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Austin-based Newchip, an online accelerator aimed at helping startups, has filed for bankruptcy and is now facing insolvency in the face of employee and client discontent. The troubled organization experienced a walkout on May 4, with dozens of employees demanding the resignation of the Newchip’s founder and CEO, Andrew Ryan. Ryan started the accelerator in 2016, following a seven-year stint as a city commissioner in Austin, Texas. Initially, Newchip was an aggregator of equity crowdfunding platforms, and later, it evolved into its current accelerator model, offering entrepreneurs skills and tools necessary for building, scaling, and funding their startups from launch to exit.
Newchip presented itself as an accelerator that would help startups meet and raise money from investors and grow their companies for a fee. However, according to TechCrunch and interviews with several founders, the accelerator fell short on its promises and left startups stranded after they signed up. Some founders complained that the fees charged by Newchip was too high and that the accelerator provided inadequate services.
Several former employees who spoke to TechCrunch cited “mismanagement” on Ryan’s part, including aggression and poor decisions regarding leadership roles. Ryan, in response, acknowledged that his leadership style was based on “a military mindset” and that “there have been moments where the line between accountability and conflict has blurred.” He also accepted “full responsibility for the events at Newchip” and the company’s filing for Chapter 11 bankruptcy in March, which revealed that it had only $1.7 million in assets compared to $4.8 million in liabilities.
Last week, a bankruptcy judge converted the Chapter 11 case to Chapter 7 liquidation, following a troubling financial history that saw the company raising $7.9 million from accredited and non-accredited investors but recording a net loss of $197,884 for 2016 and a $748,999 loss for 2017.
FAQ:
1. What is Newchip?
Newchip is an online accelerator founded in 2016, initially as an aggregator of equity crowdfunding platforms, and later, evolving into an accelerator aimed at offering entrepreneurs all the skills and tools necessary to build, scale, and fund their startups.
2. What went wrong with Newchip?
Newchip struggled to deliver on its promises, with several founders and employees citing “mismanagement” on the part of CEO Andrew Ryan. There were also complaints about the high fees charged by the accelerator and poor services rendered.
3. How did Newchip end up filing for bankruptcy?
Newchip filed for Chapter 11 bankruptcy in March with $1.7 million in assets compared to $4.8 million in liabilities. A bankruptcy judge later converted the case to Chapter 7 liquidation because of Newchip’s poor financial history, recording a net loss of $197,884 for 2016 and a $748,999 loss for 2017.
4. What was the reaction of former employees and clients to Newchip’s bankruptcy?
Several former employees held Ryan responsible for the organization’s woes, calling for his resignation, while clients claimed they were misinformed and misled into joining the accelerator.
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