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Update: At 9:39 pm EDT 3rd Ward CEO Jason Goodman confirmed the closure in an email to instructors.
With news of 3rd Ward‘s unexpected closure reported earlier this afternoon in the New York Observer, further details have emerged regarding the operational and strategic difficulties that have plagued the widely-utilized creative depot cum instruction space for the past year. A last-minute $1.5 million attempt to raise capital from accredited investors on the Fundrise platforum was shut down as of 7 pm EDT tonight. That campaign, which was launched on September 27 and slated to conclude in two days, was ended by Fundrise tonight “due to the fact that 3rd Ward has shut down operations.”
At the time of its suspension, the campaign had raised $375,000 from 27 investors, including several executives and a co-founder at Fundrise. In an SEC filing for a different equity offering of $2.5 million in 2012, the organization declined to disclose its revenue range and the net value of its assets. In the Fundrise campaign, 2012 revenues of $3.6 million and a 2013 “downtick” are stated, but it’s ambiguous whether the 2012 figure is operating revenue, which would exclude the cash infusion from investors, or not. It’s also unclear whether that 2012 funding round reached its goal; the filing states that 14 investors had participated in the round by the time of the filing. The same documents list Jason Goodman as an executive officer, director, and promoter of the business (he apparently bought out his co-founder, Jeremy Lovitt, sometime between 2010, when they incorporated, and 2012). David Belt and Joanne Wilson are listed as directors only.
Speaking on condition of anonymity, a former instructor who taught classes at the organization’s Bushwick flagship for several years detailed the organization’s high level of turnover, frequent strategic shifts, and rumored and observed financial turmoil — including a check for a nominal sum that bounced earlier this summer. On September 26, Jason Goodman emailed all 3rd Ward members with a note that began: “It is my pleasure to bring you some exciting news and ask for your support by investing in 3rd Ward.” “Investing” was hyperlinked to 3rdward.com/invest, a page that has since been taken down but, accessed via cache, seems to show a rather interesting range of “investment” opportunities offered:
The Fundrise campaign’s overview on that site clearly indicates that the offering was sparked by an unexpected financial duress, with “three factors” given:
- Our revenue at the Brooklyn location fell as a result of a change we made to one of our membership products earlier this year.
- The new location in Philadelphia is requiring more capital than expected to achieve profitability or reach cash flow break-even.
- The development of the Culinary project required advance spending.
Our source also noted that Zappos CEO Tony Hsieh’s name floated around among the staff as a potential savior — a report we were not able to corroborate, though Goodman did visit Hsieh’s Downtown Project in Las Vegas in 2012.
Frequent changes in staff included a complete turnover of the education team twice in the last year and a half. Several other strategic shifts in 3rd Ward’s final year seem to signal that the organization may have overextended itself by rapidly expanding to Philadelphia, then starting ancillary projects like a Chelsea Market popup and a culinary offshoot in Crown Heights. A shift in April 2013 from paying instructors an hourly fee to a per-student commission structure placed the onus on teachers to promote their classes and, according to some, prompted an exodus of talented instruction.
William Zoe FitzGerald, a member of 3rd Ward of four years who claims to have taken nearly every class offered during that period, corroborated these claims to Hyperallergic, adding that the organization had significantly shifted away from its earlier focus on incubating serious creative talent.
“3rd Ward drove out artists for weekend hobbyists. It wasn’t really about investing in the community after last year, just getting people in to take classes,” he said. Yet despite this apparent focus on the bottom line, FitzGerald stated that the front desk was often staffed indifferently if at all, with no verification of paying membership among people who would walk in to use the facilities. “You could walk in there and the front desk would never be open.”
Attempts to reach senior employees at 3rd Ward, including its full-time accountant, were not responded to by press time. Calls to 3rd Ward went straight to voicemail, and the storefront was shuttered as of this morning. If you have any additional information, let us know.
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