Fresco News, founded in 2014 by John Meyer, aimed to revolutionize journalism by empowering "citizen journalists" to sell photos and videos to local media outlets. Initially promising, the startup quickly grew but faced severe financial instability, leading to its eventual downfall by 2017.
What Was Fresco News?
Fresco News offered a platform for "citizen journalists" to sell photos and videos to local media outlets. Its unique value proposition was providing a cost-effective, user-generated content service for newsrooms. Notable achievements include investment from Ashton Kutcher, a Thiel Fellowship, and partnerships with major news organizations.
What Happened to Fresco News?
The story of Fresco News is a compelling example of a startup's rapid rise and sudden fall, marked by several critical phases:
Initial Concept and Launch: Fresco News was founded in 2014 by 19-year-old John Meyer with the aim of empowering "citizen journalists" to sell photos and videos to local media outlets. Meyer envisioned the platform as a new kind of journalism for millennials who don't read traditional newspapers or news websites.
Key Milestones and Achievements: The company quickly expanded from three employees to over 50 by the fall of 2016. Fresco signed deals with local news affiliates across the country and was awarded a Thiel Fellowship, a $100,000 grant from PayPal cofounder Peter Thiel.
Challenges and Obstacles: Between 2016 and 2017, Fresco missed at least 10 payroll periods, leading to high employee turnover and a chaotic company culture. Financial difficulties included being locked out of its payroll provider JustWorks and failed attempts to unionize due to internal conflicts.
Factors Contributing to Decline: The inability to reliably meet payroll strained the business and employee morale. Financial mismanagement, reliance on non-traditional payment methods, and failed multi-million dollar partnership deals, including one with Univision, further exacerbated the situation.
Eventual Closure and Impact: On June 30, 2017, Meyer laid off the entire company via Slack, except for executives and those willing to stay on as volunteers. The closure left employees without pay and with stock options regarded as worthless, highlighting broader issues faced by many startups.
When Did Fresco News Shut Down?
Fresco News shut down on June 30, 2017, after a crucial deal with Univision fell through. The company had been struggling with financial difficulties, missing multiple payroll periods, and was unable to secure consistent funding.
Why Did Fresco News Shut Down?
Inability to Meet Payroll: Fresco News missed at least 10 payroll periods between 2016 and 2017, leading to high employee turnover and a chaotic company culture. By June 2017, the company failed to pay employees for a full month, causing significant distress and dissatisfaction among the workforce.
Financial Mismanagement: The startup faced severe financial mismanagement, including delays in fundraising and reliance on non-traditional payment methods like SquareCash and Venmo. This erratic financial strategy led to being locked out of their payroll provider, JustWorks, further exacerbating the company's instability.
Internal Disharmony: The chaotic company culture was marked by internal conflicts and attempts to unionize due to low pay and poor working conditions. Sexual harassment claims and a lack of HR support added to the internal turmoil, making it difficult to maintain a cohesive and productive work environment.
Failed Univision Deal: A crucial multi-million dollar deal with Univision fell through at the last minute, leading to immediate layoffs. This failure was a significant blow, as the company had been relying on this deal to secure long-term funding and stabilize its operations.
Pressure to Maintain Facade: The pressure to appear successful led to misleading announcements about financial health and funding rounds. This facade crumbled as the company struggled to meet basic operational needs, revealing the underlying financial instability and mismanagement.
Lessons Learned from Fresco News's Failure
Financial Discipline: Ensure robust financial management and avoid reliance on non-traditional payment methods to maintain stability and trust.
Consistent Payroll: Prioritize meeting payroll deadlines to sustain employee morale and reduce turnover.
Transparent Communication: Maintain honest and transparent communication with employees and stakeholders to build trust and avoid misunderstandings.
HR Support: Establish a strong HR framework to address internal conflicts and support employee well-being.
Realistic Projections: Avoid overpromising and ensure that financial projections and funding announcements are realistic and achievable.
Partnership Reliability: Secure reliable partnerships and have contingency plans in place for potential deal failures.
Company Culture: Foster a positive and cohesive company culture to enhance productivity and employee satisfaction.
Legal Preparedness: Be prepared for legal and operational challenges to avoid sudden shutdowns and ensure smooth transitions.
We Shut Down Startups
Fresco News's failure underscores the complexities and challenges startups face, from financial mismanagement to internal conflicts. If you're navigating similar turbulent waters, Sunset can help you manage the legal, tax, and operational burdens of winding down your startup.
Don't let the stress of shutting down a business overwhelm you. Book a demo with Sunset today to ensure a smooth and compliant closure, allowing you to move on to your next venture with peace of mind.
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