July 25, 2024
Latest News

Another Crypto Tax Software Startup Is Laying Off Staffers

Through the October deadline for filing US tax extensions, ZenLedger’s revenue increased by 100% year on year: Exclusive to Blockworks

Crypto tax software startups have had a difficult few weeks.

According to two sources familiar with the situation, ZenLedger reduced its headcount by 10% this week. Pat Larsen, the company’s CEO, confirmed the layoffs in a statement issued on Friday.

This was the second such action taken recently by a startup in the niche and emerging sector. Blockworks previously reported that a larger ZenLedger competitor, Koinly, laid off approximately 14% of its own employees in recent weeks. In both cases, sources were granted anonymity in order to discuss sensitive business matters.

Both ZenLedger and Koinly’s layoffs appear to be oddly timed, with tax season approaching, at least in the United States.

In the case of ZenLedger, a half-dozen employees were let go on December 5 in order to “extend [the company’s] runway to several years” in order to “successfully navigate this time of high economic uncertainty in the crypto markets and the global macro economy,” according to Larsen of Blockworks.

Though the net number of affected employees is relatively minor — at least in the grand scheme of all things FTX-related — the layoffs are emblematic of crypto companies large and small struggling to make ends meet as the bear market continues, according to both sources. Even operations that have purposefully remained lean and agile have had to make difficult decisions. The ultimate goal, of course, is to keep the lights on.

Retail and institutional digital asset traders alike were expected to look for any way to lock in mounting 2022 capital losses in order to reduce tax liabilities, according to industry participants. But, for whatever reason, that hasn’t quite worked out at least not sufficiently for companies like ZenLedger and Koinly.

In a statement this week, Koinly’s CEO stated that the startup had observed a “lack of awareness” on the part of crypto investors when it comes to booking crypto losses for tax gains. Losses on digital assets, like losses on stocks, can be used to reduce tax liability for future gains in the United States.

According to Larsen, ZenLedger informed employees of the layoffs during a company-wide meeting, and the company is assisting former employees in “transitioning to new roles as needed.”

Despite the cuts, ZenLedger’s revenue and new customer pipeline increased by nearly 100% year over year through the October 2022 deadline in the United States for filing federal tax returns on extensions, according to Larsen.

“We continue to be a highly talented and capable team that will use 2023 and beyond to expand into international markets and innovate with new enterprise and government products,” he said.