Big Cuts at Airy Labs, Ex-Employees Blame Management

Airy Labs, an educational gaming startup backed by Google Ventures and others, has eliminated the vast majority of its 20-person staff, leaving only a skeleton crew to keep the company going.

That’s what I’ve been told by former employees, and when you bring up the “team” page of the Airy Labs website, you now get a 404 error message. (There’s still a link from the jobs page.) When I contacted founder and CEO Andrew Hsu, he acknowledged that there have been cuts, saying, “We’re a young company and we tried some early experiments… some worked and some didn’t, so now we’re focusing a smaller team on the areas that worked.”

Airy Labs develops learning games for smartphones. Like many startups, the company began with lots of promise, particularly in Hsu himself. He’s someone for whom the word “prodigy” seems inadequate — according to the company biography, at the age of 16 he graduated from the University of Washington with three bachelor of science degrees, and at 19 he was a fourth-year Ph.D. candidate in neuroscience at Stanford. That’s when he left to start Airy.

Hsu received a Thiel Fellowship, which is the “20 Under 20” program started by PayPal co-founder Peter Thiel to encourage students to drop out (or at least take a break) from college and create companies instead. For a while, Hsu looked like the program’s biggest success story, since he was the first to raise venture funding, specifically from Google, Foundation Capital, and Playdom founder Rick Thompson.

(I notified the Thiel Fellowship about this post and asked if they wanted to comment, but I did not receive a response.)

The former employees I spoke to offered their version of what went wrong — an account that may, of course, be colored by their current negativity towards the company. Despite his credentials, they place the blame for Airy Labs’ problems squarely on Hsu and his family. For one thing, they say Andrew Hsu wasn’t the only one running the company. Instead, they claim that his father David Hsu was the real boss (he was described to the team as the chief strategist and later as the COO). His mother was also involved in management, and his younger brother was often around too. The family usually holed up in one office that was inaccessible to employees. There was even an email address for reaching all three adults:

The former employees say it was surprising to find a traditional family-run business beneath the veneer of a venture-backed startup, especially since the family relationship was never explicitly disclosed — they had to piece it together from inference, based on hints like Andrew Hsu’s YouTube videos.

They have other complaints. 9am to 6pm were declared “library” hours in the office, when employees were supposed to communicate via instant messaging and emails rather than talking out loud. A promised break period wasn’t consistently honored. At the end of every day, some team members were required to have individual debriefings with either David or Andrew Hsu, which would keep people in the office until 9 or 10pm or later. They were regularly expected to work six- or seven-day weeks.

Individually, these practices might not seem entirely unreasonable at a hard-driving startup, but the former employees say that collectively, this made for a micromanaged, overworked staff. Late last year, the team rebelled, demanding more reasonable hours, and the Hsus gave in. However, some team members were told that the new, laxer rules did not apply to them.

They also describe Airy as a paranoid, secretive environment. They say the Hsus refused to commit anything to writing, and would become angry if anyone complained via email (rather than verbally). Employees were warned against socializing or discussing their compensation with other members of the team. At the same time, office life was obsessively documented in photos, a practice that extended to people interviewing for jobs. And things got worse after a negative review of the company was posted on Glassdoor — at that point, lectures about loyalty became common, and employees were told not to speak to anyone who had left the company.

Speaking of Glassdoor, the anonymous employee reviews on the site support the broad strokes of the account I heard. One review is positive, the other five all focus on a single theme — bad management. One reviewer said the management team “reminded me of my parents.” In some ways, that was positive, as there were “random bouts of affection.” But in many ways, it was not:

The management were unlike parents in that they definitely didn’t love us. They asked for work hours that are probably normal in the country they’re from, but are not okay here. I don’t think they adjusted for culture difference. That’s how I’m choosing to look at it, anyway. The time and efforts they asked their employers [sic] to put in did not align with the pay they handed out (somewhat understandable as they are a young start-up) or with the appreciation they showed.

I wish they would understand that everyone who joined did so because Airy Labs holds a wonderful vision. We employees were/are there to help them work toward this vision because we believe in it too. The employees are definitely not in it for the money. Many of us sacrificed family time we can never get back to build their vision, which we made our own. The ones who couldn’t take the work load left right away. It’d be nice if the ones who stayed were shown more appreciation and human kindness.

Worst of all from a business perspective, the former employees say there was no clear vision, no sense of how the company was going to achieve its goal (described on the site as “creating the next generation of social learning games for kids”). For one thing, Airy didn’t have a full-time game designer for several months last fall. Although the company released seven games in relatively quick succession during that period (some of them, like Mini Catch, achieved high rankings in the Apple App Store), productivity since then has slowed as everyone devoted their energy to a big product, one that has yet to launch and whose goals were constantly shifting. The former employees say these shifts weren’t brought on by brilliant new ideas, but instead by Andrew Hsu’s desire to chase the latest trends.

While this was going on, they say Hsu promised more funding was coming, in the form of a Series A. (At this point, Airy Labs had raised $1.5 million.) He was hiring aggressively, growing the company to 20 people and saying that it would soon be 40. However, that Series A still hasn’t materialized, and the company wasn’t earning much revenue, having released the games for free and only introducing in-app purchases several months later. Eventually, employees were told that investors had become concerned about the business, so the team would have to take a pay cut. Some employees quit then, and soon after, others were laid off or told to take an unpaid vacation.

Now, the former employees say the only people left are an engineer, two artists, an administrator/executive assistant, and Andrew Hsu. Desks in the big Palo Alto office are being rented out to other companies. (Hsu also sent out messages to Stanford email lists looking for tenants.)

I provided Hsu with a summary of this article, and he responded with the following statement:

We’re a young company and we tried some early experiments… some worked and some didn’t, so now we’re focusing a smaller team on the areas that worked. I’m a first-time CEO and certainly made some mistakes, including growing the company too fast. I feel good about where we’re headed and while we’re having strategy changes, I am fortunate to have my awesome advisors, investors, and experienced mentors to lean on to guide me through this difficult process. Their input was instrumental in making these decisions. I am also making a number of management team changes that will ultimately help me lead the company through the new strategy. I was and continue to be the sole decision maker in the company.

I sincerely appreciate the hard work and diligence from all of our past team members, but I had to make the right but difficult decision for the company at that time, to keep us moving forward. I wish them all the best in their future endeavors. We are currently working on some innovative, exciting projects that are coming out soon. Our space is new and interesting and requires innovation, and we’re currently formulating our next plan of attack.

Looking back on the experience, the former employees say they are most disappointed to have given so much time and energy to the Airy Labs vision, when they’re now convinced the executives had no idea how to make that vision a reality, and no desire to recruit more experienced advisors.

“Andrew said he was fully committed to that vision,” one says. “I hope that’s true. I hope they succeed. I hope they build back up.”