(Bloomberg) -- Disruptive, a technology-focused investment firm, furloughed roughly two-thirds of its employees as it grapples with a cash crunch caused by how it earns fees, according to people with knowledge of the matter.

The firm in late January temporarily discharged some staff over a group Zoom call led by Chief Operating Officer David Tarnowski, citing a lack of cash, said the people, who asked not to be identified discussing confidential information. On the call, Tarnowski said the firm has been “bleeding” due to its fee structure, one of the people said.

Since January, Disruptive has brought back some employees and laid off others, said one of the people. The Austin, Texas-based firm has 26 employees listed on its website.

Disruptive, which has raised most of its capital through special purpose vehicles, has historically charged a 0% management fee and 20% carried interest, the latter which is realized only upon exits. The environment for startup exits has been challenged amid a lack of desire by closely held companies to do deals following a steep decline in valuations.

“Disruptive has been right-sized over the last month to adjust for current market conditions, like many other venture funds and technology-based companies are also actively doing,” a representative for the firm said in a statement. “The core team has remained in place and is actively investing in its core competencies.”

The firm’s cash position was recently bolstered by its receipt of between $4 million and $5 million from Morgan Stanley, said one of the people. The bank settled a demand for arbitration that was filed about two years ago, alleging that the Wall Street bank had mishandled information relating to a Palantir Technologies Inc. block trade in February 2021, said the person.

A Morgan Stanley spokeswoman declined to comment.

Disruptive, led by Chief Executive Officer Alex Davis, was founded in 2012 and has backed startups including Airbnb Inc., Slack Technologies Inc., Spotify Technology SA, Lyft Inc., 23andMe Holding Co., Hims & Hers Health Inc. and Shield AI Inc., its website shows. An affiliated blank-check company, known as Disruptive Acquisition Corp. I, said last week it would wind down, citing an inability to consummate an initial business combination within a predetermined time frame. 

The special purpose acquisition company, which sought to strike a deal with a company that operated in the health and wellness, entertainment or consumer-facing technology sectors, named athletes including four-time Grand Slam champion Naomi Osaka, Kansas City Chiefs quarterback Patrick Mahomes and Houston Astros pitcher Justin Verlander on its athlete advisory council. 

Disruptive “deployed more than $3 billion in capital through Dec. 31, 2020, into businesses that it believes will transform into some of the world’s most valuable companies,” it has said in filings.

©2024 Bloomberg L.P.