Digital Asset has lost at least 25% of its staff in six months.
Digital Asset, a startup that was once considered a key piece in the adoption of blockchains-centric technology, has suffered significant layoffs from employees, indicating the difficulty of building a business in what was once a striking technology.
Digital Asset was founded in 2014 amid the growing obsession of the financial industry for blockchains and raised more than USD 115 million in funds from companies such as Goldman Sachs, JPMorgan and Citi.
The layoffs have been a combination of people who have left on their own, as well as staff reductions. Since April, at least a quarter of its employees, of different levels of seniority and divisions, have left the company, according to a LinkedIn analysis.
One of the biggest mistakes of Digital Asset was the launch of a product that many of its competitors were willing to offer for free. As the company focused on finding a viable business model, it was forced to dispose of an important part of its employees.
Further complicating the transition, Digital Asset changed leadership after its CEO, Blythe Masters, retired in December 2018.
The changes in Digital Asset represent the difficulties in building a business in the space of technology associated with blockchains. Technology, which was once seen as the future of how Wall Street handled its businesses, has yet to overcome the pilot projects and initiatives of the other financial companies, which still do not seem safe, or are not willing, to fully implement the technology in day-to-day operations.
A spokesman for Digital Asset said in a statement that the company “focused its efforts on the parts of our business in which we can provide the greatest value to our customers and the market in general, which are DAML smart contracts.” DAML stands for Digital Asset Modeling Language, or Digital Asset Modeling Language, a smart contract programming language.
“The execution of our strategy is the result of years of planning, engineering work and careful evaluation of the market opportunity, rather than a reaction to external pressure.”
In many ways, Digital Asset served as an initial reference for Wall Street’s interest in blockchain potential. In 2016, it secured USD 60 million from 15 of the largest financial and technology companies, including Goldman, JPMorgan, IBM and Citi, with the belief that its technology could be disruptive in the area of the operation of global financial markets.
However, in those three years, the adoption of the startup accounting book technology platform has been limited. The Australian Stock Exchange, which announced at the end of 2017 that it was working with Digital Asset to replace CHESS, its capital clearing and settlement system, is the only Wall Street company that has taken significant steps to go beyond a pilot phase with the original DLT platform, or distributed accounting book technology, from Digital Asset.
A source indicated that the problem that the startup was constantly facing during the launches was the fact that competitors offered similar and free blockchains platforms through open source.
Another former employee said that the company maintained a mentality of wanting to own its own technology and not collaborate with others, an ideology that did not work for the focus of those in the DLT space.
One of the former employees said:
We were at a huge competitive disadvantage because most were giving away the product and saying “Yes, you can keep it yourself.”
The company faced another significant change in the last 12 months. Masters, a former JPMorgan executive announced her resignation as CEO of Digital Asset, causing shock in the company and the industry in general.
The departure of Masters, which joined Digital Asset in 2015, was seen by many as another sign of Wall Street’s apathy for technology.
Internally, the departure of Masters was also a surprise, according to former employees, who said that many had come to Digital Asset because of her and her vision to disturb Wall Street.
One of the former employees commented:
“Blythe Masters is a superstar. In terms of pure charisma and magnetism, she is, in my opinion, irreplaceable.”
However, in April, Shaul Kfir, co-founder and chief technology officer of Digital Asset, downplayed his departure and the importance it had for the future of the company.
“Blythe is a person in a 180 company. The company was not just Blythe, and his departure didn’t change anything in the plans.”
Masters’ immediate replacement was AG Gangadhar, a former engineering executive at Amazon, Google and Uber, who joined the board of directors of Digital Asset in April 2018.
The decision to appoint Gangadhar as CEO and president caused some to be surprised at the company. Although Gangadhar had an impressive resume of his time in some of the largest and most innovative companies in the world, he also came with his own luggage. At Uber, he ran an engineering department that was plagued with controversy over how he handled sexual harassment complaints.
His time as CEO of Digital Asset would also last shortly. Under Gangadhar, uncertainty remained around the direction of the company and employees were not sure what their daily responsibilities were.
In March of this year, Yuval Rooz, co-founder of Digital Asset, who had served as COO and CFO, was appointed CEO while Gangadhar remained as executive president.
The following month, DAML, a programming language for the development of “smart contracts”, was open source. A week later, a partnership with the VMware software company and its blockchain project was revealed as part of an initiative for DAML to work with a variety of blockchains instead of just Digital Asset. The integration with DAML in blockchain projects led by Hyperledger, R3 and Amazon would take place in June.
While DAML had always been part of the Digital Asset plan, a former employee said the decision to allow its use in other blockchains was an important decision.
“It was time to accelerate the execution of our strategy, which included the open source of our smart contract language (DAML) and its integration with other accounting books.”
So, the construction of the Digital Asset bookkeeping platform for large companies was no longer the priority.
A combination of resignations and staff cuts followed the association’s announcements, as the company focused all its efforts and resources on DAML and on the construction of the developer community around and away from the blockchain platform.
As for ASX, in August the exchange house signed a memorandum of understanding with Digital Asset and VMware to join forces in projects that included the CHESS review and support for DAML.
People who had been hired to develop and sell platforms to large companies now had completely new mandates. While some employees were forced to retire as part of the layoffs, others left on their own.
Since Friday, Digital Asset has published six job advertisements for its New York office on its website, and seven other vacancies in its offices in London, Zurich, Budapest and Sydney.
After the USD 60 million investment, Digital Asset had raised USD 7.2 million from ASX and then USD 40 million in a Series B round led by Jefferson River Capital, the family office of Blackstone executive vice president Tony James, in October 2017. Since then, however, there has been no fundraising announced.
All employees agreed that a change of focus was necessary for Digital Asset. The initial approach he had taken was not working, and a change was necessary.
From the announcements about DAML in April, Broadridge, an investor in Digital Asset, explained its plans to use the programming language as part of a DLT-based platform it was building. The Swiss bank UBS also commented on an initiative that uses DAML for some structured products in Asia.
That said, the new business model is not a sure thing. Another former employee with knowledge of DAML’s strategy said that the change in approach put Digital Asset on track to make it “much more useful and valuable,” however, an open source strategy made it difficult to assess profitability.
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