Scott Goss

The News Journal

Laid-off SevOne employees filed out of the company's Newark facility one by one late Monday morning, many carrying plants, computer monitors and other personal effects.

"It's brutal," one worker said of the atmosphere inside SevOne's new 48,000-square-foot Technology and Innovation Center at the University of Delaware.

"They are laying off so many people I had to wait [hours] to get my severance," the worker said. "It's like standing in a line for a guillotine."

Once Delaware's fastest growing tech startup, SevOne is now conducting its second round of layoffs in six months.

The exact number of employees who lost jobs Monday was not immediately clear.

SevOne charts future with $50M in venture capital

A company spokeswoman declined requests for comment, saying only that executives were meeting with employees.

Several of those workers who lost their jobs were willing to speak on the condition of anonymity for fear of losing their severance.

Former employees estimated as much as a third to 40 percent of SevOne's global workforce got the ax Monday.

The company's total headcount numbered about 525 in early 2015 when SevOne laid off “less than 10 percent” of its staff. At the time, nearly half of that workforce was based at the company's Newark facility off Del. 896.

Federal law requires companies to give states 60 days' notice before a plant closure or mass layoff involving 33 percent or more of its local workforce. As of Friday, SevOne had not submitted a so-called WARN notice to the Delaware Department of Labor.

Workers said the layoffs touched a wide range of departments within the company, including marketing, sales and business development.

Some top executives reportedly were among those who lost their jobs Monday, the laid-off workers said, although The News Journal was unable to confirm those reports.

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SevOne also notified employees of plans to close its satellite office in downtown Philadelphia by the end of the month.

"The recent changes in our workforce, coupled with the fact that many of our Philadelphia-based employees work from the office relatively infrequently, encouraged us to make this decision to further reduce operating expenses," stated a memo sent out to staff on Monday.

This week's layoffs reportedly followed a second quarter in which the privately held company failed to hit revenue and sales goals.

Disappointing sales also reportedly led to February's job cuts. SevOne called those layoffs a “reprioritization” that would allow the company to “focus our efforts on our core business and redeploy resources to our highest priorities – all of which will enable us to grow.”

Launched in 2005 by newlyweds Vess and Tanya Bakalov and their best man, Jim Young, SevOne develops innovative software to monitor customers’ networks and data centers – collecting information on such things as light bulbs, air conditioning, and bandwidth and computing demand. Comcast, Verizon, Lockheed Martin and HBO soon became customers, and SevOne moved out of a Newark garage and into a global headquarters at the Linden Park Office Building in Pike Creek.

Satellite offices around the world helped the company see its annual revenue grow by 60 percent for four straight years – hitting $64.5 million in 2014, the last year the company released such data.

SevOne hired more than 200 workers worldwide in 2015 as it prepared to move into what had been Chrysler's main building before the automaker closed shop and the property was converted into the STAR campus.

SevOne: Tech company strives for a 'culture of awesome'

SevOne signed a 13-year lease for the facility. The company's space features a 32-foot metal slide that connects an office area to an employee lounge at the Innovation Center, Ultimate Frisbee tournaments every Friday and regular performances by the company’s in-house musicians, the Garage Band – a nod to SevOne’s humble beginnings.

Outfitting SevOne's new building was backed by $1 million worth of taxpayer grants approved in early 2015 by the Delaware Office of Economic Development. Most of that state funding was tied to SevOne's promise to add 150 jobs through the start of 2021.

DEDO grants are not paid out in a lump sum. Rather, payments are given over time as certain hiring benchmarks are met.

To date, the company has received nearly $260,000 of the approved funding for the creation of 37 jobs. SevOne is required to next report its hiring totals in mid-January. The company would be placed on a watch list if it fails to meet its hiring goals by that date. Further violation of the agreement would trigger a "claw back" provision requiring a full repayment of the state grant money, DEDO officials said.

DEDO also approved another $480,000 grant for SevOne in 2012 that was tied to the addition of 122 jobs. The company ultimately received $440,559 for creating 111 jobs.

"We are confident that SevOne remains steadfast in its commitment to Delaware and pleased that the state's economy continues to do well in this competitive environment," DEDO Director Bernice Whaley said Friday when The News Journal first reported SevOne would be laying off workers.

UD officials and Gov. Jack Markell's office declined to comment on Monday's layoffs.

As late as last fall, Markell was publicly praising the company as an example of how DEDO was supporting job creation.

But SevOne’s heady days in Delaware began to turn soon after the company landed a $50 million round of private financing in September that brought its total venture capital to more than $200 million since 2007.

At the same time, the company quietly moved its corporate headquarters from Delaware to Boston, where the Bakalovs purchased a second home.

Company officials said they did not inform Delaware officials of the move beforehand and downplayed its significance when The News Journal broke the story in November.

Three months later, the company initiated its first round of layoffs. Around the same time, SevOne was forced to admit it had fallen victim to a spear-phishing data breach that resulted in the “unauthorized disclosure” of employees’ W-2 wage and tax data, including workers’ Social Security numbers, home addresses, dates of birth and other personal information.

SevOne's recent troubles come as the Delaware Business Roundtable – a group of 50 local chief executive officers – is calling on elected officials to refocus their economic development on startups and entrepreneurs across a range of industries.

Bob Perkins, the roundtable's executive director, said Monday that the state's faith in the ability of startups to grow future jobs should not be shaken by SevOne's layoffs.

"There is risk in any business venture," he said. "But if you look across the country, the areas experiencing the most growth are tech- and startup-oriented and value entrepreneurship and innovation."

For much of Delaware's history, that innovation has come from large legacy companies, such as the DuPont Co.

"When they have experienced a significant downturn, so has Delaware," he said. "That's why diversification and volume are so very important."

Contact business reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.