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Background, I work in diligence for software aquisitions. There are a lot of assumptions on this thread. I don't know the answers in this case (not sure if any

Background, I work in diligence for software aquisitions. There are a lot of assumptions on this thread. I don't know the answers in this case (not sure if anyone does?) but I think it is naive to assume that Bandcamp was wise to be employing all these people. While acquisitions tanking a company with stupid decisions are super common, it's also super common for companies who are trying to look like they are growing (for future funding or acquisitions) to have way too much staff (and thus, high a burn rate) instead of running a sensible, profitable business. It is not necessarily a good thing that they have tons of employees - sometimes it's entirely motivated by putting lipstick on a pig in order to look like a runaway growth success thing. Songtradr is in the music infrastructure business. I think it's quite possible they are cleaning house to make Bandcamp a more viable business that is actually focused on their core business. Doesn't seem impossible to me that Bandcamp was way off base trying to make too much written content when really, it's about selling music. But I'm spitballing here, anyone know more about whether Bandcamp was bloated?

NewJazz 3y ago
Isn't the pre-IPO / pre-acquisition playbook to cut staff lower than the optimum level to show profitability? But I'm spitballing here, anyone know more about whether Bandcamp was bloated? Bandcamp was shown to be profitable quite recently. Hard to justify slashing staff in half with that in mind.
- theolivenbaum 3y ago
  From what I see, it's exactly the opposite. It's more like we hired all these people because we're growing so fast, so please give us money
  - heleninboodler 3y ago
    That doesn't sound like a powerful negotiating position, though; it sounds like desperation. Why would you do that intentionally?
    - jacobr1 3y ago
      If the top line is also growing fast, and you have a good story on the unit-economic, part of the narrative is that you can eventually reduce costs and increase margin. It is hard from the outside to distinguish between Amazon style "we are investing all our profits back into R&D so we can take over the world" and "We are bloating our team to grow at all costs and don't know what levers to pull"
      - lotsofpulp 3y ago
        > It is hard from the outside to distinguish between Amazon style "we are investing all our profits back into R&D so we can take over the world" and "We are bloating our team to grow at all costs and don't know what levers to pull" Considering Amazon was building physical warehouses, buying land, literally delivering to people, executing deployment of AWS which Netflix was famously using, all while being a publicly listed company with audited public financials I think Amazon’s style is easy to distinguish from the outside.
        jeremyjh 3y ago
        It really doesn't sound easy to me to tell this from the outside. What if the R&D investments are all garbage? It is hard to scale an engineering org effectively, it can take off and start building some microservice fortress that never yields any business value if it has the wrong leadership.
        lotsofpulp 3y ago
        Because they were publicly listed with public financials, you know they were not losing money: https://www.macrotrends.net/stocks/charts/AMZN/amazon/profit-margins https://www.macrotrends.net/stocks/charts/AMZN/amazon/profit... You also know from using Amazon that they were near flawlessly executing 2 day shipping across the US with prices competitive with Walmart and other successful retailers. They also had a pricing advantage against incumbents due to not having to collect sales tax in all states until 2016. It’s mostly the verifiably not losing money part though so you knew they weren’t overextending, and they were delivering what people wanted.
- iainctduncan 3y ago
  Honestly, it's all over the map. Depends on the reason for sale and the reason for purchase. They are looking for "synergies" and a very common one "you already have this thing, so you can cut it out of this company after you acquire and use yours". It is very possible that Epic had plans that involved hyper-growth, now realized those are not going anywhere, and is happy to demonstrate that a chopped up Bandcamp is a good deal. I have literally done diligences where part of our role was to weigh in on how much could be slashed, which is not very pleasant, but like I said, when the growth was dumb in the first place it can be the right call.
- s1artibartfast 3y ago
  There are a lot of counter-intuitive pre-IPO behaviors. Another one is to raise a huge amount of cash through unnecessary funding rounds. You would think that massive dilution for no gain would be a bad idea, but there are usually a lot of perverse incentives at play
  - ghostbrainalpha 3y ago
    Could you give an example of 1 of the perverse incentives that could cause that? It's very interesting.
    - s1artibartfast 3y ago
      A lot of the time IPO investors, both public and institutional, value company cash on hand at more than $1 per dollar during an IPO. An extra 500 million in the bank might make the company IPO for a billion dollars more. Peloton is an example of a company that did a huge unnecessary fundraise before IPO. I'm sure it makes a bunch of numbers and ratios look better on paper. Psychologically, I think it also helps companies lock in evaluation closer to their IPO Target for when people look back at the history of the company. It's pretty similar too the idea of inflating employee head count. You can say "we made $10 million with only 10 employees last year. Wait until you see how much money you're going to make now that we have a hundred employees"
- barrkel 3y ago
  You want to sell when you can show growth because that justifies a higher multiple. If you're cutting people, it means you don't have enough growth opportunities to use those people for. It's the opposite signal. You might need to sell, which may change the calculation.
- hatsix 3y ago
  Shown how? I keep seeing reference to a webpage on Bandcamp that was published over 5 years ago.
- onlyrealcuzzo 3y ago
  At one point - in the not too distant past - a common way of valuing tech startups was $1M per engineer... You can see why companies might have been incentivized back then to hire anything with a pulse that claimed to be an engineer.
- smadge 3y ago
  When a company isn't profitable you hire developers to build a product which can make you profitable. When a company is profitable, you fire all the developers and start collecting dividends.
  - artyom 3y ago
    Agreed but from what I've seen most layoffs were on the content/writer/social side of things. Sounds to me that the focus is now on being a platform and not an outlet. I still have no clue what Epic wanted to do with it.
ye-olde-sysrq 3y ago
prior to this, bandcamp was owned by Epic and lord only knows why they bought them or what their bigger plan was. i also have no idea how much they staffed up under epic rule since they went from a small business to being owned by the fortnite money man. Entirely possible it's something like: 1. bandcamp is a sustainable normal small-to-medium business growing healthily 2. Epic has tons of fortnitebux and is feuding with apple so they buy bandcamp as some kind of tangential play should they end up as a big alternative store on iOS. so they could have a music store offering (to compare to itunes? not that apple gives a crap about itunes anymore??) in addition to an app store? 3. the money music stops and everyone races for a seat. bandcamp is left hanging. 4. epic sells bandcamp to whoever just to get it off the books so they can focus on fortnite lootboxes 5. songtradr or whatever their name is tells the union to pound sand and cuts bandcamp down to a core team because they're planning to just gut the product and transition all these indie artists over to whatever platform they were running before. This is a music IP company. I don't think they want to handle B2C purchases or provide streaming music. They just wanted to buy a big pot of artists and IP to add to their collection.
- sitharus 3y ago
  On point 5, bandcamp doesn’t own any rights to the music on the site. The artist agreement is limited to the service of selling music, if that changes the artists can revoke their agreement.
  - southwesterly 3y ago
    That can change.
    - sitharus 3y ago
      It can, but not retrospectively.
      - Kye 3y ago
        "By continuing to use Bandcamp, you agree..." What's an artist who depends on the platform to do?
choppaface 3y ago
> I think it is naive to assume that Bandcamp was wise to be employing all these people It probably was stupid, but stupid isn’t illegal, and companies will hide behind that fact to issue mass layoffs (which can be even stupider when they result in an inoperative team). The financial argument behind a layoff is today made more irrelevant when the employees are smart and creative enough to be the key to company success. Good employees won’t take stupid, no matter how legal stupid is. > sometimes it's entirely motivated by putting lipstick on a pig in order to look like a runaway growth success thing The same can be said for the CEO and Board who created the mess. Except they get a big payoff no matter what, and have much larger leverage over the lives of the employees.
matthewn 3y ago
Bandcamp had 118 employees total. That doesn't smell bloated to me. (Source: https://www.sfgate.com/tech/article/bandcamp-layoffs-oakland-songtradr-epic-18429463.php https://www.sfgate.com/tech/article/bandcamp-layoffs-oakland...)
- hipadev23 3y ago
  [flagged]
  - sp332 3y ago
    Support for hundreds of thousands of bands and their bank payouts, and millions of customers. (They also sell vinyl, CDs, cassettes, and t-shirts.) Edit: they reportedly had a good editorial team, but I'm not sure how many people you need for that part.
    - armini 3y ago
      [flagged]
      - ruined 3y ago
        bandcamp is an ecom provider. it is their core product. edit: your product showed me a loading spinner and then crashed, so. not sure what you think you're doing
      - vosper 3y ago
        How is your business that you plugged different from Bandcamp, apart from being smaller? Sounds like you're both in the same business?
        armini 3y ago
        our platform facilitates micro transactions with minimal fees because we take away the bank burden as much as possible. We focus on the creators, as long as they create great content people will reward them. platforms turn to crap when people find the need to sell other things. why should i sit through amazing youtube content only to be sold nordvpn? surely the community can do better with micros transactions.
sarma17 3y ago
> like a runaway growth success thing. is this because employee growth is easily verifiable? Put another way, don't companies ask for accounting statements etc to figure out if the target company is worth acquiring? (context - I have no idea how one company accquires another, so this is a noob q)
ShamelessC 3y ago
> Background, I work in diligence for software aquisitions. It shows. I don't see lay-offs from this perspective. Instead, I think about each of the employees impacted by the company's reckless behavior. Did the employees have any say in this matter? No? Then who cares if the job they were there to do was unimportant in the first place? That is absolutely the fault of the company. Your stance is not effective when treating human beings like human beings and not some `num_workers` configuration in some kubernetes yaml.
- iainctduncan 3y ago
  Your calculation falls apart if you are comparing it against no business - which is what happens when a non-sustainable business eventually runs up against economic reality. The whole business of not-profitable companies growing for years and hiring people on imaginary future money is tech industry magic beans shit. It's divorced from the reality of the rest of the world where people have to really work for a living and don't get paid our astronomical salaries. I work as a consultant in tech diligence, but previous to that I worked for many many years for small, profitable, Normal Businesses. And the company I work for is a normal business that watches the bottom line and doesn't over hire because we have to be profitable. If you go work for a magic bean company that doesn't think being a sustainable business matters, you are, unfortunately, part of a ponzi scheme that can fall apart any time.
- gen220 3y ago
  > I think about each of the employees impacted by the company's reckless behavior. The "reckless behavior" in the above quote was not committed by the acquirer, but by whoever was responsible for leading + growing Bandcamp off this cliff. In the same way you want to treat humans like humans, you need to treat businesses like businesses – i.e., if you're not making money or growing revenue fast enough to justify hiring the marginal employee, as a hiring manager, you're gambling with the prospective hire's career in pursuit of a collective gain. If you're an employee joining an unprofitable company, this is part of the package and should be really clear in the interviewing/onboarding. If it isn't, again, the blame falls at the feet of the CEO, ultimately.
- jbm 3y ago
deleted 3y ago
[deleted]
bgroat 3y ago
A founder friend confided in me years ago, "It is MUCH easier to raise more money than it is to fire someone... I just keep raising and hiring and eventually everything will get done" No surprise that this approach was very much a "Low-Rates Phenomenon"
- user_named 3y ago
  Why is it hard to fire? I thought it's super easy in the US.
  - danjac 3y ago
    Legally perhaps, but firing people particularly en mass is hard to do right, unless you don't care and you are just prepping for a fire sale. You can lose people who might be key contributors. You can destroy morale in the rest of the company. Everyone else knows they might be next, so they will leave first chance they get. Finally, it signals to the market you are in trouble (hence why a lot of companies are doing it now: better to be just one more company doing layoffs when everyone else is doing it).
    - bgroat 3y ago
      This was the point that founder friend was making. It's hard to look someone in the eye and say they're done
      - user_named 3y ago
        He mentioned several points, all different from what you said
  - paulddraper 3y ago
    Legally yes. Morale-wise no.
_the_inflator 3y ago
I totally agree. In corporate environment, people really must be fooled by two numbers: head count and budget. This is true for other walks of life, too. I initiated and lead a platform in Financial Service Industry which lead to massive productivity gains. Through standardized processes we could use an inhouse build No Code editor instead of individual app development. Costs went down from 1.5 Mio to sub 10k USD, time to market from 4 1/2 month for two dev teams to a couple of hours for a non-developer per app. Reaction: "Dude, you are destroying careers. We get paid and promoted by budget and head count. We artificially inflate budgets and projects so that we get promoted." I was stunned. We could do so many other things with the free capacity or help build value for the company. Lesson: People are sometimes able to comprehend abstract stuff ("Software can be used to automate processes and can scale. It serves 1000+ customers worldwide 24/7. We have 10 people employed."). Mostly decision makers sadly prefer power ("Woooha, your company has 1.000 devs?! How cool, you must feel like superman!") Lesson still not really comprehended, but somehow ingested.
deleted 3y ago
[deleted]
DonnyV 3y ago
I think your right about them focusing on the wrong thing. Content writing instead of sales. There music discovery is horrible and they don't push any of their artists. I mean they only make money when their artist do. You would think that they would promote them better or have a Spotify like interface to push they artist music.

NewJazz 3y ago

Isn't the pre-IPO / pre-acquisition playbook to cut staff lower than the optimum level to show profitability? But I'm spitballing here, anyone know more about whether Bandcamp was bloated? Bandcamp was shown to be profitable quite recently. Hard to justify slashing staff in half with that in mind.

theolivenbaum 3y ago
From what I see, it's exactly the opposite. It's more like we hired all these people because we're growing so fast, so please give us money
- heleninboodler 3y ago
  That doesn't sound like a powerful negotiating position, though; it sounds like desperation. Why would you do that intentionally?
  - jacobr1 3y ago
    If the top line is also growing fast, and you have a good story on the unit-economic, part of the narrative is that you can eventually reduce costs and increase margin. It is hard from the outside to distinguish between Amazon style "we are investing all our profits back into R&D so we can take over the world" and "We are bloating our team to grow at all costs and don't know what levers to pull"
    - lotsofpulp 3y ago
      > It is hard from the outside to distinguish between Amazon style "we are investing all our profits back into R&D so we can take over the world" and "We are bloating our team to grow at all costs and don't know what levers to pull" Considering Amazon was building physical warehouses, buying land, literally delivering to people, executing deployment of AWS which Netflix was famously using, all while being a publicly listed company with audited public financials I think Amazon’s style is easy to distinguish from the outside.
      - jeremyjh 3y ago
        It really doesn't sound easy to me to tell this from the outside. What if the R&D investments are all garbage? It is hard to scale an engineering org effectively, it can take off and start building some microservice fortress that never yields any business value if it has the wrong leadership.
        lotsofpulp 3y ago
        Because they were publicly listed with public financials, you know they were not losing money: https://www.macrotrends.net/stocks/charts/AMZN/amazon/profit-margins https://www.macrotrends.net/stocks/charts/AMZN/amazon/profit... You also know from using Amazon that they were near flawlessly executing 2 day shipping across the US with prices competitive with Walmart and other successful retailers. They also had a pricing advantage against incumbents due to not having to collect sales tax in all states until 2016. It’s mostly the verifiably not losing money part though so you knew they weren’t overextending, and they were delivering what people wanted.
iainctduncan 3y ago
Honestly, it's all over the map. Depends on the reason for sale and the reason for purchase. They are looking for "synergies" and a very common one "you already have this thing, so you can cut it out of this company after you acquire and use yours". It is very possible that Epic had plans that involved hyper-growth, now realized those are not going anywhere, and is happy to demonstrate that a chopped up Bandcamp is a good deal. I have literally done diligences where part of our role was to weigh in on how much could be slashed, which is not very pleasant, but like I said, when the growth was dumb in the first place it can be the right call.
s1artibartfast 3y ago
There are a lot of counter-intuitive pre-IPO behaviors. Another one is to raise a huge amount of cash through unnecessary funding rounds. You would think that massive dilution for no gain would be a bad idea, but there are usually a lot of perverse incentives at play
- ghostbrainalpha 3y ago
  Could you give an example of 1 of the perverse incentives that could cause that? It's very interesting.
  - s1artibartfast 3y ago
    A lot of the time IPO investors, both public and institutional, value company cash on hand at more than $1 per dollar during an IPO. An extra 500 million in the bank might make the company IPO for a billion dollars more. Peloton is an example of a company that did a huge unnecessary fundraise before IPO. I'm sure it makes a bunch of numbers and ratios look better on paper. Psychologically, I think it also helps companies lock in evaluation closer to their IPO Target for when people look back at the history of the company. It's pretty similar too the idea of inflating employee head count. You can say "we made $10 million with only 10 employees last year. Wait until you see how much money you're going to make now that we have a hundred employees"
barrkel 3y ago
You want to sell when you can show growth because that justifies a higher multiple. If you're cutting people, it means you don't have enough growth opportunities to use those people for. It's the opposite signal. You might need to sell, which may change the calculation.
hatsix 3y ago
Shown how? I keep seeing reference to a webpage on Bandcamp that was published over 5 years ago.
onlyrealcuzzo 3y ago
At one point - in the not too distant past - a common way of valuing tech startups was $1M per engineer... You can see why companies might have been incentivized back then to hire anything with a pulse that claimed to be an engineer.
smadge 3y ago
When a company isn't profitable you hire developers to build a product which can make you profitable. When a company is profitable, you fire all the developers and start collecting dividends.
- artyom 3y ago
  Agreed but from what I've seen most layoffs were on the content/writer/social side of things. Sounds to me that the focus is now on being a platform and not an outlet. I still have no clue what Epic wanted to do with it.

ye-olde-sysrq 3y ago

prior to this, bandcamp was owned by Epic and lord only knows why they bought them or what their bigger plan was. i also have no idea how much they staffed up under epic rule since they went from a small business to being owned by the fortnite money man. Entirely possible it's something like: 1. bandcamp is a sustainable normal small-to-medium business growing healthily 2. Epic has tons of fortnitebux and is feuding with apple so they buy bandcamp as some kind of tangential play should they end up as a big alternative store on iOS. so they could have a music store offering (to compare to itunes? not that apple gives a crap about itunes anymore??) in addition to an app store? 3. the money music stops and everyone races for a seat. bandcamp is left hanging. 4. epic sells bandcamp to whoever just to get it off the books so they can focus on fortnite lootboxes 5. songtradr or whatever their name is tells the union to pound sand and cuts bandcamp down to a core team because they're planning to just gut the product and transition all these indie artists over to whatever platform they were running before. This is a music IP company. I don't think they want to handle B2C purchases or provide streaming music. They just wanted to buy a big pot of artists and IP to add to their collection.

sitharus 3y ago
On point 5, bandcamp doesn’t own any rights to the music on the site. The artist agreement is limited to the service of selling music, if that changes the artists can revoke their agreement.
- southwesterly 3y ago
  That can change.
  - sitharus 3y ago
    It can, but not retrospectively.
    - Kye 3y ago
      "By continuing to use Bandcamp, you agree..." What's an artist who depends on the platform to do?

choppaface 3y ago

> I think it is naive to assume that Bandcamp was wise to be employing all these people It probably was stupid, but stupid isn’t illegal, and companies will hide behind that fact to issue mass layoffs (which can be even stupider when they result in an inoperative team). The financial argument behind a layoff is today made more irrelevant when the employees are smart and creative enough to be the key to company success. Good employees won’t take stupid, no matter how legal stupid is. > sometimes it's entirely motivated by putting lipstick on a pig in order to look like a runaway growth success thing The same can be said for the CEO and Board who created the mess. Except they get a big payoff no matter what, and have much larger leverage over the lives of the employees.

matthewn 3y ago

Bandcamp had 118 employees total. That doesn't smell bloated to me. (Source: https://www.sfgate.com/tech/article/bandcamp-layoffs-oakland-songtradr-epic-18429463.php https://www.sfgate.com/tech/article/bandcamp-layoffs-oakland...)

hipadev23 3y ago
[flagged]
- sp332 3y ago
  Support for hundreds of thousands of bands and their bank payouts, and millions of customers. (They also sell vinyl, CDs, cassettes, and t-shirts.) Edit: they reportedly had a good editorial team, but I'm not sure how many people you need for that part.
  - armini 3y ago
    [flagged]
    - ruined 3y ago
      bandcamp is an ecom provider. it is their core product. edit: your product showed me a loading spinner and then crashed, so. not sure what you think you're doing
    - vosper 3y ago
      How is your business that you plugged different from Bandcamp, apart from being smaller? Sounds like you're both in the same business?
      - armini 3y ago
        our platform facilitates micro transactions with minimal fees because we take away the bank burden as much as possible. We focus on the creators, as long as they create great content people will reward them. platforms turn to crap when people find the need to sell other things. why should i sit through amazing youtube content only to be sold nordvpn? surely the community can do better with micros transactions.

sarma17 3y ago

> like a runaway growth success thing. is this because employee growth is easily verifiable? Put another way, don't companies ask for accounting statements etc to figure out if the target company is worth acquiring? (context - I have no idea how one company accquires another, so this is a noob q)

ShamelessC 3y ago

> Background, I work in diligence for software aquisitions. It shows. I don't see lay-offs from this perspective. Instead, I think about each of the employees impacted by the company's reckless behavior. Did the employees have any say in this matter? No? Then who cares if the job they were there to do was unimportant in the first place? That is absolutely the fault of the company. Your stance is not effective when treating human beings like human beings and not some `num_workers` configuration in some kubernetes yaml.

iainctduncan 3y ago
Your calculation falls apart if you are comparing it against no business - which is what happens when a non-sustainable business eventually runs up against economic reality. The whole business of not-profitable companies growing for years and hiring people on imaginary future money is tech industry magic beans shit. It's divorced from the reality of the rest of the world where people have to really work for a living and don't get paid our astronomical salaries. I work as a consultant in tech diligence, but previous to that I worked for many many years for small, profitable, Normal Businesses. And the company I work for is a normal business that watches the bottom line and doesn't over hire because we have to be profitable. If you go work for a magic bean company that doesn't think being a sustainable business matters, you are, unfortunately, part of a ponzi scheme that can fall apart any time.
gen220 3y ago
> I think about each of the employees impacted by the company's reckless behavior. The "reckless behavior" in the above quote was not committed by the acquirer, but by whoever was responsible for leading + growing Bandcamp off this cliff. In the same way you want to treat humans like humans, you need to treat businesses like businesses – i.e., if you're not making money or growing revenue fast enough to justify hiring the marginal employee, as a hiring manager, you're gambling with the prospective hire's career in pursuit of a collective gain. If you're an employee joining an unprofitable company, this is part of the package and should be really clear in the interviewing/onboarding. If it isn't, again, the blame falls at the feet of the CEO, ultimately.
jbm 3y ago

deleted 3y ago

[deleted]

bgroat 3y ago

A founder friend confided in me years ago, "It is MUCH easier to raise more money than it is to fire someone... I just keep raising and hiring and eventually everything will get done" No surprise that this approach was very much a "Low-Rates Phenomenon"

user_named 3y ago
Why is it hard to fire? I thought it's super easy in the US.
- danjac 3y ago
  Legally perhaps, but firing people particularly en mass is hard to do right, unless you don't care and you are just prepping for a fire sale. You can lose people who might be key contributors. You can destroy morale in the rest of the company. Everyone else knows they might be next, so they will leave first chance they get. Finally, it signals to the market you are in trouble (hence why a lot of companies are doing it now: better to be just one more company doing layoffs when everyone else is doing it).
  - bgroat 3y ago
    This was the point that founder friend was making. It's hard to look someone in the eye and say they're done
    - user_named 3y ago
      He mentioned several points, all different from what you said
- paulddraper 3y ago
  Legally yes. Morale-wise no.

_the_inflator 3y ago

I totally agree. In corporate environment, people really must be fooled by two numbers: head count and budget. This is true for other walks of life, too. I initiated and lead a platform in Financial Service Industry which lead to massive productivity gains. Through standardized processes we could use an inhouse build No Code editor instead of individual app development. Costs went down from 1.5 Mio to sub 10k USD, time to market from 4 1/2 month for two dev teams to a couple of hours for a non-developer per app. Reaction: "Dude, you are destroying careers. We get paid and promoted by budget and head count. We artificially inflate budgets and projects so that we get promoted." I was stunned. We could do so many other things with the free capacity or help build value for the company. Lesson: People are sometimes able to comprehend abstract stuff ("Software can be used to automate processes and can scale. It serves 1000+ customers worldwide 24/7. We have 10 people employed."). Mostly decision makers sadly prefer power ("Woooha, your company has 1.000 devs?! How cool, you must feel like superman!") Lesson still not really comprehended, but somehow ingested.

deleted 3y ago

[deleted]

DonnyV 3y ago

I think your right about them focusing on the wrong thing. Content writing instead of sales. There music discovery is horrible and they don't push any of their artists. I mean they only make money when their artist do. You would think that they would promote them better or have a Spotify like interface to push they artist music.