Aug 12, 2015 · 3 minutes

Yesterday, following the implosion of Zirtual, I reported that the company was about to be snatched out of bankruptcy by a buyer arranged by investors.

Late last night that buyer was revealed to be Startups.co, in a deal Zirtual founder Maren Kate Donovan tells me was set up by investor Dan Rosen.

I also predicted yesterday that the acquisition would be presented by the company as an “all’s well that ends well” story. And sure enough, a Medium post by Donovan makes this sound like the entire Zirtual cast is about to get its happy ever after…

I was contacted by a client and friend of a current investor, Wil Schroter, CEO of Startups.co  — the world’s largest startup launch platform. He was a happy client, had done the entrepreneurial thing seven times and sold four companies.

During the last twenty-four hours we have worked out a deal where Startups.co will purchase Zirtual, and all its assets, and restart the service — to offer our clients support and give us the opportunity to hire some of our Zeople back…

Note: There has also been speculation about whether people will or will not be paid for their time worked. Everyone will be compensated fully. Checks have already been processed and are being mailed out today. If you have direct deposit, you’ll receive payment that way. Benefit charges will also be refunded. PTO payments will be sent.

And yet. It only takes a gentle tug on that narrative for the holes to show. Buried towards the bottom of an FAQ page on the Startups.co website we find this important epilogue:

In the interest of getting everyone back to work quickly, we will issue a contractor agreement to ZAs who we are able to place back into the field. We will calibrate compensation to be comparable to previous levels wherever possible. We have to wait until we assess the client volume and ZA utilization before we can begin discussing any other compensation terms.

I’m hearing from former Zirtual employees that they are being offered to return only as contractors, not W2 employees. Former Zirtual employees had their healthcare benefits cancelled the moment the company announced its collapse. There’s no sign those benefits are ever coming back.

Sources close to the company tell me that a big part of Zirtual’s financial woes were caused by the founders massively underestimating the cost of actually employing hundreds of people rather than hiring them as contractors. Startups.co is essentially pressing the “undo” button on that decision, leaving Zirtual’s 400-strong workforce far worse off than they were this time last week. And that’s just the lucky few who are actually getting their “jobs” “back”.

Last evening, investor Jason Calacanis -- who this past weekend was essentially soliciting for new Zirtual investors on his podcast -- tweeted “my guess is they [hire] 1/3rd to 1/2 of everyone back.” Even at the most generous end of that prediction, that leaves 200 people out of work.

Still, at least Calacanis is sympathetic to the plight of his portfolio company’s former employees. When one former Zirtual employee pointed out that she had only been offered her job back as a contractor, the multi-millionaire responded “bummer.” He also made another one of his famous “guesses”:

“I guess they are trying to rebuild the business & make it sustainable day one.”

Still, at least all those shafted Zirtual employees can take some comfort in knowing they’re not the only ones who might be out of a job. I asked Donovan whether she’ll be continuing as CEO post-acquisition or if she’ll have any role whatsoever in the “rebuilt” company. She told me: “You know, I have no idea. We are still figuring out details.”

One thing we can say for sure: With Zirtual unable even to stay open while the sale was finalised, no employees guaranteed a job in the new company, no return for investors, and a founder who doesn’t even know if she has a role, this deal can’t possibly be called acquisition. It’s likely not even an acquihire. Bluntly put, it’s a fire sale, and one in which hundreds of workers got very badly burned.  

“Bummer” indeed.