Bolt announces layoffs
bolt.com
bolt.com
I guess this is the beginning of the tech washout. clings to large tech company job
EDIT: 33% layoff today
2) Based on their recent fundraise (and assuming that they had 0 dollars at that point), that's basically a burn rate of 25-30M/m. I'm not sure I can event comprehend what that company could be spending that much money on.
I would find it very hard to believe they have increased their headcount by 900% (~4500 people) in 4 months.
While not everyone has a linkedin, 900 employees seems like a reasonably safe pre-layyoffs estimate?
The way to do layoffs is simple. You get managers to stack rank the lot, then you get every single person with 30 or more reports under them in a room.
Then you do the whole layoff in one 5 hour meeting.
Swing the axe and get it done in 2 days.
Most often I saw “divisions” or “capabilities” cut, either entirely or to skeleton crews that kept the lights on.
Next was just randomly applied. And frankly managers with 30 or more reports were frequently layoff targets as they are expensive and don’t add a ton of obvious value to the bottom line (unless they had a sales function).
I'd imagine a lot of paperwork got back up, but presumably the company business roughly kept going. True or false?
That’s true of ninja rockstar developers and vp directors of business dev. Largely the world keeps turning no matter who leaves a firm no matter the circumstances.
It's rare that the damage is surfaced. I did see an event once though when a fairly senior manager made repeated attempts to hand over some data collection and reporting when they were made redundant but were rebuffed by colleagues and their manager alike. Essentially this person was seen as a bit of a third wheel, and many comments were hurled around during the lay off process along the lines of "not clear what his real contribution is".
Well, it turned out that the data that he was collecting, analysising and reporting on was fundamental to the running of a strategic investment. Some months after he left the said project tanked, and because the data was not available a lot of money that potentially should have been recoverable wasn't.
So, it cuts both ways.
This is important, because a company can be held liable for wrongful termination. [2]
[1] https://www.nolo.com/legal-encyclopedia/making-layoff-decisi...
[2] https://www.employmentlawfirms.com/resources/employment/wron...
In California, severance is almost always in exchange for signing away various rights, one of which is likely any claim of wrongful termination. You can always try to negotiate the payout or the terms, though. Just expect to hear "no."
When a second round breaks that trust though, all bets are off.
There is still a huge difference between “this is the only round of layoffs, we will grow past this” (when this is the true intent) and “that’s all for this week. We’ll be back with the next round of layoffs on Friday”
Now that cheap debt is off the table, that buyback strategy will have diminishing impact as well, forcing companies to find other ways to keep stock up (such as cutting costs)
They just won't have quite as obscenely large of a dragon-esque hoard to sleep on.
Have a compelling product that generates revenue. Unless your workforce is 100% saturated and you don't really _need_ that many engineers, lay-offs are one step above cutting free snacks on the usefulness scale when it comes to trying to stop bleeding.
Packaged dreams and hopes as a product ceases to be investible with high interest rate / high inflation.
2. Public companies will cut the fat, cut “dream” projects, to protect their stock price. The further the money, the more risk to the employee.
3. Things could get a lot worse.
Facebook? Who knows? I don’t follow adTech
Their strategy here is not the same as in US. They came here for cheap workforce, but cheap for them means REALLY cheap.
How would staglfation impact digital advertisement and retail revenues?
https://www.crunchbase.com/organization/bolt-5/company_finan...
how can a company burn money that quickly so they end up with only 12-18 months of runway?
Whether it's actually possible to usefully deploy all that money is another matter. Generally it's very hard. I only have an up-close perspective on one such large raise (that ultimately failed) but imo the reason they got the money was that they made themselves a credible way to spend so much so quickly.
Depends on the economic environment. We are headed for a difficult cycle. Downsizing and doing a raise to at least partially "sit on" might be the best strategy at this moment. Money flow can go from huge to nothing faster than one might imagine.
I guess we could interpret that as the cofounder cares about sustainability for as long as it takes to hand off the bag.
People get lazy because things seem good and let questionable hires and other expenses slide by because why not, there's plenty of money.
But that doesn't answer his question. Was it worth it?
You get tech debt a little at a time, but it can be hugely valuable to leverage it for growth.
It will be 12-18 months at least before we can tell if a long legged tech washout is upon us.
Last valuation of this company was $10+ billion. Absurd. [0]
I'm personally happy to see the correction coming where profits - or lack thereof, more likely around these parts - actually means something these days.
[0]: https://techcrunch.com/2022/01/14/online-checkout-bolt-decac...
I worked for a retailer with >$2B in revenue across stores and 5 websites plus internal tools and we had about 100. And probably half were low cost contractors. Software practices sucked, deploys took forever, they had an ivory tower architecture crew and pie in the sky CTO and yet their digital products all worked fine and made tons of money. Why? Their products and branding were excellent.
The other thing Uber has to do is optimize well. It needs to state competitive with Lyft for both passengers and drivers, minimize driver churn (but not too much), optimize matching, and charge predicted fares accurately.
Uber also processes an insane number of transactions. Not quite Visa, but I'd guess it's in the top 5% of volume as a merchant.
and some more text in a list below
Jesus, my startup is making about half that with a good sales pipeline for this year and we are 55 employees total. We might hire additional handful this year but that's it. How do you even onboard when you double your workforce every few months?
But of course revenue (and, having achieved that, then profit IMO) should be among the concrete goals. It’s so weird that this is missed so often.
But many of the objective things that count towards a high standard of living are not much better than the rest of the nation, given the eye-watering tax burdens on CA residents. California roads are amongst the worst, housing quality is generally poor and nothing to write home about, failure to promote dense housing has led to encroachment on wooded areas that are huge fire risks, zero investment in burying power lines has exacerbated forest fires even further, and heavy property crime due to the exploding homeless population in core urban areas is continuously threatening public safety. Not to mention the insanely high gas prices (due to CA taxes), consumption taxes and effectively high property taxes which all hit living standards of average people quite hard.
What company is that?
But we’re not really ‘a tech company’, except in as much as we have a website. We did outlast companies in our sector that expanded like startups, though.
Staying relatively small and focussed with growth driven by making money instead of outside investment might be the antithesis of what a lot of people on here are into, but it can produce better results in many occasions.
Did you work in this space and already have connections?
There are lots of people of people out there running highly profitable (and globally well-known) businesses off of Excel sheets. They have identified that they don't want to do this anymore as these sheets have grown so monstrously complex over the years that the employees who have to use them are miserable. Basically there is lots of opportunity to start a tech company whose sole purpose is to get much bigger businesses off of Excel. However, for reasons, this is much harder than it sounds.
Everyone there is used to dealing with it and for every use case except this particular one, it does what they need.
All I did was write a little program to consolidate data from many thousands of spreadsheets, do some aggregations, etc. allowing them to get better insight into scrap and downtime rates per machine and per contract.
I charged $500 for about 1.5 hours of work, and they were thrilled.
Anyway, what I wanted to point out was that totally eliminating Excel is, for many businesses, probably not worth the hassle and productivity problems associated with the switch. But you certainly can move complexity out of Excel and into a place where it is much more manageable. Reading/writing Excel files is ridiculously easy and doesn't need to occur on a machine with Office, or even Windows.
Then they explained it to me. They needed to show growth through hiring in order to raise money.
I mean, I couldn’t even blame them, if that’s a criteria for VC to hand you a check, well you gotta do what you gotta do.
Needless to say this startup, eventually had to cut cost and end up firing most North America employees and replacing them with new hires in east Europe.
I'm always more interested in the low-fixed-cost software businesses like Sublime Text, Pinboard, or Hwaci (SQLite)
to be clear most VC funds are not actually able to do that.
Someone's earlier point about hiring as a growth indicator to VC's reminds me of the point made by the CEO in the documentary about how VCs told him he needed to have 100 employees in order to boost the value of the company, so they ended up hiring people off the street, spouses and family members.
Crazy story.
There have to be tons of businesses like ours. No one cares about small business success though. I'd love to read more books and stories about "small" businesses making $5-40MM and how they go about their day and running the company. Would make for far better reading than all the vaporware and malinvestment in the VC space due to free money over the last 5-10 years.
The thesis is (If I remember correctly) that the backbone of Germanys economy are "Hidden Champions", small but highly skilled and specialized companies that can produce a niche (technical) good at an quality that cannot be matched by any other mean, making them practical the entire market for that thing.
- The book on Amazon: https://www.amazon.com/Hidden-Champions-Twenty-First-Century...
- Wikipedia even has an article on the subject: https://en.wikipedia.org/wiki/Hidden_champions
After 2000 that particular ideal faded away, and also the market for what Inc magazine offered faded away. Slowly, but increasingly, the focus shifted to "unicorns." There were a few contributing factors:
1. In the 1950s and 1960s and 1970s it was still possible to start a business and grow it to $20 million, and then remain relatively stable at that level. However, the creation of new businesses has been in decline since the 1970s, a trend partly offset by the explosion of software startups, but still the trend is downwards.
2. Consolidation. In 1999 there were 8,000 businesses listed on all of the USA's stock markets (NYSE, Nasdaq, etc). In 2022, there are only 3,400 businesses listed. These last 20 years have seen the fastest consolidation in the history of the USA.
As such, the middle zone of American business is under pressure. Much more now than before 2000, a business has to get big, or get bought, or go under. So the dream that Inc magazine was selling in the 1980s and 1990s simply isn't realistic any more.
Knowing nothing about nothing, I wonder about the role of financialization and tax policy in driving this transition. Stuff like the preference for growth stocks over value stocks, replacing pensions with individual retirement accounts, and cutting capital gains taxes.
However we got here, my belief (hope) is our economies would be more resilient with more small to mid-size companies. Ditto more fair.
I guess. Our HQ is in an industrial-commercial zone, and there are no shortage of small businesses making $1-100MM doing stuff I've never heard of, have probably existed for decades, and just do quite well for themselves. I've driven around 5-10 square miles over the last few years around here just to take inventory of said businesses, and so many of them don't have websites or meaningful online presence, yet clearly do decently well.
I think people just don't talk about these businesses, or care very much. Only Mike Rowe really seems to care about small business / blue collar-type work (Dirty Jobs). I guess Guy Fieri does a good job of highlighting restaurants in his work, too.
Kinda sad.
...and yet apparently significantly more revenue per employee than Bolt. Oh, and we were profitable, infinite runway, good growth, solid unit economics, LTVs we understood.
Imagine!
I have no positive view of Bolt myself, but in a situation like this VCs are putting money on future prospects/growth potential, not the early revenue.
(Doesn't work if the company goes bust though)
Source: https://twitter.com/theryanking/status/1493609864534315014
> if the common stock becomes less than exercise price, their personal assets are on the hook
Can someone explain what that may mean for the >50% of employees at Bolt that bought into this program, now? I'm really struggling to grok what my quoted sentence entails...
edit: thanks much for the quick explanations
If you don't happen to understand Stock options: At a later date you will have the OPTION to buy company stock at a set price (often referred to as a Strike price)
So some entity is lending you money because they know you have Stock options and presumably will be good for the money when they vest/mature.
Of course, if the value of the Stock at the point of your options maturing is LOWER than your strike price, you essentially have earned yourself the option to buy $4 apples at the price of $50 an apple. Eg: your options are worthless (beyond their ability to purchase shares which might not be buyable on a public market)
So since you took out a _personal loan_ you now have to pay it back.
EDIT: I missed one thing - you actually get to exercise _now_ if you take out this loan... This has slightly more upside because it means that you could have in theory, sold those shares for immediate upside on the secondary market and thereby have de-risked yourself. If you didn't, then you got hosed. You could also have a capital gains advantage by spreading the gains I suppose
For the Bolt employees who took this deal, I feel bad...
This is insane to me. I work at a startup with a similar valuation and we bring in almost double that amount of revenue a week... and I think we're overvalued.
Profit is a closer abstraction to cash flows (i.e. to the investor) than revenue, but it's still an abstraction. Investors looking at revenues and unit economics can sometimes--often--predict future profits and discount backwards, in the same way that a value investor can look at a company's profits and sometimes--less often, frankly--predict future cash flows from dividends or M&A and then discount backwards.
How can you have a successful business that spends more money than you make?
The term profit covers a number of metrics. All of them are abstractions. The number of assumptions that go into a GAAP profit figure is uncountable. Profit on a cash basis is less wiggly, but it's still--for valuation purposes--useful only inasmuch as it is an estimate of actual cash returns on the investment.
> you bring in more money than you spend, it means that you don’t have to worry about a “runway”, nor do you have to worry about outside funding
Lots of ways for cash-flow positive businesses to be running themselves into the ground. Garden variety is off balance sheet liabilities, though people certainly
> How can you have a successful business that spends more money than you make?
Nobody argued this, not for the long term. But there are loads of situations in which losing money in the short term is the long-term savvy move. (This literally describes all investing. You send cash out when you invest.) Valuation involves estimating the value of those future earnings today.
I wouldn't like to guess what the success rate of this game is though.
Recognize that, simplistically, Profit = Revenue - Expenses, and that expenses is a dial which can be turned somewhat arbitrarily.
People like to cite the one case where it worked and seem to be forgetting that most of Amazon’s profit comes from AWS. What are the chances that any of these startups are going to pivot to a competent different vertical to shore up their main business? That’s just like saying all you have to do is rehire the former CEO after a 10 year absence and become a trillion dollar company after almost going bankrupt.
And no Amazon did not use “excess capacity to jump start AWS”.
https://www.networkworld.com/article/2891297/the-myth-about-...
Today or tomorrow?
If a company has to spend more than they make today in order to build something they can sell for profit tomorrow, that's investing in the future.
Just looking at revenue or profit is too simplistic. It's also too simplistic to only look at a single point in time.
It’s not a single point in time, most of those same companies who IPOd before becoming profitable recently are still not profitable and being punished by the market more than the market in general.
That doesn’t help now that the public market doesn’t have an appetite for companies that aren’t profitable.
So if retail investors aren’t interested in non profitable companies, there is no profit it in it for investment bankers to flip the stock at IPO to take advantage of a “pop” meaning that VCs are less interested in throwing good money after bad.
How have the former “unicorns” focused on “growth” fared in the last few years?
For instance DoorDash couldn’t make a profit during a worldwide pandemic when everyone was ordering takeout.
If you service has complexity and needs lots of hand-holding and is expensive to generate the sales, then it's harder to say what to do with sales numbers.
For instance, even when Amazon was “losing money” for years, they were using cash flow to expand. If they were running short of money, they could have just stopped building infrastructure. They had marginal profit unlike companies that are losing money on each sell.
Cloudflare ($NET) TTM revenue is $0.73B and $16.9B marketcap (23x P/S).
DocuSign ($DOCU) TTM revenue is $2.1B with $15.5B marketcap (7.3x P/S).
UIPath ($PATH) TTM revenue is $0.9B with $9B marketcap (10x P/S).
Okta ($OKTA) TTM revenue is $1.3B with $13B marketcap (10x P/S).
I wonder whether they are prepared for the next reality where these multiples is no longer sustainable.
https://twitter.com/theryanking/status/1493390184897032201
HOLY CRAP. How is this even legal???
1. Ryan (was) the CEO, and can pressure employees to buy stock (or let them go because they aren't "committed" enough).
2. Ryan loses nothing if the company fails (his personal loss has probably already been covered since the first VC round), but each employee is left with a mountain of debt.
3. It's just bad advice. I know plenty of people who took out loans for stock; and I would never recommend it; it's incredibly risky especially if it can destroy you if it fails. If leadership plays so fast and loose with other people's money, you have to question how well they are doing their job.
Borrowing against one's shares shouldn't be illegal. Companies lining up recourse financing for their employees should.
How were the terms of the loans chosen? Who knew who was and wasn't participating? How was it ensured this wouldn't factor into personnel decisions? How were/are the people setting the strike prices of options segregated from the people setting the terms of the loans? There is too much already loaded onto the employer-employee relationship, we don't need to add lender-borrower to the damn mix.
(Side note: the $300 stipend for financial advice is laughable. You couldn't even get a lawyer to review a fraction of such an instrument for that amount, and yes, I'd put recourse loans against private shares in the risky as hell bucket which should absolutely be legally reviewed.)
Wait the companies set these loans up? I thought they were just going to a bank and getting something akin to a personal loan or some other 3rd party collateralized loan.
Might as well work for free at that point.
If you were to get a private loan, the interest would be much higher.
The company does not want to be in the business of making loans, but this is a way to allow the employee to exercise upfront (and thus potentially get certain benefits, like in a good exit scenario, of having gains be subject to LTCG and not ordinary income), in the best way possible. But in a downside scenario, like the company folding, the person is on the hook for the loan just like if they had decided to exercise with their own money.
Is it realistic for a bankruptcy trustee to come after employees that signed uo for a personal loan for shares in a company now worth zero.
Is there a documented case of this happening and suceeding?
These are "cashless" loans, which are recourse for tax purposes (so that the IRS respects this as a true purchase of shares, in order to start people's LTCG and QSBS clocks). The terms were likely very favorable, i.e. set with an interest rate equivalent to the AFR. This is not a situation in which the company is trying to make money as a lender.
This is no riskier than deciding whether or not to exercise your options, which typically employees have to decide within 3 months of leaving a startup.
The risk is not in the terms of the loan, but in whether the employee wants to exercise and lay out the cash (or the promise to pay the cash); in each case, it's an investment decision to decide whether it's worth it given that the stock is risky and could eventually be worth zero.
Note that all these issues are driven by tax rules, and generally not the startups. Startups are damned if they do, damned if they don't.
Every type of equity has pros/cons. If it's an immaterial amount of money, the employee should be a big boy and just decide whether or not to risk the cash. If it's a material amount of money, the employee should really be speaking to their own advisors, which if they have a material amount of equity, they should be able to afford to do.
Unless there was an agreement to forgive the loans if the options go underwater, which I haven’t seen reported here.
The potential outcomes if you spend money you have are that you recover your money (break even), lose the money, or make a profit.
The outcomes if you take a loan are that you break even, make a profit, or acquire a debt that you by definition weren’t really able to afford in the first place (or you would have just used the resources you have to fund the exercise).
I feel sorry for anyone who was hoping they were young and had tons of upside potential, who now needs to service a loan that they will never see a corresponding asset for, who is about to face a quite difficult job market for juniors.
Does that apply to Elon Musk as well? Leveraging Tesla to buy fucking Twitter when he could have had a strategic stake in Ford for less?
The risks here are not rocket science. If the most recent round of preferred stock financing was $100, and your exercise price is $20, the risk is that if the stock ends up being worth less than $20, it's a mistake in hindsight. You can talk all day about the risks, the numbers, etc. What's currently happening is macroeconomic -- inflation, fed tightening, asset prices dropping across the board, etc. This was not some Bolt-specific issue. People assumed it was more likely that the stock would be worth at least their exercise price (which still may be the case). A full half of the people this was offered to declined, because they were prudent and the risks were probably clear. The other half was probably optimistic, and also gambling on crypto and other startups at the same time.
It may not be rocket science, but this isn’t obvious unless you’re really savvy about startup deal structure, and all of the preference stack is disclosed.
Good advice I got from colleagues at a 2000 era company who took out loans to buy their options and cover the taxes when the stock was at $50/share and then watched it drop to <$1/share while they were in a lockout window. I worked with people who had 6 figure loans they owed on for worthless stock. Took years for the stock to recover.
Greed by the taxman.
It would be a non-issue if the tax authorities collected the tax at the point those shares are converted to something else, or used as collateral to a loan. But to tax them without any ability for the employee to extract value from them - especially relevant for privately listed companies with glacially illiquid stock - is abhorrent.
But instead the taxman has to always be the first to eat the pie. Even if that pie never turned into anything real.
In the UK it is horrid- share options of any meaningful value are taxed at ~%63 (including all hidden National Insurance taxes) and it could be years before you can cash your shares, if at all.
To answer your question, yes there are still companies that facilitate the secondary market for pre-IPO options, Forge/Sharespost is the one that immediately comes to mind.
In 2015, I talked to ESO fund for some fintech options I had where I couldn’t cover the tax when I quit (stock wasn’t public). I was very satisfied with my dealings with them. Ultimately, they pulled out on the deal. That was a pretty strong signal because, low and behold, that pre-ipo stock tanked in a month too. Luckily, the lessons I’d learned from the earlier stories helped me to walk away from those options. It was a tough, but ultimately good decision.
You missed the tweet directly under it:
> Therefore, we made sure to give every employee ample time to read about the pros and cons of this decision, including learning about all the risks in the business, and we gave every employee a $300 stipend to consult a financial advisor during the implementation process.
I understand making things illegal to protect people from being swindled because they don't know any better, but if you made decision even after consulting a financial advisor that's on you.
It may not be perfectly valid, but it’s very easy to see how someone could feel like they didn’t really have a choice if they didn’t want to sabotage their position and future at the company.
Conveniently the CEO has bailed the sinking ship and publishes daily tirades against the "establishment" that is victimizing Bolt specifically every day.
Obviosuly that’s different than a valuation, but that would immediately disqualify Bolt.
Responsible leadership will give you numbers, but leave you to make your own choice. Anything else should make you worry.
Do we have evidence to this encouragement?
There is basically no way to read that thread where it doesn't sound like an encouragement.
I presume the Twitter braggery counts as encouragement.
Turned out I left very early because the company wasn't doing great, in the current climate I think they're probably default-dead. All that cash is just gone.
I mean, I don't know the exact numbers / company profile. But I was in a similar situation 8 years ago. I could early exercise and I did. Estimating taxes was a pain (but a fun challenge too, lol). A couple of years ago they finally had a liquidity event and doing all these exercise shenanigans saved me a ton of money, so I'm glad I did that.
The business was doing well and I knew exactly what the risks were and I knew I could afford to lose that money. I joined early so it wasn't that much money to begin with.
I guess my point is that I wouldn't be too dismissive of early exercise / RSAs / etc — for the right kind of person / company it could be a great tool.
> At Bolt, we did it as a Series D company
> If your company has a strong growth trajectory, the benefits to your team from this program can be extraordinary.
https://mobile.twitter.com/theryanking/status/14933901919518...
This reminds me during the dot com crash, when employees exercised their options when the stock was sky high, so they had gigantic paper gains and big AMT bills. Then the stock crashed (like 99% and then some crash), so employees were not only left with near worthless stock, but they had huge tax bills with no money to pay them - and they were sometimes locked out of selling due to insider trading rules as the stock was crashing.
1) you must use corporate card for company expenses 2) you must not use corporate card for personal expenses 3) you cannot accrue points for use of corporate card 4) you are personally liable for corporate expenses on this card
I'm pretty sure amex was giving big perks to CFOs.
If you assume a limit of $10k per card and company (like the one I was at) had over 10k employees (though not all had cards) the amount is pretty astonishing and zero liability.
I once had an issue with Amex because I'd been travelling a lot and the boss was away and then slow to approve.
> In January 2022, Bolt raised €628 million from investors led by Sequoia Capital and Fidelity Management and Research Co, taking the company's valuation to €7.4 billion
- Company almost certainly juiced its usage numbers, potentially by buying users to inflate its customers revenues, so it could use those numbers to convince new customers
- Used a single deal with a large company (Forever 21) to sell VCs on the vision, while under the hood that deal was clearly failing
- ex CEO picked twitter fights constantly, to the point of calling into question whether he was even capable of focusing on execution
- Biggest competitor (Fast) exploded even before the market crash.
- Offered employees a four day work week while claiming rapid exponential growth
- Offered employees PERSONALLY guaranteed loans to help them exercise the options
- Raised at $11B valuation with 100x forward revenue multiples.
- Cash raised is currently 6-8x revenue multiple, meaning valuation over next 12m makes employee options worthless
- I've never seen the technology used on any website, and I am a frequent online shopper.
Real talk, is this fin-tech's latest Theranos?
Bolt definitely has some explaining todo with employee stock options but calling it Theranos seems little extreme.
Fast didn't inflate their revenue.
Bolt encouraged employees to take the loan to exercise stock. And Bolt's founder founded that loan company.
Fast definitely didn't do that
Calling it theranos seems fair...
Bolt : WeWork :: Fast : Theranos
I went down this rabbit hole last month. While not directly related to the current topic, it might help explain why you've "never seen it": https://twitter.com/nrmitchi/status/1519174682863226880
A product not intended for an SMB, but instead one targeted at large enterprises?
Here are some good reads: https://www.nytimes.com/2022/05/10/business/bolt-start-up-ry...
and ICYMI the infamous "Stripe and YCombinator, the Mob Bosses of Silicon Valley" thread from the soon-to-be-former CEO:
https://twitter.com/theryanking/status/1485784823641755648
if it looks like a duck, walks like a duck, quacks like a duck...
Boggles my mind how companies flip on a dime between "hire as fast as possible" and "the sky is falling, we're laying people off." In the case of Bolt and Twitter, there were material changes (lawsuit from major customer, Elon Musk) but the others are just scared about the economy.
Operating on either extreme probably makes for captivating blog posts and "leadership reading material" but in praxis seems like it should be self-evidently a bad idea.
When you’re small, and have revenue, it might only take a handful of layoffs to get to “default alive” as a startup. But once you go beyond a series A and start dumping gasoline on every part of your business to scale faster, the risk starts to grow exponentially. These companies with hundreds of employees are insanely inefficient, but that’s the game. You run hot until you get above everyone else and then you start to figure out how to actually make money.
During a recession that type of growth probably doesn’t work. We might still see a few companies blitz scale, but if the capital is risk off there’s unlikely to an abundance of these types of companies.
In a way it’ll be an end of an era. Probably for the better, but the run was great while it lasted (depending on how you view great). I think any startup caught in the middle right now needs to effectively assume they’re dead unless they get to operational break even with their current runway.
Especially the, up until now, habbit of inefficiently thtowing money and people at a problem hoping something sticks. In hardware, so nothing that can be growth-hacked.
I've repeatedly commented on this phenomenon. In my experience this has never worked and unlikely to work. I've seen at least 2-3 startups doing well go completely offtrack by sudden infusion of big VC money. They are then expected to ship features like no tomorrow which leads to rampant hiring. As a result salaries go through the roof messing up internal compensation parity. Also, money attracts a certain persona of people who are good at building empires and not creating value.
I guess what I'm trying to say is; a big infusion of VC money is rarely a good thing for an org. They stop being efficient and innovative orgs. When money is abundant the first response to any challenge is to throw money at it. Is website not able to handle traffic? Throw bigger DB, more machines. Not able to ship a feature on time? Hire a dozen more. Is user sign up down? Run a cash back campaign. This may help them crush a competitor in the short run but by the the music stops and money dries up once efficiency driven org would have lost that DNA.
Maybe it’s just me. But I don’t consider publicly traded companies to be anywhere near a startup.
I guess net burn = net loss?
I don’t think it will, but even a 1-2 year recession is enough to destroy these companies. The leverage in / structure of the current financial system makes it extremely hard to not decrease interest rates again.
Layoffs are something of a fact of life but, seriously, executives need to stop saying things like this when they announce them. Nobody gives a damn how company leaders feel in these situations, least of all the people receiving the message - nor should they.
At the same time, it is such a copy-paste statement that it's unlikely to elicit much confidence in its veracity, but still, the absence of it would not be taken well I'd imagine.
Thank you so very much. This is what I've been searching for.
When he outed YC, Sequoia Capital and New York Times, I felt uneasy because I knew there would be blowbacks.
Edit: added "some of"
He claimed Stripe copied his blog post, but when you click the links you'll see that Stripe's post was submitted earlier than his! This was his big "WHO WANTS PROOF?" reveal. He does not walk away from this looking good.
Ryan didn't even look at the timestamps for the posts he was referencing: https://news.ycombinator.com/item?id=30069359 Everything else he said was pure speculation and story-telling.
Anecdotally, most people on HN hate the NYT; it should give you pause if even these people did not buy Ryan's story-telling.
edited (I understand I might not have described what I mean clearly).
With news of layoffs at Bolt, I wonder how many partners lost sales like mine.
I'm not working at Bolt, but this week our (not large) company has announced a 20% layoff and essentially made it clear that we shouldn't count on any investment funds in the foreseeable future.
Hard times with all these investment sources drying up, but so far this crisis is localized to the tech world, unlike the dotcom bubble was. I sincerely hope that it will stay this way.
If a CEO won't do it, the remaining employees should question the CEOs ethics, and ask themselves how they will be treated in the future. And if the business literally can't afford to do it (which is rare), then everyone should question the CEO's competence.
As customers, we should all do our best to avoid and boycott companies that do layoffs without providing generous severance. Because who wants to do business with an unethical or incompetent company.
If anyone knows what severance Bolt is paying, let us know.
That aside, I fail to see this as anything other than this "company" taking advantage of the current environment to execute layoffs in a way that lets them blame "the market" rather than their own short-comings. We saw this in March 2020 as well. They overhired for the hype, and now are taking advantage of any excuse that isn't "ya we hired way to many people so that we could say we are bigger than Fast".
Bolt apparently raised $355 million 4 months ago. If they are having cash problems, or are concerned about not having enough runway, I don't believe for a second that any magnitude of layoffs will help them.
edit: I saw on blind indicating its 15% of workforce
Our marketing team wanted to move everything to Shopify, and then I asked them to do a cost-benefit analysis compared to the 0% we pay with our current setup (plus Stripe fees).
When the estimate came back in the hundreds of thousands of dollars more per year, I took the opportunity to lecture them on rent-seeking and middleman evaporation of profits that these software startups/businesses capture silently from organizations who just don't do the math.
well, may be there is a connection :
"Earlier this month, Bolt announced it was purchasing crypto startup Wyre Payments in a deal worth reportedly worth roughly $1.5 billion."
Talk about euphemisms...
It seems to be normal nowadays for a startup to pursue all the sorts of shallow growth indicators instead of worrying about making real money. They are concerned about "runway" not as a measure of how long they will last, but as an indicator to plan the time for another "round".
And I don't blame the companies alone. Investors are usually thought to be smarter people, but they are humans with emotions and dumbness like everybody. The amount of investors who don't understand very well what they are doing seems to be increasing. They are setting (accidentally, as they don't quite know what they are getting into) this sick system of incentives. Companies are basically playing accordingly.
I think there was some colo in the day that charged only by sqft and gave away the electricity assuming customers would have reasonable densities. Somehow Google crammed a completely unreasonable density of machines into the colo. I would guess this was corkboard days. When the contract was renewed, the colo was sure to change the terms.
> Coinbase ended Q1 with 4,948 full-time employees, up 33% versus the fourth quarter of 2021. Over the past twelve months, Coinbase also said in its first-quarter report that the company added over 3,200 net new employees.
https://www.coindesk.com/business/2022/05/19/coinbase-outlin...
are these new hires lobbyists?
Firing for cause is when the employee screwed up, not when the CEO did.
IMO, it’s dumb HR/Legal lingo.
A nonseasonal (or similar) company that has a large swing in employee-counts has a problem. If swings happen repeatedly, the problem isn't getting fixed.
This makes lots of sense. But I never see it play out this way.
Because in a given company, if you ask people to identify “the deadwood” there will be a couple standouts, but otherwise quite a bit of variability. If nothing else because everyone has ego centric biases that over compensate their own contributions (or that of their function/department). And then it’s really just a mosh pit of politics that decides who stays and goes.
Or put more succinctly “one man’s deadwood is another’s diamond in the rough.”
I think in this case it's a significant volume number of people.
And so it's not normal even with a downturn. It's indicative of poor management.
You get a $335 million in Feb with a common understanding with current investors that you are going to raise $ XXX in roughly 24 month, depending on results compared to an agreed upon business plan. You thus plan for a roughly 24 month runway. 4 month later (now) you get a call from your investors that your planned next series is going to be significantly lower/harder. You now need to stretch your 24 month runway to at least 36 month. SO you have to adjust plans.
They didn't overhire compared to the initial plan, but overhired compared to the current situation, where basically all rounds are 50% lower and many are just not happening at all.
The ycombinator downturn letter (https://techcrunch.com/2022/05/19/yc-advises-founders-to-pla...) just says something like this:
> The safe move is to plan for the worst. If the current situation is as bad as the last two economic downturns, the best way to prepare is to cut costs and extend your runway within the next 30 days. Your goal should be to get to Default Alive.
That sounds exactly like what Bolt is doing.
Frankly I don't care what their plan was if they "planned" to spend ~350M in 2 years while making 10-40M in annual revenue while getting sued by their largest customer. That is an absolutely insane level of spending. Just because you had a plan to do some unsustainable and irresponsible crap doesn't absolve you of responsibility when it turns out to be unsustainable and irresponsible.
> The ycombinator downturn letter ...
You really think that Bolt, and Bolt's ex-CEO, saw a letter from YC, and thought "Oh ya, let's definitely doing what YC said. YC definitely knows what they're talking about. I personally trust all of their decisions and statements."?
No, but I strongly suspect that both YC and Bolt CEO reached the same conclusion: "what was true few month ago isn't anymore, so we need to buckle, focus a bit less on growth-at-all-cost and a bit more on extend-the-runway"
$355M is a lot of money... Nobody can tell today what the market will look like in 24 months and nobody could tell in February what the market will look like in 24 months. You need to include some uncertainty in your plans anyways.
If there's a downturn it's not all negative, the people you were going to hire in 6 months might now be better and cheaper.
Sounds to me more like the CEO feels there was over-hiring anyways and this is just an excuse. Also maybe this is a little about "after acquiring crypto startup Wyre in April" and the current outlook on crypto?
I remember interviewing at real estate start ups during the pandemic hiring like crazy, as if this wasn't obviously a temporary boom period.
The problem is that the vast majority of startups suffer from a Markov memory problem where they can't fathom a world different from their current state no matter how absurd that view is to anyone with common sense.
and similarly to Fast can’t recall a single merchant I’ve shopped from that actually uses it.
and with such a public brawl with their largest merchant/customer I don’t see how that really inspires much confidence in any other medium or large merchant that were even remotely considering using them. the risk of it not working very well seems far too high to switch to it if whatever a merchant is currently using is far from broken.
If I'm the buyer of a B2B product, am I going to start looking at startup competitors and asking "Will they be around in X months? Or should I just buy from MAMAA, who I know will survive?"
https://www.forbes.com/sites/kenrickcai/2022/05/25/checkout-...
So if what you’re trying to say someone or something was impacted by something else, you say “affected”.
Also as a general rule of thumb “effected” while grammatically correct is rarely ever used in colloquial talk in the context of what it means which is executed or produced. So people almost always mean “affected” when they make this mistake.
Affect is the influence or impact on something.
Effect is the result of the influence or impact on something.
The simplest way to think about it is that 'affect' is a verb and 'effect' is a noun, but they refer to essentially the same thing (you could define 'affect' as 'to have an effect on' something). But even that is confused by things like the verb phrase 'effect change'.
Which word you use might actually just come down to which way you're talking about something, but broadly affect is the action and effect is the result.
https://www.nytimes.com/2022/05/25/business/bolt-layoffs.htm...
(/s)
Can anyone explain how any of these companies (Bolt, Fast, 1o) are doing anything different than "checkout with paypal"? What exactly is wrong with paypal that would make a merchant want to use Bolt instead?
I often use it as Paypal accepts Amex when a merchant may not. Works well and I've never had an issue.
If you transact with Bolt at least once through any of their merchants, then Bolt will have saved your billing and shipping information so that future purchases are instant and do not require checkout forms to be completed. Theoretically with the reduced checkout friction there is a reduction in abandoned carts.
Makes no sense to me either.
That they were able to raise 1B$ is a true dotcom era déjà vu.
The next time you checkout on any website that uses the same 1-click checkout provider, they already have your information for “1-click” checkout.
The investment thesis is that if 1-click checkout were to take off, it would become a winner-take-all market where every shop wants to use the 1-click provider with the largest customer base. This is the magical “network effect” that investors want to see. If it works and becomes ubiquitous, the network effects would be massive.
So far, none of the providers have managed to get much traffic at all. The common theme is that integrating 1-click checkout into everyone’s different web store has been a much bigger engineering challenge than they expected. They’re burning cash at shocking rates to do all of these custom integrations but not getting enough return on investment.
It’s also entirely unclear why Shopify or Stripe or another provider wouldn’t just step in and use their scale to make this happen themselves. I kind of suspect few people actually want 1-click checkout to begin with.
Not saying you're wrong about that being the thesis, but the thesis makes no sense to me. It assumes that consumers are selecting shopping sites based on which payment service the sites use rather than on, say, price or selection.
The target market this investment thesis depends on is people who say, "I found a site with just the thing I wanted, but to buy it, I would have to enter my payment information! Guess it's back to Google to see if someone else has it at a similar price, and if not, I just won't buy it at all." Because the moment you give in and enter your payment and shipping details into a second checkout provider, that provider becomes just as convenient for future purchases as your first one.
Usually this is due to having to type in all my data just to figure out what shipping options are, but I'm quite sure every step you make people do to check out results in x% fewer sales.
“We have a huge drop-off rate in our checkout flow! Customers have intent to buy and they’re somehow getting blocked in checkout; we need a smoother/faster checkout…”
No dumbass, you need to need to not charge $15 shipping on a product where you’re only $5 cheaper than your free shipping competitor.
If I'm shopping for something and multiple sites offer it for the same price, which happens pretty often for many categories of products, I prefer the vendor with the easiest checkout experience and/or the fastest shipping.
Simple example is itch.io. Games on there are a couple of bucks. I have my payment information saved. People link a game to me, and I'll maybe impulse buy cuz I don't have to deal with making an account or setting up payment info.
It's silly, but I think it works in a certain sweet spot! But honestly I think the bigger thing than payment details is actual account creation. I'll go over to Amazon to buy a thing just to not deal with some product's bespoke checkout page, unless I really want to support the product's creator.
- Conversion rates on the checkout page will be higher when user info is prefilled bc of less friction
- This means conversion rates will be highest for the one click checkout product with the largest market share
- This will lead to merchants choosing the one click checkout product with the largest market share, bc they want the best conversion rates
- This leads to VCs lighting money on fire trying to capture the market, since largest user network will be the main objective
This is assuming, of course, that checkout page UX and optimization is something all these companies will be able to do so it'll be a level playing field there. Given how much research and experimentation has gone into optimizing checkout pages, if these players all have buckets of VC money, that seems safe to me.
I've stopped using the Paypal option even though I really want to use it, because it makes me uncomfortable providing my credit card information to so many sites. Not sure what's changed, it used to work quite well. My guess is either there's a bug on PayPal's side with my account, or the PayPal integration has gotten more complicated and many websites have not kept up with certain changes.
This.
I trust Amazon almost implicitly. I know that they have all my information, and that I use the same shipping and payment method every single time. There should be no reason for 1-click checkout to not work perfectly every time.
And even there, I don't use it. I dunno. Is it really that much more effort to look at one more screen and get the feeling of security that the item is going to the right place and will get there on a day that makes sense?
If Amazon can't get me to use 1-click, No other merchant/retailer has any hope whatsoever.
It works for digital items (iTunes, Kindle) because the delivery is "to me, in the UX i'm using right now", not a physical item that has to come to an address.
The ethics are, of course, terrible. I made myself a little sad just writing this!
I also imagine more than a few shoppers would be freaked out by seeing their card details stored on a site they've never used.
I hate the use of things like "directly impacted" - feels like such corporate speak to try to lessen the blow. Just be straight about things. "Those who are being laid off" - don't hide behind words.
Reminds me of this George Carlin's performance: https://www.youtube.com/watch?v=vuEQixrBKCc
You should still continue looking since you don't know what you'll be getting into.
If they do rescind the offer, since they'd be screwing you pretty hard, I'd ask for pay and health insurance until you find your next job, but also ask them to connect you with other companies their VCs have invested in. Feel free to ask even if they don't offer.
If they offer severance, feel free to ask for more.
IANAL, but I doubt you'd have much legal recourse. California is a right-to-work state. Public shaming is always an option, but that can be personally and professionally expensive.
My current understanding is that both of these businesses were premised on the end of Amazon’s one-click checkout patent. Is this proving that to be a faulty premise?
But for the most part you should treat it as random. For instance I was in the room when a company decided to shut down a whole location, even though it was very high performing. The reason? It had the lease ending soonest so they could cut even more costs there.
Some times entire departments are laid off if their projects are part of the cuts. You can be the best performer and still get laid off if you're in the wrong department. Some times companies will identify key employees and ask them to "re-apply" for other positions at the company in other departments.
More often, cuts are made throughout the organization. If the company is laying off 5-10% of employees then it's usually not that difficult to identify underperforming employees if management goes in with a scalpel. However, once the layoffs grow to 20-30% or if the layoffs are imposed at a team level (many teams are 100% good performers) then you have no choice but to lay off good performers as part of the plan.
Actual strategies vary depending on circumstances, but generally you retain people who have the most experience on critical items whereas newer hires and people working on random, nice-to-have type projects are at high risk. Anyone with an unusually high compensation relative to their performance is also a likely target for cuts. If everyone on the team is performing similarly but some people are making 50% more than others (seniority, better negotiating, etc.) then you'd rather lay off two of those employees than three people at more traditional pay. It's about budgets, not headcount.
We had to let a really great UI engineer go because we didn't have the team size to support his position any more. He found a job quickly and we gave recommendations - including clearly communicating it was just an unfortunate draw for him.
Trying to delay a recession just means all that waste work gets even deeper entangled into your economy, making the recession hit harder and wider.
De facto - bear in mind the system that we´re talking about moves rather slowly - recessions always have real financial or economic system causes, and quite often are seen coming in advance by some people.
People who are at the right points in the financial system, who for example can see bad debt starting to build up (takes months, but there's always a clear pattern of people starting to skip payments etc), companies starting to run out of runway with no revenue coming in, again their banks will typically be able to spot this fairly quickly. Changes in fuel costs are very significant, especially in the US, too many people drive too far to work, petrol goes up, this multiplies quickly - this one hasn't even really hit the system yet, wait for winter.
You've got the "well we kicked the can down the road" group, who are just as bad as the "predict 10 recessions and you'll get one right" group because there's always going to be a recession; saying "it'll happen in the future" is at least more accurate than saying "it'll happen last month, no this month, no next month, ok JULY" because at least you're not wrong, but the future is indefinite. Its not useful.
If the markets & macroeconomies were rational, then you could draw a line and say: root systemic issue causes recession. Clean, simple. The problem is, economies aren't rational (by any definition of rationality understandable to the human brain, which is the only useful definition). They're extremely complex, billions of signals, and predicting what's going to happen is extremely difficult.
Its honestly surprising to me that, generally, people on HN fully understand: you can't predict when the stock market is going to go up. It is literally no different than predicting when its going to go down. You can't do either; not with any foolproof reasoning. If you spend every month saying "its going to be a down month", eventually you'll be right, but it doesn't mean your process is good and it doesn't mean you'll be right next month.
"companies starting to run out of runway with no revenue coming in" Like Bolt? The company that raised $300M this year, and to compensate for their "declining runway" decides to fire... 250 people.
This is not an example of a company reacting to systemic market conditions. Its a company reacting to systemic market sentiment. Sentiment precedes conditions. Startups operate for years with 12 months of runway and no revenue. What's changed? Availability of capital? Eh, not really. What's changed is the expectation of availability of capital in 12 months. That expectation is based on real or semi-real things: rising interest rates, inflation, supply chain woes, but it is not in-and-of-itself Real; its a prediction of the future.
Of course, maybe availability of capital is drying up, today. Why? VCs being more stingy. Why? Well, maybe you say rising interest rates, maybe inflation, war in ukraine, but go talk with a VC and they'll say: expectation of market downturn in the coming year.
Through that expectation they (hopefully temporarily) destroyed the economic activity of 250 people. A hold has been placed on all those peoples' ability to: buy iPhones, buy clothes, eat at a nice restaurant, buy a house... and that is what causes recessions.
Sentiment precedes conditions. Sentiment is already priced in.
The people believe it's going to go down because they are doing things like looking at balance sheets and tracking the relevant data. It's like saying someone got killed because a bullet happened to be moving around towards them but that it definitely wasn't because they were shot.
Don't waste people's time by burying the most important information. You can receive a longform explanation, but not at the expense of comprehension or speed of delivery.
How is this authentic? I was reading through and thinking how it's mincing words and making it sound like everyone is going to feel the same pain.
"This is one of the hardest messages I’ve ever had to send." Bad start. Why do CEOs make this about them? "Unfortunately, this includes reducing the size of our workforce and parting ways " "I know this will be difficult for us all" At least acknowledge that it's going to be more difficult for people who will lose their jobs. "But today, my focus is on our people. " You're literally laying people off. First paragraph literally puts employees as the last priority. "my top priority has been to do what’s best for Bolt’s business, customers, and employees"
Stuff like this is business reality- just be really authentic. Say it sucks but we've had to do this. Don't talk about how hard it is for you or others who aren't directly impacted. It may be hard but it's way harder for the ones losing their jobs and cut the BS about focus being on people. It's clearly not.
Thank you!
He listed his priorities right there, first priority is the business, then comes the customers, and the last of his priorities are his employees.
Mostly because of the loss of face. Layoffs means the CEO/board has screwed things up big time.
Firing people is easy. They fire screw-ups all the time, no platitudes no regret.
But this time the CEO screwed up, there are no two ways about it. Taking responsibility is painful.
But I think they raised about $1.3B, so if they recap at about that amount plus an employee pool, they can bring that multiple to 50x. This would wipe out the founders and early employees, leaving current employees some incentive to move forward.
Then, if the team can grow the business 2x, you are in normal-ish SAAS multiples. So it's not crazy. It could still work. A lot of pain.
Perhaps the feds inducing a hiring freeze is _working as designed_ :
https://finance.yahoo.com/news/why-the-fed-wants-corporate-a...
> To laser focus on our core business and products, we will be prioritizing our roadmap and making several structural changes. Unfortunately, this includes reducing the size of our workforce and parting ways with some incredibly talented people on our team as of today.
Bolt seems like it managed cash flow poorly, and it's in a tough space, effectively competing with your browser, your phone's wallet, Paypal, Amazon, and (eventually?) Shopify. The question is how bad are second-order effects, and how much does a pullback hurt well-run players.
> great depression 2
You must be a Ray Dalio fan.
There’s some special irony in this statement as they attempt to achieve the holy grail network effect of being “the sole” 1-click checkout option!
I wish I could short all startups that use the term 'democratize' for any reason.
Surprising that I’ve never heard of either Fast or Bolt
Can employees go on strike to prevent the layoffs?
No more Web 3.0, NFT, DeFi posts for a few years. Top Kek, lel.
EDIT: I am doubly screwed because I signed up for the employee stock option loan program... and I'm not sure what the bank will want from me now that the stock price has tanked.
In all seriousness good luck going forward.
> There IS risk to the employee; they now have a real loan outstanding and 100% personal recourse, so if the common stock becomes less than exercise price, their personal assets are on the hook
So I suppose the bank will be after your personal assets?
HOPEFULLY this loan isn't a lot more than OP's salary. And theoretically, they can be sold for a decent percentage of the principal.
"troll account. didn't actually get laid off from bold. curious to see how long it takes HN to realize this."
what?
throwaabolt's profile account is now:
"ex-employee of bolt. ready to tackle new challenges, in particular in the fintech or insurtech areas."
I don't know what to believe. throwaabolt's futher messages:
"thank you. can my wife's boyfriend contact you too? he is part of the layoff as well."
To answer the question, it took HN only a few minutes for some users to realize this, but 2 hours for me to find out about it. Most of that time, an email was sitting in the inbox waiting. Thank you for pointing this out, and also to the user who emailed, since otherwise I wouldn't have seen this. We rely on the community to route info to us. Fortunately HN has a lot of users who care about the quality of the site.
All: if you notice anything weird, dodgy, or otherwise degrading of quality, we always appreciate a heads-up at hn@ycombinator.com. HN admins are mostly a clearinghouse for things that the community notices, so this really is a shared effort.
Please don't create accounts to do this.
I really don't think that's a good gamble for an employee to take, but oh well.
That's even beyond what the show depicted!
https://twitter.com/theryanking/status/1493390184897032201?s...
A the same time in the same market we have several Transportation players investing in creating Hydrogen generation infrastructure for hydrogen based fuel cell EV cars and trucks.
Even Indiana gets a hydrogen gen plant for Trucking.
Everyone should get obscene salaries