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What you need to know for 08/18/2017

Quirky on its last legs?

Quirky on its last legs?

The New York City-based startup that received a hero’s welcome in Schenectady last spring when it an
Quirky on its last legs?
Quirky at City Center on State Street in Schenectady is pictured on July 16.
Photographer: Peter R. Barber

Quirky is in crisis.

The New York City-based startup that received a hero’s welcome in Schenectady last spring when it announced it would open an office downtown and create 180 local jobs is facing massive layoffs and dwindling funds.

Its West Chelsea headquarters is shedding 109 employees over the next two weeks, according to a filing posted Wednesday with the state Department of Labor. Its Hong Kong and San Francisco offices have closed, and its remaining office in Schenectady — which was hit with layoffs this summer, too — might just be its last hope.

That’s according to a handful of current and former employees who say the Schenectady office is crucial to the continued operation of Wink, a connected-home platform Quirky developed last year and is now trying to sell. But those same employees — who spoke on the condition of anonymity this week because they had signed nondisclosure agreements as a condition of their employment — expressed concerns over the company’s management, questioning frivolous purchases and a sometimes out-of-hand party culture on company grounds.

“Before everything happened, it was a really nice place to work,” said one former Schenectady employee who was laid off last month. “Then all of a sudden everything started to happen. Just before they announced the first round of layoffs, they bought our office an $8,000 ice cream machine. Why do we need an $8,000 ice cream machine?”

Quirky was founded in 2009 by a 20-something Ben Kaufman, who launched his first startup while still a teen. The premise was simple: Ordinary people from all over the world would submit their ideas for inventions, and Quirky would help make then reality, giving them and anyone who influenced the final product a cut of the revenue from sales.

It worked for a while. Jake Zien of New York City came up with the company’s most popular product, a flexible power strip that bends to fit any kind of plug or adapter. But the premise began to unravel the more expensive a product was to manufacture and the less unique it was.

Take the Aros air conditioner. Air conditioners were invented long ago, but Garthen Leslie came up with the idea for one that you can turn on as you head home from work. Quirky partnered with General Electric to make it and wound up diving headfirst into the connected-home market. It launched Wink, an app that allows anyone with a smartphone or tablet to activate air conditioners, thermostats, lights, security cameras and locks with the tap of a finger.

But the air conditioner itself wasn’t anything special, and it struggled to compete with established names. An ex-employee put it this way: “It’s a David versus Goliath thing. All the products Quirky made were awesome. They were really, really good. But when you make a bunch of products and try to compete with people who’ve been in the market for years, for generations — would you buy Quirky when you can buy Frigidaire?”

So Quirky had to reposition itself. One thing it had going for it was its community of more than 1 million online inventors and influencers. Earlier this year, Kaufman made the announcement that Quirky would change its core business model. Instead of making products and inventions itself, it would deploy its online community to help shape product development for companies like Mattel, GE and Poppy.

In the meantime, it kept developing Wink. Last summer, it spun the platform off as a separate company and started contracting with outside companies willing to connect their devices to the platform. That’s where Schenectady comes in. Customer service representatives work around the clock and are expected to have the technical skills to troubleshoot any issues that arise for customers with the Wink platform, from connectivity to syncing devices.

Quirky officials have not responded to multiple requests for comment in recent weeks. Two weeks ago, Kaufman told Fortune magazine that Quirky had run out of money. He later clarified that he had about $12 million in the bank and a few rescue possibilities that could include fundraising to keep both Quirky and Wink afloat, or he could sell one or both companies.

Schenectady employees say an offer was made this spring to buy Wink, but the buyer backed out after the platform experienced a security hiccup in April that cost millions of dollars to fix. The Schenectady office proved crucial during that hiccup, employees say.

“People were working as hard as they could,” said one ex-employee who was laid off last month. “Literally, I’ve never seen people be more selfless in my life. One of the core tenets of Quirky is to embrace conflict, and these people just jumped right in and got the job done. You couldn’t have asked more of them.”

Each employee or former employee interviewed this week said Schenectady will undoubtedly be part of the package should Kaufman sell Wink.

“As long as office culture is preserved and cultivated, that call center is Wink’s ace in the hole, and any company that would think otherwise is foolish,” said one ex-employee.

Yet even the Schenectady office hasn’t been immune from companywide layoffs. Quirky pledged to create 180 jobs in the Electric City when it opened here last May, driven in part by an incentive package totaling nearly $1 million from the county and state. But the closest it came to that figure was about 150, employees said.

After a round of layoffs earlier this summer, that number is now down to between 50 and 60, they said. The notice filed Wednesday with the state said another two at the Schenectady office would be laid off in coming weeks.

Ray Gillen, who heads the Schenectady County Metroplex Development Authority, insists the company still employs 150. “We get monthly numbers from our parking system, and it’s like 150,” he said. “There’s no way there’s 50 people there. That makes no sense.”

Metroplex agreed to give the company $450,000 toward renovation costs associated with building out the top two floors of Center City. So far, it’s disbursed $300,000 of the grant, which is doled out as Quirky hits job targets. As part of the grant agreement Quirky signed, Metroplex has the right to ask for its money back if the company closes or fails to meet those job targets. When asked Wednesday if the agency would do that, Gillen declined to discuss the matter beyond saying the grant went toward renovating a vacant space.

“None of the funding went to the company,” he said. “It went to the space.”

The company has worked to maintain a hip image, and that includes its space. The New York City and Schenectady locations both boast an open floor plan with carefully selected vintage furniture and a workforce made up of millennials who are allowed to enjoy wine and beer at their leisure from an on-site kitchen.

Employees said that for the most part, everyone is responsible with alcohol on the premises. But at least two employees said the company’s desire to maintain a fun workplace has occasionally spiraled out of control. Last week, in the midst of the company’s public financial woes, the Schenectady office skipped its usual staff meeting and threw a party instead, according to multiple employees, with on-shift workers ignoring calls to play beer pong and other games.

One former worker said he never saw work being ignored or employees act irresponsibly with alcohol. Rather, he said, the company’s mission of cultivating a fun work atmosphere encouraged employees to give 100 percent during times of crisis.

“We had wine, beer, bean bags. So?” he said. “As long as you’re doing your job, then you can have all these things. Maybe it’s not the place for people like our parents, but Quirky is very much a millennial kind of company. The culture is what it is. Some people like it, and some people don’t.”

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