Silicon Valley startups rein in spending and prepare for layoffs

An offer for a one/two-month tryout without pay has nothing to do with their skills. That's just someone trying to get some cheap labor.

For examples, I didn't even have to leave the linked article:

- The link off the article: "Silicon Valley's reality: The party is over"

Yes, the whole 16 hour work-day for potentially valueless-shares "party." Excuse me if I'm not wearing my party hat. You'd never see "Coal miner's reality: The underground rave is over", nor would you see them taking a shot at executive compensation in the banking industry.

- From the article: "Margaret Quigley, 27, a techie with some coding experience, is on the hunt for a job in San Francisco...there is literally Airbnb — for cats!...'Do I see value in the platform?'.. she has also rejected multiple sales job offers"

Ah yes, the non-programmer vague "sales techie" living in the modern day political and corporate Gomorrah and a trivialization of the tech industry. Yes, quip about some startup no one has heard of and avoid talking about a company like SpaceX that is inarguably changing the world by doing things at the scale of NASA.

- "The candidate wanted more money, the opportunity to work from home three days a week and to set the hours. Six months ago the company scrapped free in-office yoga and massages."

Again, trying to paint tech workers (with these demands, he/she was likely an engineer) as spoiled, pampered children.

The rare/uncommon perks exist because it's hard to find people capable of doing the engineering work, and once you find those people, it's very easy for them to be ground down to a nub. Funny that CNBC isn't brave enough to talk about the perks that politicians receive from lobbying groups.

Getting hired is not a problem - getting a really nice job though is much more difficult, especially due to all of the companies that like to talk a nice game but are disguising weak aspects of the company such as leadership/management, quality engineering, work-life balance, etc.

An aside, that popup iframe with video on the top as you scrolled down is one of the most annoying dark UX patterns I've encountered in a news site. It is one of a handful times where I used Chrome's element inspector to set display: none.

Yeah, no. As someone who hires on the east coast, and has a pretty extensive network of professional peers in generally "high" positions -- all these general assumptions about applying the SF market to anywhere else in the country is complete non-sense. And rightly so.

Times go bad, revenue drops to 10 million. You fire the non-essential designer and take the 1%=100k revenue hit. If you had fired an essential employee, your revenue would have dropped some double digit percentage, so those you have to keep around.

You expand/contract the business to the point where the marginal employee costs you the same as the marginal revenue they can bring in.

Well that's the theory for stable profitable companies. For startups I guess you'd have to think of the marginal expected future revenue.

When the price of oil tanks, but the price of coal rises, you downsize on oil production and ramp up coal mining.

I've heard of companies doing the opposite. Instead of laying off, they hired more. Sure, you cut shot term cost by firing, but you also lose the human resources to develop any long term value. What of your product? If every of you competitor is laying off, and you decide to actually hire more and double down, you might be able to get the competitive advantage.

1) any employee who asks runs a good risk of getting fired, so they don't ask. If anyone is crazy enough to do so, what I've seen happen is this : everybody immediately looks at the guy asking, wondering if he'll get his head lobbed off. Everything goes very, very quiet. Management moves to the next question as if nothing happened. The guy is never heard from again.

2) any shareholder who asks approved the stupidity (this, of course, doesn't stop them from blaming others, but generally not publicly).

3) the big shareholders, who make the decisions, control who can film the shareholders meeting and who can report on it, and they make sure reporters who get to enter agree beforehand on what questions to ask. This means that if you go to a shareholder meeting of a large company, you'll see that question asked, and usually it turns the whole meeting into a shouting match (and once, I've seen it turn into an actual fight). Then the next day you open the newspaper or online sites and read a reporter describing a serene and cool meeting echoing almost exactly the press release of the earnings.

Management of long-running companies is stupid. Management that just left long-running companies is stupid. Well, perhaps stupid isn't the right word, but they're looking for very specific outcomes, which don't usually have anything to do with running the business well. Poking holes in how they're running things is easy, because people who do the hole poking are looking at the interests of the business itself, not of the people investing in it (they may want an exit, or even an entry : they want to buy extra shares, so it'd be real helpful if a "medium-size" business disaster happened).

And why not hire smarter management ? Senior management isn't hired (in most cases). They buy themselves in, then get to write the "reason" they get hired. It's never that they paid good money (usually in the form of shares, so technically they loan money to the business). Note that senior managers often don't use their own money to do this, but money of people they represent. Very often risky bank loans come with the string that a board seat and a C-level position must be given to a "to be named" individual.

(If you're working for a startup that got a bank loan and a sudden "weird" executive, I guarantee you this is what's going on. Same for investments. A good thing is that companies like Andreesen Horowitz are pretty forthcoming with that this is a requirement)

So the purpose of management generally isn't to run the business. It's to make the balance sheet look good for the duration of his investment. Making sure a loan is repaid at all costs. Making sure their company gets a good opportunity to buy shares (ie. break out news that kills the stock price, then sudden takeover happens, or at least gets closer)

Also, keep in mind hiring is partly done because open job openings that change regularly is something a lot of investors look at. This is one of the value-investing tricks in the category of tricks that everyone knows about. So it is gamed.

Not every company is running like this of course, but as a general rule, any company older than perhaps 20 years is. Or, more generally, any company whose stock has at some point really stalled is run like this. It'd be more accurate to say that any company that ever needed a bigger loan than their rating would justify is, but that's a very tough call to make.

Read this for an especially egregious example, bordering on fraud (but it isn't fraud. They never lied about the numbers, they just changed them so people who don't dig deep would see a huge improvement that wasn't real ...) https://foragerfunds.com/bristlemouth/dick-smith-is-the-grea...

If a company could inflict so much damage in the broader ecosystem by when it goes out of then it can charge high prices for what it offers. As a general rule if you're providing something people sttruggle to function without. then you can always stay in business if you want.

Of course, there are edge cases involving mismanagement, but I suspect they're extremely rare.

Perhaps what might be more likely would be acquisitions where the acquiring company kills the service for some reason - like what happened with Parse.

I'm curious, as I have no experience in this area, if that's really likely.

As an outsider, it feels like salaries would be the overwhelmingly largest monthly expenditure for most tech startups. Such that things like office space, even a lavish choice, wouldn't really be relevant.

If you were to break it down by "cost per employee" is there really a case where office space, perks, etc, really becomes the driver for failure? Where it is statistically meaningful versus the base salary cost?

http://paulgraham.com/badeconomy.html

I might not want to work at the crappy startups, but their additional engineering demand drives up salaries overall.

But in the transition period it will make VC/angels more risk averse making money harder to find for good startups as well.

There is an old saying in business: "overhead walks on two legs." People are expensive; everything else is cheap in comparison. This is particularly true for most software companies, where payroll (and other expenses directly sensitive to number of employees) typically dominates every other expense.

There are software companies which do $100 million a year in revenue on $50k a year in infrastructure costs. Bloat that crazily for a B2C startup making, let's say, generous time-to-market and inhouse-expertise-required tradeoffs. Even if you're spending $50k a month on Amazon, shaving off half of that buys you 1~2 extra FTEs.

The very fact that 20 people jump in and warn us at the slightest hint (like this) that this is a bubble tells me that we are not in a bubble. Even if people get laid off they will find work else where. Funny thing is that this article talks about laid off tech workers finding work in Finance, which as we speak is getting decimated.

IMHO that's the business world in a nutshell. Being scared of innovation and changing the status quo.

This statement seems excessively judgemental. What exactly is wrong with someone wanting to walk from their flat to a bar to pay X for a drink, and pay what housing cost they are OK with for that privilege? And what's wrong with companies paying to be in the same environment? EDIT: rewording

I see a lot of startup stories here. I fear that part of the problem is that stories get posted, have good discussions, and fall off the front page before many readers see them.

They're saying that when Google was still a start-up / very young company, it thrived in the post dotcom bust after 2000.