Late in June, Modsy, an online interior design firm, abruptly stopped offering design services, sacked its designers, and abandoned clients with ongoing restorations and project orders. In exchange for completing a form, the company promised to reimburse some repair order charges and refund furniture deliveries. But tweets indicate that many Modsy users are still waiting for updates more than two weeks later.
Unfortunately, Modsy has leveled-up the resistance to contact. Modsy recently erased its Twitter and Facebook profiles and made its Instagram private account, however, the company's website is still accessible.
According to founder and CEO Shanna Tellerman in an email, the reason is that Modsy discreetly shut operations in early July. The management of Modsy was meant to wind down the "corporate and legal entity of Modsy," according to a June report from Business of Home, and many of the company's e-commerce staff, engineers, and management had been let go. But at the time, Tellerman had declined to corroborate this.
Pencil, LLC is the organization and is classified legally as an "assignment for the benefit of creditors," or ABC. To create an ABC, a company—in this case, Modsy—enters into a settlement to assign its property to a separate third party (such as Pencil) responsible for managing the company's liquidation. Within the tech industry, it is not a new strategy. Pebble, a maker of e-ink smartwatches, took the ABC approach when it ceased operations in December 2016.
ABCs have the advantage of making it possible to quickly buy real estate, either for cash (to pay creditors) or to sell the business to a new owner and keep operations running. The disadvantage is that the original company's equity, including any founder, investor, and employee equity, gets tarnished.
Some Modsy customers received an email with a link that leads to a form for claims "outside of refunds," such as equity interest, wages, salaries, bonuses, severance, commissions, and payments to an employee benefit plan. The language offers a method to recover money and benefits that employees believe they are due, but it's not obvious which claims will be successful.
Upset customers
Many customers claim that they have been stonewalled by Modsy's support team, or what's left of it, as the skeleton of the former Modsy workforce plots its future. Five out of the seven customers sources spoke with, who had all requested refunds in June, had either not heard from the company or had received boilerplate emails with little information regarding the status of their reimbursements. One person claimed they were told they would receive a refund within three to five business days. Another was informed that their request for a refund had been approved, but they were not told when to expect it.
The initial business model for Modsy focused on selling interior design services on top of an AI-driven platform. Tellerman worked as a partner at GV (formerly Google Ventures), where he specialized in retail, 3D, and augmented reality technologies before starting the company.
Property owners can construct renderings of their rooms using Modsy's apps and redesign them in real-time, or they can hire a designer to develop a unique structure. Fixtures may be purchased directly through Modsy or affiliated tools like Crate & Barrel's 3D Room Designer.
TCV, Comcast Ventures, Norwest Venture Partners, and NBCUniversal were among the investors in Modsy. According to data from Crunchbase, the company's final investment round closed in May 2019, bringing the total amount raised to $72.7 million. Modsy hinted in May that it would change course to provide Modsy Pro, a platform for software-as-a-service, as a solution for interior designers.
The shift took place two years after Modsy made a series of drastic cuts, reducing the number of salaried employees and its community of designers while slashing designer salaries. Tellerman claimed at the time that it was an attempt to "lean" the organizational structure. According to Business of Home's research, Modsy formerly experimented with outsourcing design work to the Philippines and Bulgaria to reduce operating costs. This was in addition to launching its brand of personal furnishings.
Customers can use the Modsy Pro landing web page to gain early access to the still-beta product. But given the closure of Modsy, the launch appears uncertain.
