The company’s CEO cites restructuring while Cleveland media report the company is going out of business. An investor in the company said a 2018 acquisition might have created cash burn problems.
Blockchain voting company Votem is on life support after laying off most of its staff Feb. 15.
Headquartered in Cleveland, which has sought to become an epicenter of blockchain innovation through various projects and partnerships, Votem launched in 2015 with the stated goal of having 1 billion people worldwide vote with its mobile platform by 2025. The company counted the United Nations and the Rock & Roll Hall of Fame as clients, touting the 1,880,525 votes cast for the Rock & Roll Hall of Fame’s fan vote in 2017 as the largest-ever use of online voting with blockchain at the time.
Votem acquired Everyone Counts, a California-based online voting company, in October 2018.
According to a report this week from alt-weekly newspaper The Cleveland Scene, Votem employees did not receive their most recent paychecks and were told on Feb. 15 that everyone was fired, effective immediately. In subsequent reports, both The Scene and Cleveland.com cited an emailed statement from Votem CEO Pete Martin claiming the layoffs were part of a “restructuring and recapitalization” effort to ensure long-term viability, and an unspecified number of employees were still serving customers.
Martin reiterated some of this in a brief email to Government Technology on Friday.
“Contrary to popular opinion and rumors, the facts are that we did not go out of business, we are still operating, we do have employees and we are supporting all of our current active customers,” he wrote. “We are working tirelessly on our restructuring and we hope to announce more news very soon.”
Aside from handling the actual voting process, the company also offers other tools for elections officials such as voter registration software. Votem was also involved in a contract to update Los Angeles County's voting equipment.
Bernie Moreno, an investor in Votem and former car mogul who’s spearheading the effort to turn Cleveland into a hub for blockchain, told Government Technology that 52 people were laid off and Votem was “unlikely” to recover. He thought the acquisition of Everyone Counts was the company’s downfall.
“It was probably too big of an acquisition in terms of cash burn. They got ahead of their skis, and like a lot of tech startups that make that mistake, they ran out of cash,” Moreno said. “Votem was burning cash, but at a sustainable rate. The company in California was burning a lot more cash at an unsustainable rate, which is why the primary equity company had it sold, and when you combine the two together, it was not something Votem could sustain.”
How many employees remain on staff is unclear. Moreno was under the impression they were all laid off, and he was resigned to the loss of his own stake in the company, which was less than 5 percent.
“Pete’s working on getting some funding to finish some of the projects that were really close to being done,” he said. “I hope he pulls a rabbit out of a hat, and if he does, fantastic.”
That said, Moreno was “100 percent confident” that someone will eventually crack a blockchain solution for mobile voting. He compared the traditional voting process — getting in a car, driving to a polling station, waiting in line and filling out a piece of paper — to what Blockbuster Video used to be for home media, and he praised Votem’s business model as sound.
“The idea that you can get a ballot to your mobile device and know that it’s secure, immutable, and that you can track your vote to make sure it was recorded properly, and at the same time … save the government millions and millions of dollars, is a very compelling business proposition. It will happen,” Moreno said. “Everybody needs to be reminded that AltaVista, AskJeeves, Go.com all went out of business, but that doesn’t mean the model of a search engine was a bad one. Google is worth almost a trillion dollars.”
A prominent investor in Votem is Medici Ventures, the venture arm of Overstock.com. Medici also backed another blockchain voting company, Voatz, a year ago.