Fresno tech darling Bitwise showed signs of financial distress. What’s next isn’t clear

The stunning announcement Monday night by Bitwise Industries that it has furloughed its entire workforce of about 900 people in Fresno and across the U.S. is prompting questions about the financial stability and sustainability of the real estate and technology company.

It’s also creating ripples of concern at Fresno City Hall and on social media about whether the company — long a darling of downtown redevelopment efforts — will survive and what effect its troubles may have on revitalization of a struggling urban core.

“We expect this to be a very temporary action by the board and executive team while we determine the next steps,” Bitwise co-CEO Jake Soberal told The Fresno Bee late Monday. The decision, reached by the company’s board at an emergency meeting earlier Monday, was the result of “several critical (financial) transactions (that) either did not materialize or materialized unfavorably.”

Earlier this year the 10-year-old company announced it had secured an $80 million infusion of capital from investors including Goldman Sachs Asset Management, Citibank, The Motley Fool and the Kapor Center. That is the single largest one-time investment that Bitwise had received to date, and brings to a reported $157 million that Bitwise had secured over several rounds of venture capital investments in recent years.

The Bee reached out to Soberal and a Bitwise spokesperson on Tuesday for a follow-up interview but received no response by mid-afternoon.

On Tuesday morning, the front doors were locked at Bitwise South Stadium on Van Ness Avenue near the Chukchansi Park baseball stadium downtown and the Bitwise 41 building at Ventura and R streets, but associated tenant businesses including restaurants remained open for business.

Tax liens, property listings point to financial pressure

From its roots in 2013 in the Mural District in downtown Fresno, Bitwise — which has billed itself as a “mothership” for technology entrepreneurs — has embarked on a decade of rapid expansion not only in Fresno, but across California and to other cities in the U.S. Bitwise has four sites in Fresno, plus additional locations in Bakersfield, Merced and Oakland. Nationwide, the company has spread its presence to cities in Wyoming, Colorado, New Mexico, Texas, Ohio and upstate New York.

Earlier this year, Bitwise announced its plans to open in Chicago — the largest city in which the company would bring its model to provide technology training for students in historically underserved demographics and communities and services for local businesses.

Amid the growth, however, signs of cracks in the company’s financial foundation could be found.

In March, Fresno County filed tax liens against the Bitwise South Stadium building at 700 Van Ness Avenue. The same property was subject to a certificate of delinquency of personal property taxes in May 2022 and September 2020.

Also in March, three Bitwise locations — two in Bakersfield and one in Fresno — were listed for sale as a package deal to be leased back to the company. The status of that offering was not immediately clear.

On Tuesday, some Bitwise employees indicated anonymously that Bitwise had stopped making matching contributions to their 401(k) retirement savings program in March, and that some workers’ paychecks issued Friday for the most recent two-week pay period did not clear.

On Monday, Soberal and co-CEO/co-founder Irma Olguin Jr. told The Bee that the conditions prompting the furlough decision came about “within a very short period of time.”

“The events that we’re dealing with that led to furloughs of the team were very new and very unexpected,” Soberal said, adding that he could not offer more specifics about the situation.

“A company growing at the the velocity that Bitwise does depends on a meaningful number of (venture) transactions, revenue, debt and equity closing,” Soberal said. “This is a year where we simply lost too many times. That led us to a financial condition where we needed to take immediate and decisive action.”

An uncertain future for the company and its workers

Soberal said the company’s leaders had not yet determined how much cash Bitwise needs to bring its workers back from furlough and resume operations, or where it might obtain such an investment. He added that he expects some furloughed workers to be brought back to work to deal with a minimum level of critical business activities.

But, he said, “it’s much too early to know what the future of Bitwise will hold.”

“Building a company as fast as we have over the last 10 years is by design unsustainable,” Soberal added. “Venture-backed companies inherently carry risk in their effort to do something novel so quickly, and Bitwise is included in that.”

Status of local tech training, business-support efforts

Another issue that remains unclear is the status of several partnerships that Bitwise established with colleges including Fresno Pacific University and Fresno City College to offer technology classes for students.

Also uncertain is at least one agreement with the city of Fresno in which Bitwise was awarded $1 million in American Rescue Plan Act funds for the creation of a Digital Empowerment Center to improve technology literacy for small businesses. The limited-time initiative announced in February was due to run into November 2023 with a goal of helping at least 1,500 business owners by introducing them to technology tools and drive commerce for their enterprises.

“To date, the City has paid Bitwise half of the grant amount ($500,000),” Fresno Mayor Jerry Dyer said in a statement Tuesday afternoon. “We are currently in communication with Bitwise to determine if the program will continue and whether any funding will need to be returned.”

In September, the city agreed to pay Bitwise $60,000 to administer an Equitable Economic Mobility Initiative grant for the city through January 2023.

Implications for downtown Fresno revitalization

“Like many in Fresno, we were surprised and saddened to hear about the financial difficulties that led Bitwise to issue furloughs to all its employees,” Dyer said Tuesday. “It is our hope that Bitwise will be able to navigate successfully through these uncertain and difficult financial times.”

On social media sites including Reddit and on a Facebook page called “For the Love of Downtown Fresno,” some commenters bemoaned the possibility that the Bitwise furloughs may have a chilling effect on efforts to revitalize the downtown district. All four of Bitwise’s Fresno facilities are in downtown Fresno, and the company has been an unabashed cheerleader for creating a hub of technology industries in the area.

“This is going to have hellish repercussions on Fresno’s economy,” a Facebook comment stated.

“This is not looking good for anyone involved. … It will kill any momentum building downtown,” one Reddit commenter wrote. And another Reddit reader stated, “Welp, more insult to injury for Fresno, especially downtown Fresno.”

Soberal and Olguin both expressed sadness and dismay over the situation.

“The most exciting thing about Bitwise has been the ability to see people experience their fullest potential in ways that others didn’t think was possible,” Soberal said. “This is an interruption to that, and it’s heartbreaking.”

Olguin said she’s “grieving and processing” what’s happening with the company. “This isn’t what either Jake or myself would liked to see happen,” she said. “Even more, I think the people we work with are feeling a version of that as well. I’m thinking about them, about how we can get back to a place where we’re serving them.”