There's a big shift going on in startups, and this company just got caught in the middle

The walls are closing in on the on-demand economy, and another startup has decided to bow out this week.

Zen99, which offered tax help and other services for contractors like Uber drivers, announced today that it will be closing its doors on August 25 and return the remaining money to its investors, according to a Medium post by its CEO and founder Tristan Zier.

Zen99 launched in May 2014 to help the 1099 contractor workforce track their earnings, estimate taxes, and sign up for health insurance.

The company was poised to take off because of the meteoric rise of the independent contractor in the on-demand economy, which make up the majority of the workforce for companies like Uber, Instacart, Lyft, Handy, and Postmates.

However, that tide has recently changed as some of these startups have started to switch from independent contractors to employees - since June, valet service Luxe, shipping service Shyp, tech support service Eden, and delivery services Sprig and Instacart have all moved at least some workers to employee status. More companies may be poised to follow if a class-action suit filed by some drivers for Uber and Lyft succeeds.

In 2014, Zen99 raised a total of $2.6 million from SV Angel and Crunchfund after it graduated from Y Combinator, the prestigious startup incubator of Silicon Valley. It's unknown how much of that is left to return to its investors or why it ultimately shut down.

Zier declined to comment further to Business Insider, but he did confirm that the company's five employees have already found new jobs.

"Getting knocked down is hard, but absolutely makes you stronger. I'll be back up after a short break, smarter and hungrier," Zier said in his note.the