54gene has been a strange place to work in the last couple of months. 95 employees were fired in August, mostly contract staff, who were hired to work in 54gene's COVID business line. The company's vice president of engineering left in September. Dr. Abasi Ene-Obong stepped down from his role as CEO to be replaced by Teresia L.
There were more job cuts. Half of the total workforce remained after the first round of layoffs, according to the company. Roles and departments were trimmed.
The Washington- and Lagos-based genomics startup has been considered the showpiece of Africa. 54gene was founded to address the gap in the global genomics market, where Africans make up less than 3% of genetic material used in pharmaceutical research, and it hired aggressively to meet the demands of being one of Nigeria's.
Its ability to meet this opportunity with its clinical diagnostic arm was a catalyst to increasing its revenue and raising two huge growth rounds in quick succession: a $15 million Series A that year and a $25 million Series B in 2021.
It will be a bad year for the startup. The company's value has been slashed in a time when startup valuations are taking a beating. 54gene's valuation has dropped by two-thirds from the $170 million secured when it raised its Series B to about $50 million in a bridge round involving lead investors from the company's board.
According to sources, the down round closed at a 3x to 4x liquidation preference, meaning that investors would be paid back triple or quadruple their money before other stakeholders, including other investors, founders and employees. During the venture capital boom between mid 2020 and last year, these terms were rare but are now commonplace.
54gene didn't deny the premise of the deal. It stated in an email that the existing investors injected fresh capital into the company. We hope that this round will support the company through this challenging period, as well as position it for success in the future, whether it be to raise additional capital, attract strategic partners, or another future path.
If a growth-stage portfolio company exits at a lower value than anticipated, investors want to protect themselves. The investors think that the startup may struggle to produce a solid exit due to underlying challenges.
54gene CEO steps down as the company looks to cut more jobs
The CEO and his executives were accused of financial impropriety by a group of employees when the first layoffs were announced. After Ene-Obong resigned, these accusations came to light again. 54gene's current troubles are not blamed on irresponsible hiring, questionable expansion drives or misappropriation of funds by the affected employees. The company didn't reply to the request for comments about the former executives' alleged mismanagement of funds.
54gene's tight-lippedness on the matter raises questions and leaves room for interpretation as both co- founders resigned a few weeks apart. 54gene argued in an email that Osifo's resignation was unrelated to this month's activities and that Bost was the right person for the job.
The company said that Teresia is a well-rounded executive with a depth of experience in the global pharmaceutical and biotech industry. She will be an asset to 54gene in this next phase of the company due to her skills and experience. 54gene's position as a genomics leader will be strengthened by the addition of Delali and Teresia.
54gene stated that its ex-chief executive will continue to support the company in its go- forward plans without explaining why he left.
African genomics startup 54gene lays off 95 as COVID testing business struggles
The terms of 54gene's new deal contributed to Ene-Obong's resignation. Ene-Obong may have resigned as CEO in protest of the new valuation and preference offered by investors in the bridge round, according to them. Some investors tried to duplicate the company's previous prized round to get more shares while diminishing the value of the other investors, according to rumors. 54gene refused to speak on the matter.
The fact that 54gene had to arrange a bridge round in-house despite securing over $45 million over the last three years is a reminder of the high cost of a human genome. 54gene isn't different from other biotechs in that they use investors' funds into research while thinking about revenue later. The way in which the genome startup is aggressively cutting costs by laying off staff in two batches and shutting down its clinical diagnostic arm is somewhat troubling. The current crisis and the task ahead of the company has led many tech watchers to wonder if the present and past executives can keep the project afloat long enough to generate substantial revenue.
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