Unfortunately that's a pretty common tale. Even my current company took a fair deal of VC, did a mass hiring, and now - about a year later - the layoffs have started.
Same thing happened at Factor 5, as well. Success with the SW: Rogue Squadron games, gambled it all on Lair (which internally had it's own bushel of development problems), lost, and then petered out. What's worse is that they made everyone work for weeks at the end without pay while promising them that funding was around the corner. But it was never coming; the guys at the top of company were actually trying to transfer assets from F5 to a new company they were trying to start. It took years but the employees were finally able to get some of the money they were owed by the studio.