and Exchange Commission was investigating the company for alleged fraud.
“We got on and were told that our finances were not what we thought they were, and there would be layoffs,” said an employee, who declined to be named because they were not authorized to speak to the press.
NS8 could not be reached for comment. The SEC declined to comment.
NS8’s effective shut down comes just months after the company had announced a massive $123 million Series A round led by global VC firm Lightspeed Partners. That funding round valued the company at more than $400 million, according to data from startup tracker PitchBook.
Lightspeed said in a statement to Forbes that it is still gathering facts on what has occurred. “This is a rapidly evolving situation,” the investor said. “We are shocked by the news and have taken steps to inform our LPs. It would be premature to comment further at this time."
Rogas however maintains that he resigned for family and personal reasons. He also alleges that NS8’s board and current management have used “an SEC investigation that began in November of 2019 to insinuate a more insidious narrative...I did not walk away with the companies [sic] money.”
He added that when NS8 raised an initial $50 million of the announced funding in the fall of 2019, the startup was nearly out of cash. The remaining funding was raised via a secondary round conducted by the new investors, Rogas claims. “The company was burning [$4 million to $6 million] a month and was going to run out of money in a couple of months,” he said.
For outgoing employees, news of the company’s near-total closure has proven devastating. “It was just shock, horror and despair,” says the software engineer. “It’s not fun.”