Modsy, an interior design startup founded by a Google Ventures partner, is shutting down its design business and splitting ties with designers
As the markets continue to plunge and venture investors pull back, a digital interior design startup co-founded by an ex-Google Ventures partner is parting ways with its designers and notified customers that it is no longer offering design services.
The seven-year-old startup, Modsy, had used 3D modeling for customers to design and furnish their homes starting at $159 per room, and it had launched a digital renovation service just earlier this year. In total, the company had raised nearly $73 million in equity from investors including GV, TCV, Norwest Venture Partners, and Comcast Ventures, according to PitchBook.
Now the company has removed most of its pages from the website—but has introduced a new interior design software in beta it is calling “Modsy Pro.”
“We unfortunately are no longer offering design and e-commerce services,” says a customer service message sent by a Modsy representative that was obtained by Fortune, which notes that the company will ensure all existing merchandising orders are fulfilled. Later on in the message: “We know this is disappointing but this was a sudden and unexpected change for the business and we apologize for the inconvenience.” One of the company’s designers, who Fortune granted anonymity due to their fear of legal retribution, says that the company has terminated contracts with approximately 250 designers, and says that they were given only three days notice. Designers were caught off guard and “confused as to why we weren’t informed earlier,” they said.
“We are all very much in the dark regarding any specifics,” the designer said. “We are truly embarrassed that our names have ever been associated with this company.”
When reached via email, Modsy CEO Shanna Tellerman told Fortune that “we intend to fulfill customer merchandise orders and we are working through a process for our design service customers.” She added: “I hope that for many people, the Modsy story will not be defined by this turn of events, and we are truly sorry. We would like to thank our team, our designers, and our customers.” Tellerman did not respond to a request for comment as to the new SaaS offering, whether the company is shutting down, nor provide any detail or information about the company’s separation with designers.
Modsy, which was co-founded by Tellerman in 2015, had launched with $2.75 million in early funding from Google Ventures, where Tellerman had previously worked as a partner, as well as Ammunition Design Group and other investors, and would raise more than $70 million more over the next four years. Since then, Modsy had raised mezzanine financing and taken out two loans, per PitchBook, which estimates that the company had grown to approximately 341 staffers, as of the end of May. Modsy likely benefitted from a surge in e-design during the pandemic. The company said in October it was experiencing “soaring customer demand” and that sales of its “Luxe experience,” a collaboration with one of Modsy’s top tier designers at a cost of $499 per room, had increased 275% year-over-year.
As the startup scaled, Modsy had faced criticism online over its product recommendations and quality, as well as how it worked with third-party designers. TechCrunch reported that the company was expecting to be acquired, but that the deal had fallen through.
Many private companies have already had to lay off customers, reorganize, or shut down this year as interest rates rise and public tech stocks prices falter. Investors have been warning founders of an impending funding drought and advising founders to plan a long runway of cash in order to stay open. Just in the last month, at least 13,700 startup employees have lost their jobs, per Layoffs.fyi, according to tracked figures, and the actual numbers are likely far higher. The wave has hit startups across many sectors, including digital health care, crypto, food, and transportation.
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