AP Photo/Mark Lennihan
- A startup that raised $30 million from WeWork CEO Adam Neumann in January collapsed on Wednesday — the same day that WeWork filed for its IPO.
- Faraday Grid was developing innovative transformer technology, but ran out of money and nosedived into administration, putting 45 people out of work.
- A former senior insider told Business Insider about how the firm burned through $2.4 million a month amid a giant hiring spree and a US launch.
- The source said Faraday Grid’s founder and CEO Andrew Scobie was fired in June after two employees raised the alarm about the firm’s financial health.
- Scobie did not respond to Business Insider’s request for comment.
- Click here for more BI Prime stories.
WeWork’s upcoming IPO will likely turn its CEO, Adam Neumann, into a billionaire many times over.
That won’t be much consolation to one of Neumann’s portfolio investments, British energy startup Faraday Grid, which collapsed into administration on Wednesday — the same day WeWork filed to go public.
Administration is the approximate UK equivalent of filing for Chapter 11 bankruptcy. News of the firm’s collapse was first reported by The Wall Street Journal.
Neumann invested £25 million ($30 million) into the clean energy startup in January. Eight months later, it was gone.
According to a statement by administrators Grant Thornton, Faraday Grid needed significantly more money to continue operating and "was unable to continue its activities in its existing structure." Grant Thornton said 45 employees lost their jobs and it is now looking for a buyer.
Read more: WeWork files for IPO, revealing spiraling losses of $1.6 billion
Faraday Grid’s goal was to replace electricity transformers with new technology that would boost the grid’s capacity to handle renewable energy. The firm was developing a flow control device, called the Faraday Transformer, that could replace the current generation of electricity transformers.
According to a former senior employee with direct knowledge of the matter, there were months of drama in the run-up to Faraday’s collapse. Although Faraday Grid had landed a big-name investor in Neumann in January, its underlying finances were unhealthy, according to the source.
Faraday Grid/YouTube
This person described how the firm spent lavishly through 2019 on launch events and hiring an all-new C-suite. Between January and June this year, Faraday Grid announced its US expansion, a new chief systems architect, comms chief, two regulatory bosses, CFO, general counsel, COO, VP of engineering, and a new innovation centre in the Czech Republic.
Around the same time, then-CEO and cofounder, Andrew Scobie, had said Faraday Grid was in the process of raising hundreds of millions of pounds in new funding following Neumann’s investment.
According to the source, people were lured in by the promise of cool technology that might help tackle climate change and Scobie’s fundraising claims. They also thought an investor as high-profile as Adam Neumann would have done deep due diligence on the company. Scobie was even feted in the press at the time as a "pioneer," reinventing the energy grid.
The reality was that the firm was haemorrhaging cash and that Scobie would be ousted a month later.
According to our source, two executives discovered around mid-2019 that Faraday Grid was actually close to running out of cash, with a monthly burn rate of £2 million ($2.4 million), partly thanks to the expensive new hires. They took their findings to the board, and suggested dramatic cost-cutting and directing the money to engineering.
According to the source and public filings, the board comprised Scobie; cofounder and CTO Matthew Williams; and investor David Rogers, CEO of clean energy group Amp. Ilan Stern, who runs investments for Neumann’s family office, 166 2nd Financial Services, also had a presence on the board, the source said, although he is not listed on Faraday Grid’s leadership page.
Unusually, the source said, the board didn’t hold regular meetings and, when confronted with the executives’ financial findings, "they were very, very surprised." They acted quickly, firing Scobie in June and replacing him with Amp executive Paul Ezekiel. They also made a number of the new and incoming executives redundant, meaning some people were fired before they even started the job, the source said.
But it was too late, and the firm collapsed.
Facebook/Faraday Grid
Another discovery that made new joiners uneasy was the fact that Scobie and another Faraday Grid employee, Jacqui Porch, were in a relationship, the source said.
Porch is listed as a founder of Faraday Grid, and was its chief marketing officer until June. Their relationship, the person said, wasn’t declared to new employees before they joined.
Scobie made no secret of the fact they were close, however. He regularly posted pictures of himself and Porch together on his Instagram profile, with some photos dating back to 2015.
Scobie did not respond to a request for comment. Stern did not immediately respond to a request for comment. Rogers could not be reached for comment.
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Source: Business Insider – sghosh@businessinsider.com (Shona Ghosh)