(Bloomberg) -- Hustle Inc., a text messaging startup that worked with more than 1,300 Democratic campaigns in the 2018 midterms, has fired over 35 percent of its staff in the wake of the election.
Hustle has regularly been heralded as one of the biggest success stories in the nascent industry of politically minded tech startups. It raised more than $40 million in venture capital funding to date, from investors like Social Capital, Insight Venture Partners and Alphabet Inc.’s GV. The company’s stumble illustrates a fundamental weakness of businesses who count electoral campaigns as their primary client base. Hustle’s chief executive officer, Roddy Lindsay, first disclosed the job cuts in a blog post Thursday.
Hustle builds tools for campaigns, advocacy groups and marketers to send personalized text messages to their contact lists. Text messaging has become a vital aspect of political campaigning, and Hustle worked with virtually every major institution in the Democratic political world, including the Democratic Legislative Campaign Committee, the Democratic National Committee and 45 state Democratic parties.
The company grew out of a volunteer stint that Lindsay, a former Facebook engineer, spent at FWD.us, Mark Zuckerberg’s immigration reform advocacy group. Lindsay built an interface to help organize people through text messaging. He co-founded Hustle in 2014. The company began working with Bernie Sanders’ presidential campaign, and soon expanded to other Democratic political clients. The company also works with advocacy groups and commercial organizations—Lyft Inc. was one of its first non-political clients.
Lindsay said he aggressively pursued commercial business in part to offset the inevitable drop-off in revenue after the midterm elections. “We had to go out and build a business with stable entities that don’t disappear every two years,” he said. By the end of last year Hustle had 30 commercial clients. But political campaigns and organizations made up the majority of Hustle’s revenue in 2018.
The cost of maintaining a sales staff to drum up new customers became unsustainable once the campaign money dried up, and many of the cuts will come from that department. Hustle is letting 47 people go from its San Francisco, New York and Washington offices. Lindsay said he’d like to grow again, but he added that he’s not sure when business around the 2020 political cycle will pick up. In his blog post, he apologized for mishandling the company’s growth, calling the experience “truly humbling.”
The setback is a cautionary tale for other startups. There was a wave of new political tech companies in the wake of the 2016 election, and few had gained more traction than Hustle. Raffi Krikorian, chief technology officer for the DNC, said many other startups were likely in an even more tenuous position than Hustle. “It’s a shame but it’s not unique to them,” he said. “This is the first case we’ve heard, but I wouldn’t be surprised if we hear more.”
The post-election demise of political technology vendors is a well-known dynamic in the industry. It has been a major reason that investors have mostly steered clear of election tech companies. But Betsy Hoover, a partner at Higher Ground Labs, one of Hustle's investors, said that many businesses grow and shrink seasonally. "There are plenty of industry that are cyclical and do just fine," she said. "For Hustle, they had an incredibly successful 2018, both financially and in terms of impact, and I fully anticipate they'll have a very successful 2020. This is part of getting there."
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