Bitwise sold a powerful dream. It wasn’t enough to keep Fresno tech incubator afloat | Opinion
The first time Bitwise Industries and its unique business model came across my radar, skepticism reigned.
Fresno as a training ground for well-paying tech industry jobs and incubation hub for tech startups?
The very thought seemed preposterous.
From a powerful and revolutionary idea hatched by co-founders and co-CEOs Jake Soberal (the brash, arrogant one) and Irma Olguin Jr. (the wise, thoughtful one), Bitwise proved the skeptics wrong.
Right up until the day when the company’s breakneck growth collided with an unquenching need for capital, sending Bitwise over the fiscal cliff a month shy of its 10th anniversary. The Friday night firings of Soberal and Olguin Jr. by the company’s board of directors culminated a week packed with astonishing, troubling revelations for Fresno’s darling tech incubator.
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“Unfortunately, the non-management board and I, like many of you, are finding out that the picture the company consistently communicated orally and in presentations, was not an accurate picture of the company’s financial health,” founding board member Ollen Douglass wrote in an email to furloughed employees.
While we don’t have the full story of why Bitwise crashed and burned, including why board members were seemingly in the dark, every new piece added to the puzzle reveals an ugly picture.
The Memorial Day Massacre was presaged by reports, published by GV Wire and the San Joaquin Valley Sun, that Bitwise was behind on property taxes and rent while Soberal, in a desperate attempt to keep the wheels spinning, solicited high-interest loans from local lenders.
Tacked on to the stunning furlough announcement were allegations from Bitwise employees, first anonymously and then with names attached, of bounced paychecks and 401(k) tampering — a federal crime.
Then came a lawsuit, filed by a Texas firm that helped Bitwise finance five California real estate purchases including the State Center Warehouse in downtown Fresno, alleging shady business practices by Soberal and seeking $33 million in compensation.
After that, our elected officials leaped into the fray. Fresno Mayor Jerry Dyer admonished Bitwise leadership for furloughing its entire workforce, including 300 Fresno employees, without the legally required 60-day advance notice. Dyer also dropped the bomb that the company’s business taxes have gone unpaid since 2021.
Thursday, two Fresno City Council members, Mike Karbassi and Nelson Esparza, held a press conference to announce they’ll seek to claw back any remaining money from a $1 million deal with Bitwise to develop small-business technology services.
“This resolution also ceases any further business with Bitwise or any of its affiliated entities until the present financial situation has been resolved,” Karbassi said.
Could you imagine any City Hall politician uttering such a thing a month ago? They’d be too busy waxing Bitwise’s virtues while smiling and posing for pictures with Jake and Irma at some company event.
The latest shoe to drop — and perhaps the one that had a cascading effect — is a report detailing Soberal’s handling of tax credit refund checks mistakenly deposited into Bitwise accounts by the IRS instead of a third party firm that took Soberal and the company to court.
Sorrowful fall from grace
What a sorrowful fall from grace. And throughout all this. Soberal and Olguin Jr. haven’t said a word to Bitwise employees or impacted cities since the initial furlough email and exclusive interview with The Bee’s Tim Sheehan. Regardless of any legal entanglements, they owe everyone an apology and explanation.
It’s heartbreaking to log onto social media and read the firsthand accounts of people whom I consider true community assets suddenly placed in financial dire straits by the company whose mission and values they so deeply believed in.
Bitwise isn’t like most companies, which sell a specific product or service. Yes, Bitwise invests in real estate, trains workers for tech industry jobs and sells managed tech support to local governments and schools. Those are indeed services.
Mainly, though, Soberal and Olguin Jr. sold a dream. That people living in underdog cities stuck in minimum-wage jobs can change their economic livelihoods by learning to code.
The power of that dream helped make Bitwise an instant smash in Fresno and then a major player in downtown real estate development. It helped them raise millions from global venture capital firms, enough to open branches in other San Joaquin Valley cities and beyond.
But was that enough to sustain a rapidly growing company under (at least by examples we’ve seen) such sloppy management?
In a video interview with GV Wire a few days before the mass furlough, Soberal kept deflecting questions about his company’s late tax and rent payments by employing the phrase, “That’s news to me.”
Soberal trotted out the same phrase in an email with one of the firms in which he was in litigation over $6.1 million in tax credits.
Was issuing worthless paychecks to his employees and dipping into their retirement savings contributions “news” to Soberal as well? At some point that stops being an excuse and starts to become an admission that things have spun out of control.
The complete account of Bitwise will be written out over the next weeks and months. There are already enough twists and turns for a book or Netflix limited series. Unfortunately for everyone involved, converted skeptics included, this feels like a story with a tragic ending.
