Austin startup RigUp went from hiring 'at a rapid pace' to cutting 25% of staff in a matter of weeks. Now a data breach is adding to its woes.

• RigUp, an Austin staffing firm in the oil and gas industry, was living the startup dream in chic offices just a month ago.
• The oil industry's collapse after Saudi price slashing, COVID-19 economic woes, and lack of stimulus support badly hurt the startup because it relies on a healthy oil industry, employees say.
• Adding to the startup's struggles, security researchers identified a 70,000-document data breach of client information, which RigUp addressed after Business Insider reached out.
• After being contacted by Business Insider, RigUp responded to the security researchers, who say the breach has since been closed. RigUp said in a statement to Business Insider: "We immediately closed access to the information and are actively notifying impacted users.
• Visit Business Insider's homepage for more stories.

When the Austin startup RigUp laid off a quarter of its staff in a video conference call last month, it marked a stunning reversal of fortune for a firm valued at $1.9 billion that had pulled in more than $450 million in venture capital, including $300 million in one round from tech kingmaker Andreessen Horowitz.

But a disastrous series of coronavirus-related events befell the high-flying startup, and the trouble may not be over yet: Security researchers say the startup, which managed oil workers' personal information, left a data breach open for weeks.

After being contacted by Business Insider, RigUp responded to the security researchers, who say the breach has since been closed. RigUp said in a statement to Business Insider: "We immediately closed access to the information and are actively notifying impacted users. The security of our users' information is always a top priority and we will be performing an extensive audit of our network and application security infrastructure."

Addressing the layoffs, which were first reported in March by the Austin Business Journal, RigUp said that the decision was a direct result of the economic hit in oil and gas and the impacts of the coronavirus pandemic.

"We believe the decision was necessary to support our company's long-term commitment to our contract workforce and the industries they serve," the company said. You can read the full statement further down the story.

The stunning reversal of fortune for one high-flying unicorn startup illustrates how quickly the economic shutdown triggered by COVID-19 changed the trajectory of some companies, and particularly startups in what had been a booming energy sector.

RigUp, which digitized and aggregated staffing operations in the oil industry by pulling together databases that made hiring and payroll more efficient, was renovating offices, and had made four recent acquisitions. In January, its CEO told the Austin Business Journal the startup was "hiring at a rapid pace across all functions."

But the company was hit by three catastrophic blows, employees say. First, Saudi Arabia slashed oil prices, sending them tumbling to a three-decade low. Second, the coronavirus profoundly hit the gas market as home-bound Americans stopped driving. And third, the federal economic stimulus plan did not include the support the oil industry hoped for.

Employees describe a high-flying startup

The company's story had been something of a startup fairy tale. The founders, Xuan Yong and Mike Witte, were college buddies at nearby Texas A&M. RigUp brought crowd-pleasing progress to an industry in which paperwork had been done with carbon paper for decades. The startup got oil workers hired and paid faster by pulling together databases of energy industry contractors and employees, taking less of a cut than some other services.

Employees, company communications, and social media posts paint a picture of a tech startup that funded teams' happy hours, threw big parties on Austin's trendy South Congress strip, and renovated office space that was praised in architecture magazines. "The offices were really nice," says one employee, who says more space was being renovated for the company nearby - and not always on budget. "Stuff like this is why the company didn't have liquidity."

Startups dream big, grow fast, and create an attractive culture where tech talent wants to work. When a seismic economic shift struck, RigUp was hardly the only company to get caught leaning the wrong way and have to make layoffs. That list is encyclopedic. More than a million oilfield service jobs are likely to be cut this year, according to Rystad Energy.

But the suddenness with which RigUp went from spending big to cutting jobs left a bad taste in employees' mouths, they tell Business Insider.

"People are pissed," says an employee who was laid off, and asked to remain anonymous. "There was a lot of spending. People who had been there a long time took their teams out to happy hour three or four times a week."

Three conference calls

In total, the company raised $415 million last year, breaking Austin records, including a whopping $300 million round in October from Andreessen Horowitz, the storied venture capital fim that has invested in Facebook, Pinterest and Lyft. Andreessen Horowitz declined to comment.

RigUp was valued at $1.9 billion, and filed the Securities and Exchange Commission paperwork on a $29 million round of fundraising March 20 - just days before announcing the layoffs of some 120 employees in a brief conference call.

Employees say the conference call blindsided them because two previous calls were starkly different in tone. Employees say that in the first call, in early March, the founders were confident the company would not be hurt by an economic downturn. On the second call, they said they would address economic challenges by reining in spending such as catering. Asked about layoffs, the executives said any kind of cost-cutting was possible. On a third call employees say the layoffs were announced abruptly, and kicked in right away with individual follow-up calls.

"Everyone was just in shock. Everyone was terrified," says an employee who was laid off and asked to remain anonymous. "Throughout the day people's computers and accounts were being deactivated."

The company is providing severance pay, extending healthcare coverage and helping employees prepare resumes, as well as allowing them to use company-issued computers if they didn't have a personal machine at home.

Addressing the layoffs, RigUp told Business Insider:

"That decision was a direct result of the economic hit in oil and gas coupled with the impacts of the COVID-19 outbreak. We believe the decision was necessary to support our company's long-term commitment to our contract workforce and the industries they serve. We greatly value every RigUp employee, and thank those who left for all that they've contributed to this organization."

Security issue could mean more trouble

Amid the oil industry collapse, RigUp also suffered a data breach exposing more than 70,000 documents containing the private personal information of its energy-worker clients, researchers working for the virtual private network testing site vpnMentor say.

The researchers say they sent two emails to RigUp and communicated with the hosting company Amazon Web Services about the issue, but got no response from RigUp for three weeks after the first email was sent. On Tuesday, Business Insider asked RigUp about the data breach. On Wednesday the researchers told Business Insider that the breach had been closed.

"The breached database was huge, containing over 70,000 private files belonging to companies and individuals using RigUp's platform," researchers wrote in a report given to Business Insider.

"The data could've been used in a myriad of insidious ways had the open server been discovered by a bad actor," says Brett Callow, an expert in data breaches and researcher with the New Zealand cybersecurity firm Emsisoft who reviewed the report.