A direct-to-consumer home cabinet provider called CliqStudios closed on Friday, taking with it the jobs of maybe 350 people largely in Minnesota and Indiana. As such things go, this one is about as brutal as it gets.
There's unlikely to be severance pay, unused vacation pay and maybe even no last paycheck, former employees told me and wrote on LinkedIn over the past few days. There will be no continuation of health insurance coverage, either.
Before considering the company a casualty of coronavirus alone, it's worth noting the pandemic hadn't caused as much economic damage by last Thursday as it has now.
But the tale of CliqStudios is like a canary carried into the coal mine, the early warning signal that it might be getting bad. The company had no cash cushion when conditions seemed to be changing externally, no way to make it through a coming shock.
There will be more of this. A lot more.
In response to a disease that can't be easily controlled, leaders across the U.S. are ordering the closure of much of the economy. Investments have lost one-third of their value in a month. A recession seems all but certain.
Weak businesses will fail. Stronger ones will be badly hurt. Millions will need unemployment help in coming weeks and months.
After a brief meeting at their office in Edina on Friday morning, stunned CliqStudios workers filed out to their cars around 10 a.m.
CliqStudios was created by entrepreneur Andy Juang, launching in 2010. In the origin story told on the company's website, Juang was undertaking his own kitchen renovation more than a decade ago and was struck by the need for a simpler, more transparent design and buying process, so the consumers really knew what they were getting.
The company, eventually called CliqStudios, was a bit of a hybrid. It billed itself as an e-commerce company, meaning it developed a direct-to-consumer model, but not as another version of consumer do-it-yourself.
The customers could get experienced designers to work with them, just not in a face-to-face, in-store setting. Sometimes designers could connect over the internet, for example, with the ability to share images of designs that customers might be viewing at the same time on their iPads or phones.
Juang's principal business is Golden Valley-based EQ Holdings, which looks a bit like a private-equity style of professional investor but is really more of a business holding company. One of the main differences is that traditional private-equity firms are usually a series of partnerships, each with an end date.
That's why these private-equity firms sell the companies they control after a few years, to get the money back to their own limited partner investors. EQ Holdings' promise to business owners looking for an investor or a buyer was that it doesn't have an arbitrary deadline to sell, and so it can be more patient.
CliqStudios is listed among EQ Holdings' portfolio of minority investments, because it wasn't owned outright by EQ.
CliqStudios also had a more traditional private-equity firm as a backer: Great Hill Partners of Boston. Among Great Hill's successful investments was Wayfair Inc., an online retailer of furniture and lots of other home goods that's now publicly held.
Great Hill is big, too. Last summer it announced that it has rounded up investors for its seventh fund, new commitments totaling $2.5 billion.
Trying to reach Juang through EQ Holdings was unsuccessful, but of course there's a chance the messages did not reach him, what with work from home and other social-distancing practices now required to slow the pandemic.
But as best can be determined, there had been production problems in the recent past at its manufacturing facility in Indiana.
In light of that, Juang and his executive team decided to start also selling cabinets made by other custom cabinet manufacturers, rather than continuing to rely on its in-house production. This is a big strategic change, requiring the company to strike distribution agreements with firms that might have perceived CliqStudios as just another competitor.
After the usual fits and starts associated with a course correction, former employees suggest, the business was running well. Certainly the mood inside the company was one of optimism, for 2020 and beyond, with a lot of confidence that the company had assembled the technology and team to deliver what seemed to be a better way to serve the customer.
The staff expected to do maybe $60 million in sales this year.
After a good month of consistent sales in January, activity did slow in February. News of the coronavirus outbreak in Asia by then was all over, but consumer confidence in February still looked healthy. But maybe there was growing hesitation on the part of potential customers to click "order" on a big-ticket kitchen renovation.
The crisis came last week. The company needed more cash to keep going. But "the Company's existing investors notified the company on March 11, 2020, that they would not make the additional capital investment required to sustain the company's operations," according to the note employees received on Friday morning.
Great Hill Partners, it appears, declined to put in any more money.
Within a couple of days, EQ Holdings closed the company down.