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(Ex-)Convoy engineer here. No mystery as to why this happened, sudden tight market and low available capital demolished us. External reasons given in the articl
by wooly_bully 3y ago
(Ex-)Convoy engineer here. No mystery as to why this happened, sudden tight market and low available capital demolished us. External reasons given in the article were the same we knew and couldn't do anything about considering that none of the M&A options materialized.
Detailed the shutdown on a call at 8:30am Pacific this morning. CEO said there'll be no severance or healthcare.
Lot of talented folks in Seattle and beyond who'll be looking for new gigs.
- faefox 3y ago"As I just shared on our call, I think the world of you." Just not enough to offer any severance or healthcare. #TruckYeah!
- fourseventy 3y agoThe company is shutting down because they ran out of money... where do you think this magical severance pay is going to come from?
- toomuchtodo 3y agoGood management manages the treasury so those funds are available during a wind down. If you run out of runway and the bank account is empty, with nothing to provide workers who are getting term'd, you fucked up. (have co-owned a business where we made folks whole for pay the owner skipped out on during the failure, asset acquisition, and their onboarding with us; plan ahead and you can do the right thing, fail to plan and people will experience pain; you're not saving the business while burning through the severance allocation, you're just lying to yourself that the business isn't already dead)
- ghaff 3y agoOTOH, I worked for a very small company during dot-bomb that cut salaries and the principals took no pay for a bit but came out the other side--for a decent number of years. Not sure I'd have been better off had they done a "Whelp. We did our best" a few months earlier. As you get larger, decisions obviously have longer runways.
- belthesar 3y agoThere's always risk/reward evaluations that are made when in these situations. A handful of stories are being tossed around of examples where business owners ran the business to the redline, and then somehow pulled a rabbit out of a hat. These stories ignore that the significant majority of businesses fail. As an point of principal, is it better to bet on being the unicorn rarely, or to be the leader that takes responsibility for their employees consistently?
- renewiltord 3y agoIf I’m going to work at a startup, I want to know that the founders are going to aim for the stars. If they’re going to throw in the towel like this, I’d opt out. The incentive isn’t there with guys who don’t have any balls. What am I going to do with one more year of pay. Absolute pittance. People who are going to do this should be upfront that they are ball-less.
- JumpCrisscross 3y ago> Good management manages the treasury so those funds are available during a wind down Given Convoy's margins and operational leverage, I'm not sure it was this simple. Legacy freight brokers who have been doing this a long time are being caught surprised. They may have thought they had months of runway that rapidly collapsed to weeks. We need stronger unemployment benefits. Barring a public solution, severance ensconced in employment contracts is next best. Convoy had nine figures of debt. Depending on the covenants, it may not have been able to hadn't over cash at windows to employees in the form of a novel severance package.
- psunavy03 3y ago> Legacy freight brokers who have been doing this a long time are being caught surprised. They may have thought they had months of runway that rapidly collapsed to weeks. There's at least one major US freight forwarder who has been in business for over 40 years and who has never done a layoff, not in 2008, not in COVID, and not now. They're not perfect and have other flaws (like every other company everywhere), but still.
- singleshot_ 3y agoIf you run a company and you’re running out of money and you owe any secured creditors any money, and as the last act of the company, you pay all your employees a bonus so they can buy health insurance, you’ll find that in bankruptcy this might become a preferential transfer or a fraudulent transfer which will be clawed back by the creditors with priority.
- calabin 3y agoThey probably should've called the game a bit earlier - or at least significantly cut things back
- muzz 3y agoEven if they mismanaged their cash to this extent, sometimes the VCs step up with the cash for this as a goodwill gesture.
- bart_spoon 3y agoIf things are so dire today that they have no money and must shutdown immediately, they were dead in the water 6-8 weeks ago anyways. The company isn’t going to be miraculously saved during that time, so just take the cash you used to pay your employees to rearrange chairs on the sinking ship, call it 2 months early, and pay out their severance/health care during that time while they look for new jobs.
- ska 3y ago> they were dead in the water 6-8 weeks ago anyways. That's an extremely short horizon. Normally it's more than a quarter out, at least.
- pxx 3y agoThe company can certainly be saved in a period of months. FedEx supposedly had less than a week of jet fuel opex remaining when the founder decided to try to win the missing money by gambling. https://www.google.com/amp/s/www.businessinsider.com/fedex-saved-from-bankruptcy-with-blackjack-winnings-2014-7%3famp https://www.google.com/amp/s/www.businessinsider.com/fedex-s...
- rootsudo 3y agoYes, the bet it all on black and see if Lady Luck is on your side hope. What if they did and lost it all 6 weeks ago? What would that signal instead?
- BobaFloutist 3y ago"It worked once" is a very results oriented approach. If you look only at people who won the lottery, you'd have to be an idiot not to spend all your money on lottery tickets. How many times has someone done this and lost all their money, screwed over thousands of people, and never been heard of again? We don't know, because they aren't famous, but my suspicion is it's a much more common outcome.
- FireBeyond 3y agoOh, let's not pat Fred Smith on the back for his grit and determination here. FedEx was already shafting their pilots for months before this. Bounced paychecks, pilots paying for jet fuel on personal credit cards, and more. If I was a pilot there, I'd have said "Fuck you, Fred", even though he won. How sociopathic do you have to be to gamble company money (sorry, isn't that a felony?) while bouncing paychecks? And yet you'll still have people here applauding your hustler mentality, apparently.
- tshaddox 3y agoAre you suggesting they would also not pay out the final payroll, because of course they would never shut down unless they had literally used their last dollar?
- ska 3y agoExcept in very rare circumstances, management team knows this is going to happen well before passing the threshold where this isn't possible. So it's a (common) choice. They are balancing the +/- against other uses of the last bits of cash. To some degree they do it because the employee pool accepts and expects it, no better reason. If the representational damage was more acute, they might choose someone else to disappoint. The more common problem is a "hail mary" play, where the management team is perhaps fooling themselves about the probability of success. I think the ethical thing to do there is discuss it with employees, but that's just me.
- the_optimist 3y agoPerhaps conscript some doctors and pharmaceutical manufacturers under penalty of fine or imprisonment. Don’t let them go until they provide the health care we each and all deserve.
- toomuchtodo 3y agoBest way to get impacted talent connected to opportunities? Opt in spreadsheet link available?
- wooly_bully 3y agoTalent board link: https://coda.io/d/Talent-Board-2-16_dpUo3fTL8Ev/Candidates_suM29#_luRyI https://coda.io/d/Talent-Board-2-16_dpUo3fTL8Ev/Candidates_s...
- bloopernova 3y ago> CEO said there'll be no severance or healthcare. That should be illegal. How much are the executives making from this? I'm really sorry you're in the middle of this. I hope you can find a better job soon.
- bradleybuda 3y agoWhat makes you think the executives are making anything from this? It's a startup, it ran out of money, it failed, there is nothing left. Joining a startup is risky.
- ctvo 3y agoShutting down 3 months earlier, but everyone getting severance is an option. Let's not pretend it had to happen this way because it's a startup. They made the decision, if true, to use up every cent clinging on trying to find an exit or more runway.
- pxx 3y agoThe very nature of a startup, especially one funded like this, means that your whole existence is predicated on the hopes that you make it big. As such, spending your last cent to try to find a lifeline makes far more sense than calling it quits early. It's also certainly not in the interests of investors to just call things off.
- mrguyorama 3y ago>It's also certainly not in the interests of investors to just call things off. And of course, we should prioritize a class of people who BY DEFINITION have significantly more resources available to keep themselves alive and safe and happy over the well being of 500 normal people.
- ctvo 3y ago> The very nature of a startup, especially one funded like this, means that your whole existence is predicated on the hopes that you make it big. Convoy knows their situation very well, and it hasn't changed for 6 months. As investors and founders you can make the call and be responsible to your employees, maintaining a good reputation for yourself (as founders), and enabling future deal flow (as investors) or this situation where they get 0 help transitioning. This wasn't an early stage company. They're a late stage (series D iirc?) company that was valued at 1 billion+ with 5000 employees. It's not fair to characterize this with the same risk profile as an early stage co., and the expectations here should be higher in terms of severance and help.
- emgeee 3y agoDang, no severance or healthcare is really brutal and signals to me they probably should have called it earlier.
- mywittyname 3y agoAt least nobody will be around to fight against unemployment claims.
- FireBeyond 3y agoUnfortunately, in Washington state, benefits adjudication is currently sitting at around 10-14 weeks before you'll see your first check.
- robocat 3y agoProbably to fix that would need legislation specific to start-ups. I would hope most employees know that is a significant risk of working at a startup?! But yes, harsh, regardless of how predictable.
- sofixa 3y agoWhy specific to startups? Everyone deserves some leeway during layoffs, having a minimum severance for everyone is pretty basic stuff. Also, healthcare shouldn't be employer provided.
- robocat 3y agoBecause startups are expected to fail, and VCs won't "waste" money unless they are forced to so they will leave the business with $0. Without legislation VCs won't assign any money for post-failure employee costs. Running concern businesses don't have quite the same incentives nor the same risks of failure.
- dudul 3y agoA better fix would be for people to see their health insurance divorced from their employer. That would actually greatly benefit startups and be one step back from corporate serfdom.
- bdcravens 3y agoAbsolutely terrible. Tiny companies NOT backed by some of the richest men in the world give more when they wind down.
- spieswl 3y agoGood luck and my condolences
- f6v 3y agoI hope everyone saw the writing on the wall and started looking for job 3 month ago.
- xxpor 3y agoHow can there be no healthcare without a bankruptcy filing? Isn't COBRA mandatory?
- nevir 3y agoC̶O̶B̶R̶A̶ ̶i̶s̶ ̶m̶a̶n̶d̶a̶t̶o̶r̶y̶,̶ ̶b̶u̶t̶ ̶t̶h̶e̶ ̶p̶e̶r̶s̶o̶n̶ ̶l̶a̶i̶d̶ ̶o̶f̶f̶ ̶h̶a̶s̶ ̶t̶o̶ ̶p̶a̶y̶ ̶f̶o̶r̶ ̶i̶t̶ …if the company still exists (see comments above and below)
- ghaff 3y agoOnly if there still is a group health plan to pay for. If the company has shut down, there is no health plan, and therefore no COBRA. (Although, in general, with ACA, marketplace plans are not clearly worse than COBRA would have been.)
- nevir 3y agoOh, hell, totally didn't think of that. Ugh
- boringg 3y agoIsn't COBRA for layoffs not shutdowns?
- dragonwriter 3y agoCOBRA isn't employer-paid healthcare, its an ex-employee option to pay for the previously-employer-offered plan, while the employer offers a plan to current employees. If there are no more company operations and no current employees, there is also no plan and no COBRA. This could also be an issue if a company restructured so it didn't have to offer employees health care because of size or everyone being part time or whatever: COBRA doesn't guarantee that there is a plan from your former employer, it just gives you a right to pay for it yourself if there is, for a certain period of time.
- hotpotamus 3y ago
- vogt 3y ago>CEO said there'll be no severance or healthcare. Classy. Learning a lot about how certain people treat their employees during these last couple of admittedly insane years. Good for future reference, I guess - though not much solace now. I feel for the employees. Edit: Wow, more responses than I thought! I admit that the tone of my comment was too reactionary, but my opinion stands. I won't modify the original comment but instead will add this quote from Dalton Caldwell, YC Partner: "So what happens if you have less than three months of cash? It's important to face the issue head on and account for your liabilities and the scenario of shutting down your company. In many cases, <2 months is the point of no return. If you are in this state it is immediately necessary to lay off your employees and give them severance, pay down your obligations, and use your remaining cash for shutdown costs. If you don't do this and instead end up with zero cash and outstanding payroll, tax or other obligations, things will get Very Bad." [1] Convoy raised $1.1b including a $260mm Series E almost exactly a year ago. [1] https://www.ycombinator.com/library/3Z-advice-for-companies-with-less-than-1-year-of-runway https://www.ycombinator.com/library/3Z-advice-for-companies-...
- TedDoesntTalk 3y agoIsn’t this standard for startups that shutdown?
- boringg 3y agoIt is. I think the commenter is confused on the difference between layoffs and shutdowns.
- brianwawok 3y agoYes, OP is either from Europe or very entitled or both.
- lawlessone 3y agoWhen did not wanting to be shafted become entitlement?
- dpflan 3y agoGiven that you were in the company and presumably have an idea of how the company functions: where did the funding go? $260M gone in 1 year? "Convoy, which raised $260 million in a funding round last year that valued the business at $3.8 billion, on Wednesday told employees in an email that it would stop accepting shipments until further notice and that it was rescheduling or canceling existing loads." (wsj)
- jt2190 3y agoAccording to Bloomberg they had a headcount of 1500 at their peak, so assuming that USD 1000000 gets you 5 employees for a year, USD 26000000 would get you 1300 employees for a year. (That’s a lot of hand waving on my part but overall the amount of money burned doesn’t seem mysterious)
- in_cahoots 3y agoYou’re off by a factor of 10: it’s $260 million, not $26 million. So that’s 13k employees using your conversion rate.
- iterminate 3y ago>1,000 employees means a burn rate in the hundreds of millions per year just on the costs of having employees, $260m burned in a year sounds about right for a company of that size.
- zachthewf 3y ago
- duxup 3y agoI'm confused as to what Convy "had" anyway. Was it largely spot rates, a bid board, and lots of small carriers? Customers easily could just get rates / carriers elsewhere and walk from Convoy? No other services making income keeping customers around? Rates are pretty fluid in logistics, very strange that they would rely on that alone if that was the case.
- moneywoes 3y agoExactly, I'm very curious as to what was their edge
- datavirtue 3y agoSame here.
- pasttense01 3y agoIt's basically the same as Uber vs taxi companies [and Uber Trucking is a similar company to Convoy]. So traditional freight broker companies have a huge number of brokers who handle issues between shippers and carriers manually (on the phone constantly) while Convoy was going to automate this. So theoretically Convoy would have lower costs (not having to pay all these brokers) while at the same time it would provide better service (for example instant computer response vs hours for a broker to get back to you). This theory didn't work out.
- psunavy03 3y agoEveryone in startup world wants to come in and "hack" 3PL until they realize 3PL is a weird, complicated thing even if it's got a bunch of legacy players on legacy software. It's more or less like this: https://xkcd.com/1831/ https://xkcd.com/1831/
- duxup 3y agoAgreed. The logistics industry is really old, backwards at times, and lots of penny pinches. But supply and demand for carriers and capacity is pretty dang fluid too... market forces are already REALLY at play in logistics lands. If covid showed anything it was that while there would be hiccups if people can't get to work ... stuff still flows through the system pretty efficiently. If you want to be a 3PL you gotta manage your relationships with your customers / give them a reason to stick with you.
- hipadev23 3y ago[flagged]
- josh_carterPDX 3y agoYour argument would be wrong. Just because a company fails doesn't mean it was a team devoid of talent.
- hipadev23 3y ago[flagged]
- ska 3y ago> I'd argue the business failing is a strong counterpoint to that assertion. That statement is pretty naive. There are plenty of things that can kill a startup without them having done anything specifically wrong at any level, let alone at the level of technical team.
- adam_arthur 3y agoWhile true, most of these startups that have already found product/market fit and go bust are operating off of unrealistically rosy projections. Did this company need to burn their entire round in a single year? Probably not. Could they have established themselves with lower operating expenses and still grown over time? Probably.
- ska 3y agoFor the sake of argument, assume your contentions are true. Now how do you draw a line from that to the probability that the technical team that has been let go is not high quality?
- adam_arthur 3y agoI wasn't speaking to that point... excessive operating expenses are clearly a management failure. I was contending that this shutdown is not likely simply "through no fault of their own" People who can't asses fair value of a business from a discounted cashflow perspective shouldn't be running a company. It's usually financially ignorant people like this that lead the business down a dark path. The prior round valuation, and thus the implicitly underwritten future expectations of growth, is evidence enough that something along these lines happened here.
- moneywoes 3y agoWhat happens to the customers? Are there any business lines that were in their infancy worth exploring?
- camhart 3y agoFormer employees should apply for unemployment benefits. Convoy likely paid into an unemployment insurance program (its normally mandatory).
- hintymad 3y agoAny early signs that the company was in trouble?
- NetOpWibby 3y agoI used to work for an IoT startup several years ago. We were a small team and focused on attracting big clients for big money. I realized the danger in that once I learned one of our long-standing clients had been paying us for years for a solution that wasn't in operation. No one else thought it important to try and get developers using our product to reduce our reliance on big players and well, here we are. My last check was paid out from the CEO's personal bank account. Certain spaces are exciting to work in because you can clearly see a need but sometimes the stars don't align for you. I hope the Convoy team (sans leadership) lands on their feet. Q4 is the worst time to find jobs.
- hintymad 3y agoAny insights on how effective the CEO and the executives were? I'm very curious how successful executives from big companies like Amazon function in a startup.
- joneholland 3y agoThe COO was fired as the CEO of Expedia after a very short and disastrous run after Dara left to go run Uber.
- tapatio 3y agoYou guys should spin up an identical service that's lightweight, turn a profit from day 1.
- rdl 3y agoIs there a website/etc for employee hiring?