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Growth stage startup CEO here. At the end of last year our board meeting was a pitch from outside investor director to founders recommending a 50-75% layoff, de
by snbitne 4y ago
Growth stage startup CEO here. At the end of last year our board meeting was a pitch from outside investor director to founders recommending a 50-75% layoff, despite several years of runway. The capital class is despondent that the stock market has melted, and the solution is to pull the ladder up and nurse wounds. In my opinion, companies are all responding with their own values informed version of what their financial stakeholders have been urging them increasingly to do.
- moneywoes 4y agoHow big is your startup
- indus 4y agoSo if you have to do, would it be 10% a few quarters or go for the full blow in a single shot
- lostcolony 4y agoExactly. The financials aren't actually telling these companies to lay people off; the shareholders are. The macroeconomic climate is very different than the microeconomic climate; the microeconomic climate for most of these companies is "slow expansion", not "contract". In fact, many of them are still hiring even as they're laying people off because of that. But the shareholders are very much concerned, and so this is much more of a response to that.
- candiodari 4y agoNot really. The shareholders are being forced by the FED. None of the investments they made make sense at this interest rate level, so they want out. However ... The theory behind the moves of the FED is that they want inflation down. How? By firing people (people will only pay prices they can afford). The FED can't fire much people. So if shareholders want the FED to back down ... they need enough people fired. And that doesn't really work because we are fundamentally tight on the labor market for 4+ years now. Nobody fired is going to have trouble finding a new job. Maybe not the same, but they won't exactly be unemployed (although given the wages offered unemployment might be the preferable option). It's not shareholders, it's Jerome Powell. It's also just not going to last. The Federal government is looking at two options, in ~1.5 years. Cutting spending by 4% (and one year after that, >10%) with LESS income. Or convincing "independent" Jerome Powell to lower interest rates back to 0%. So we'll have, let's call it 2 years of this. The FED will be as effective as an inflatable dart board, but they only have ONE tool and goddammit, they will make it work!
- drunkenmagician 4y agoAnother anecdote, a company i used to work for (200+) employees, in high growth mode but not yet profitable got told the same by their investors. “Save cash, layoff staff, raising is going to be more difficult” So they terminated 40% of their staff despite the growth basically because investors are very pessimistic.
- bsg75 4y agoWas that company able to continue growing post layoffs?
- jacknews 4y agoYes this is another instance of the financial tail wagging the economic dog. Our economy has become completely over-financialized, and in this situation the fed have decided that inflation needs to be contained, and are inducing a recession to do it. They can do this quite reliably because of the level of financialization, companies are in debt to the hilt even if they don't need to be (it's because shareholder value), etc.
- ggwp99 4y agoBull markets and a strong financial situation usually pushes companies to overhire or over estimate the number of employees they do actually need. I have seen clients I worked with and we have advised 75% layoffs multiple of times. This is especially true in the dev teams.