Just after lunch on February 1, employees of the e-commerce startup Hubba booted up Zoom for an emergency all-hands meeting. Founder and CEO Ben Zifkin was the only face visible among the 40 or so squares that crowded the screen as staff—cameras off and mics muted—braced for a blow. It took just a few minutes for Zifkin to tell them that Hubba was out of money. The company would shut down immediately, he said, and everyone on the call was out of a job. 

For most employees, the news, first reported by BetaKit, came as a shock. The company was at one time a rising star in the Toronto tech scene, with Zifkin himself revered as a visionary founder charting a course different from the move-fast-and-break-things ethos popularized in 2010s Silicon Valley. Core to Zifkin’s approach was showing that you could build a massively successful company while also giving back to the community and treating employees well. Zifkin, who had advised large multinationals before starting Hubba, pitched the startup—which, in its most recent form, offered a platform that connected craft brands with retailers—as a multibillion-dollar tech company in waiting, with sights on a 2020 IPO. It was a vision that attracted top talent and millions of dollars in funding from investors like Goldman Sachs, Kensington Capital Partners and Social Capital. But 10 years after its launch, the company had failed to meet the lofty expectations Zifkin had established for investors and staff. 

As the company liquidates its assets, paying out creditors while trying to avoid bankruptcy, The Logic spoke with two former senior employees and an early Hubba investor and board member, and reviewed financial documents and email correspondences and direct messages between employees, management and the Ontario Ministry of Labour, looking for insight into what led to the startup’s closure. (The Logic has agreed not to name the sources, who cited concerns that identifying them could risk their reputation in Toronto’s tight-knit tech sector.)

Some believe Hubba pulled the chute too soon. One of the former senior staff members insists Hubba was turning a corner in the months before it closed. In October 2020, the company facilitated $1 million in sales in a single day, more than 10 times what it did in a typical month, said the source. Some of the company’s leadership team saw the feat as the milestone it needed to pitch itself to investors or a buyer that could fuel its next phase. But the board was of a different mind. It had lost patience and faith and saw closing as the only way to minimize damages. 

The wind-down hasn’t been smooth. At least three former senior employees have lodged complaints with the Ontario Labour Relations Board, claiming the company denied them severance pay and bonuses for which, they say, it had the money and legal obligation to pay them. The company has acquiesced to the demands of at least one complainant. 

Zifkin did not respond to The Logic’s multiple requests for an interview. But the board member expects the founder is taking the closure hard. “Ben has a reputation of treating people as well as he possibly can,” they said, noting that firing 40 people certainly conflicts with that impulse. “He never believed this would happen. Ben Zifkin was this guy that everybody in the industry was looking up [to]. What the hell happened?” 

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Hubba launched in 2011 with a plan to help online retail giants like Amazon and Wayfair make sure information about items being sold on their sites was accurate. The service was meant to address the massive misinformation problem—false claims, wrong ingredients, inaccurate descriptions and sizing—about retail products hawked on the web. “I pulled together some of the best technology minds, and we set out to correct it by building a monster commerce data company—the monster commerce data company,” Zifkin wrote in his 2016 book The Rise Of The Craft Brand: Why Small is Going to Be Huge. Hubba raised US$3.1 million on the idea, according to PitchBook data, from backers including Brightspark Ventures and Chamath Palihapitiya’s Palo Alto-based Social Capital. But four years in, the company had just a handful of customers, maybe a dozen, by one former senior employee’s estimate. “It turns out that it’s very difficult to do,” they said of the data-brokerage model. “It’s really hard to take it to market because nobody inside retail knows half the words you’re talking about.” 

In tandem with selling its data product, Hubba was also building a database where craft brands would advertise their products for small retailers to discover and carry in their shops. The idea took off. Hubba brought 1,000 companies into its network in the first four months. Shortly thereafter, it put its enterprise-data business to bed, and within two years, it was attracting 1,000 companies to its two-sided marketplace every few days. 

Investors began piling in. The company closed two more funding rounds in two years, culminating in a US$45-million Series B in 2016 from a cast of sophisticated investors including Goldman Sachs, Real Ventures, Plaza Ventures, Kensington and Brightspark. More than the idea behind Hubba, both investors and talent were drawn to Zifkin himself. “My first conversation with Ben about Hubba was two hours and we got to the end of it and I was like, ‘I still have no idea what Hubba does, and I feel like I should,’” said one of the former senior employees. “‘I feel like that’s important, but I really like the way you’re talking about the business you’re trying to build. That’s got me excited, so let’s keep talking.’”

Part of Zifkin’s allure was his generosity with his resources and time. “There was a running series of people coming in and asking for Ben’s time, and he would always make it,” said that employee. His background—both as a lead consultant for workplace-management firm Workbrain and later as co-founder of business-strategy consulting firm Axsium Group—primed him to troubleshoot problems for CEOs, founders and investors. As well as holding ad hoc office hours for peers in the tech sector, Zifkin sat on the board of virtuous organizations such as Ladies Learning Code, the Upside Foundation of Canada and HackerYou.

Zifkin’s attitude permeated the culture at Hubba. The company held regular events like hackathons, cook-offs and annual cottage days, and they were encouraged to volunteer during work hours. When a group of developers and HR staff wanted to run basic computer-literacy coding classes for women at a shelter in Toronto, Zifkin was on board, despite the endeavour sidelining half the firm’s engineering team for the day. When Venture Out offered Zifkin a keynote speaking slot, he declined, suggesting centring a straight white man’s voice at the LGBTQA+ tech conference wouldn’t be appropriate. 

“He viewed his role as being bigger than building a profitable business,” said that employee. “He didn’t talk about needing to hire a bunch of rock stars, and ‘Fuck your feelings; we’re trying to get rich.’ There were certainly founders who wanted to talk to me about that stuff and thought that was going to be attractive to me. They used phrases like ‘generational wealth’ as a recruiting tool. And that wasn’t Ben. He wanted people to be well taken care of. He wanted to set an example and show it was possible to build a thriving business without being shitty to people, and that projected to the ecosystem, as well.”

The investor and board member said he’d had conversations with Zifkin over the years about whether his extracurriculars and focus on culture was detracting from the core business. “‘You seem to be the person in this industry that everyone can rely on,’” the investor recalled. “‘Is this affecting your day job?’” Ultimately, Zifkin convinced them it wasn’t, and that it was necessary for attracting the right people and money. 

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All three sources who spoke to The Logic invoked Facebook’s business model when describing Hubba’s planned path to profitability. First, the company needed to make its services free and easily accessible to users who would eventually come to rely on Hubba to conduct their business. Once the network reached a critical mass of retailers and brands for which Hubba had become an essential piece of their supply chain, the startup would begin charging. 

Reaching that critical mass, though, was a grind. To recruit brands, engineers scraped their websites unprompted and auto-uploaded companies’ products to the Hubba platform. They did custom marketing for retailers to manually put brands that Hubba’s team thought buyers might like in front of them. “You end up doing a bunch of basically free marketing for both sides in order to have them start to make Hubba a habit,” said one of the former employees. 

While Zifkin tried to differentiate himself as a founder, his assertion that he could turn on revenue at a moment’s notice was a familiar refrain among startups justifying losses in the name of growth. And although the company was attracting a “massive amount of interest” from retailers and brands, according to the investor and board member, “they weren’t able to turn this into a revenue model that was scalable and that made sense.” 

That investor, who participated in multiple funding rounds, speculated that the company was a victim of raising too much money too soon and suffered from a false sense of security as a result. “This is a problem that a lot of early-stage companies have when they raise a lot of money: they’re pre-revenue and then, when they become a so-called real company of selling and buying things, they don’t have the numbers that really justify the valuation based on the amount of money they’ve raised,” said the investor. “It skews how they look at things in terms of their spend and their expectations.”  

The first public indication Hubba was struggling came in 2018. The startup announced two rounds of layoffs that year, one in March and another in November, cutting its staff—which had grown from about 15 to 65 in two years—roughly in half. At the time of the first round of layoffs, Zifkin said the company was reinvesting in machine learning, engineering and data. He recruited a chief technology officer, Deshanand Singh, who had held top positions in research and software development at Thomson Reuters and Amazon’s Canadian office. But by November, Singh had left, and the heightened focus on AI and data had failed to translate into meaningful revenue gains. 

The board member who spoke to The Logic said it became clear about a year ago that Hubba needed to do something to correct course, whether raise money, sell the company or close shop. Zifkin began pitching, once again, to VCs. “Because the company had already raised all this money and was as high profile as it was, [investors] were looking for bigger, more meaningful milestones than what Hubba had to show,” said the board member, whose own firm was unwilling to back Hubba through another round. “[Investors] weren’t prepared to bet as much on pure vision as on execution, and [Hubba wasn’t] able to get there.” The company also failed to attract a buyer that would operate the company as a going concern. Hubba had considered expanding its business to include a more traditional distribution model by buying a company in that space. The board member said it was close to sealing a deal with a food-distribution company when the pandemic hit, and the target firm became too busy with online orders to consider the merger.  

It was a pattern that had developed in recent years: “They were always almost about to do something,” said the board member. “They were almost about to buy a distribution company, they were almost about to do a major deal, they were almost about to raise money, but they never managed to cross the finish line over the last few years. It was very difficult for them to execute,” they said. “They were much better at vision than they were able to operationally execute.”

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If the company was struggling a year ago, it didn’t let on to new recruits, whom it continued hiring as recently as fall 2020. One of the senior employees who spoke to The Logic started working for Hubba near the start of the pandemic and said they accepted a lower salary than what they would typically earn at another tech company, but were assured their annual bonus—based in part on the company’s performance—would make up the difference. Soon into their brief tenure, however, they noticed something was amiss. Zifkin was withdrawn in his dealings with the staff and executive team, a dynamic that conflicted with the founder’s reputation. When the new hire asked to see monthly sales volumes, they said, the numbers were shockingly low. Financial documents viewed by The Logic projected the company would generate just $39,000 in revenue in December 2020 and burn $871,858. (A source with access to the company’s books said it burned closer to $400,000 in a typical month.) Five years after its last round of fundraising, Hubba had just $2.7 million in cash left.

Despite its dwindling reserves, the senior employee said they and other staff believed Hubba could have hung in for longer than it did. Internal financial projections show the company had enough cash on hand to carry it through until April, after accounting for 2020 bonuses that hadn’t been paid as well as more generous severance packages than what the firm eventually offered the employees it let go.

That information has factored into several complaints filed to the OLRB. A witness statement viewed by The Logic claims that Hubba’s executive team met on December 9 and agreed that employees would receive their full 2020 bonuses. When the group met again in late January, five days before terminating all staff, the claimant raised concerns that no bonuses had been paid. “Ben Zifkin stated he was aware that he and the board were in breach of their contractual obligations and that he made his feelings known to the board on December 23, 2020 about this matter and he couldn’t comment further,” the statement reads. Still, on February 26, employees received an email from a CFO named Jordan Hill, whom the company had contracted to help with the wind-down, saying the firm had not met its annual targets and would not be paying bonuses. One source who had lodged a complaint said the firm has since met their demands for a bonus and substantially more severance. 

Despite its promise to be different, Hubba struggled to turn a compelling idea into profits, and longtime investors in the company began losing interest. 

Documents viewed by The Logic show that by January 6, Brightspark had delisted the startup from its portfolio fund through which individual accredited investors were able to buy secondary shares in the firm. One of the former senior Hubba employees, frustrated because they thought the board had stopped supporting Zifkin’s attempts to save the company, had considered buying up outstanding shares of the firm in a bid to gain leverage to negotiate against the board. But when they learned that Brightspark had blocked trading—a measure the firm takes when it writes down a company—they knew Hubba’s days were numbered.

On the question of what Hubba could have done differently, the board member who spoke to The Logic could offer no solution. “These things happen,” they said. “A lot of the time it’s about luck and timing.” For some ex-employees, that answer is hard to swallow, said the senior employee who recently settled their labour-board complaint. They point to the board’s tepid response to Hubba’s million-dollar sales day in its last quarter, and dwindling support from investors, as signs its backers had checked out before every effort was made to save the firm. 

“I’m sure a bunch of people feel this isn’t fair,” said the board member who spoke to The Logic. “I understand that. I know a bunch of investors who are also upset they aren’t getting anything out of it when a few years ago Hubba was flying high.” They admitted there was some “bad blood” between the board and some members of staff, but claimed that kind of conflict is typical when a company with as much promise as Hubba fails. They also said there was no such animosity between Zifkin and the board. Instead, they said, “There was disappointment.”

“It’s tough on everybody. Investors have lost all their money, employees are out of a job. We’re all upset.”