Startup Restructuring 101 | Hacker News Reader

Startup Restructuring 101

cyrilgrislain.substack.com

218 pointswalterbell198 comments

Anecdotal data but..

Was at a party with an acquaintance a week ago who said they need more money by February or they’re dead. Series A but still not profitable.

From the outside looking in they have nearly 100 employees, PMF, great marketing and appear to be crushing it. So it was sobering to hear the reality.

I asked what the plan B is if money is not forthcoming and he looked at me like I was asking a stupid question. I think the guy running it has been in this situation previously and do or die mentality is there. However as many people are saying this downturn feels different, deeper and more prolonged.

I will be watching their progress with great interest from February and use their ability to weather this storm as a yardstick albeit acknowledging it’s just one data point.

Bootstrapped companies that are profitable and sustainable will be rejoicing at the moment for sure.

The fact that a lot of startups end up on this kind of trajectory is a big part of why I haven't sought seed funding for my current company. However, this has meant learning how to do sales, and suffering from a comparative lack of connections (and credibility) that come from investors.

Bootstrapping definitely has its upsides and downsides, but I assume that in ~12-24 months, if this recession (or whatever you want to call it) continues, a lot of venture funded companies may find the money drying up. VC firms are likely finding it harder to get money for new funds, and this will trickle down to a tightening in the startup ecosystem. Bootstrapped companies will likely be able to thrive by essentially feeding on their carcasses.

There may be a third way for startups that is actually better in this environment - doing a few rounds (seed through maybe series B-C) and then making it to reasonable levels of profitability, giving up ambitions of "eating the world" - but I'm not sure that most startups can achieve this. It seems to be a lot harder than either bootstrapping or taking funding to grow until you IPO (while still unprofitable).

For sure most fund raises are on the basis of hockey stick go big or go home. It’s a moonshot and if you get stuck in orbit and cannot escape the pull of gravity you’ll burn fuel until you re enter the atmosphere…usually breaking up in the process.

At which point your business might be sold at garage sale prices. Or restructured with the C suite removed in the process. It’s just brutal.

We bootstrapped over 15 years (not a typo) and for sure can survive the next two years without issue which I’m very thankful for.

I love your idea of trying to find a balance but investors will need to be much more patient than they have been historically. Most won’t wait a year or two for return which means they are fantastically short sighted.

you aren’t immune from these problems just because you aren’t taking VC funding.

Most bootstrapped companies need some initial funding which usually comes from the founders bank account, with the idea being that’s it.

But it can be tempting to accelerate your bootstrapped growth by taking debt financing (credit cards, mortgages and other personally guaranteed loans)

The difference is that in most of these cases you are personally liable whereas you can walk away from VC funded businesses.

Started my business with £20k of credit card debt. Would have sucked had it not worked out. Was a huge sigh of relief the day I was able to pay it off.

I don’t think receiving funding from VC’s has anything to do with regards as to how you manage your company e.g if you wish to be profitable from the start

Sure they can pressure you but especially at the preseed - series A they shouldn’t have any sort of operating control

Most VCs go in with a go-big-or-go-broke mentality. The entire calculation is to get a couple 10x-100x exits to offset all the failed attempts. Leveling off after a series C to "just" a profitable company makes business sense for the company and founders. But if you do that the series B and series C investors can't get their big exit, so they will do whatever they can to prevent that.

The best way out once you're in this deep is probably an IPO. The investors get their exit, and you're now "only" beholden to shareholders, who are more used to sustainable businesses that can survive decades or centuries.

After writing this, I realized that that is kind of how businesses used to work. You would take a few rounds of funding from friends, family, and eventually connections/PE firms before going public. The whole idea of IPO-ing after series F is the new, weird thing.

Bootstrapping is magnificent. I consider the Calendly funding story absolutely fantastic: under $1M in Seed + Debt and next round comes years mater, at 3.5B valuation.

I completely agree with your sentiment. I'm a bootstrapper at heart. However, I've dearly learned in the past few years that as a bootstrapper, one of the biggest dangers is believing that markets seem real, when in fact, they are only being buoyed by investor money and hype. This causes a mistaken belief that there are real, paying customers and the market is indeed growing and significant for new entrants when what's actually happening is the rapidly growing startups and even supposed customer-growth are supported by investor money, not by paying customers.

When a bootstrapper tries to come into the market and isn't playing the investor-led startup game, by trying to build a company through customer money vs. investor money, they see that there aren't nearly as many customers as they would need or expect, and when customers are paying, the hype-driven, investor-backed startups are eating up a significant portion of the customer base.

This is because customers, far and few between in those rapidly growing, hypey markets, tend to be "lazy" buyers and will not spend the time to do any sort of real evaluation or analysis of competition and markets. Rather, if they have a real need for the product, they will buy either from who they are already buying from, or if they will select a new vendor, it will be someone they can get support internally to purchase (if it's an enterprise), with such support being a combination of a who their existing suppliers or consulting firms recommend, influence from content marketing or shilled analyst reports (buying influence), whatever companies are gaining the most attention and marketing at that moment, and/or who their colleagues and peers are recommending, all of which is subject again to startup influence, and besides a bit of a self-perpetuating cycle since the more they get recommended, the more they get recommended. In any case, it’s never about who has the better product or service or who offers the most value for the money.

In addition, and ideally, if the product costs nothing or very little to acquire, that makes it even easier for those few customers to gain support for a new vendor and that perpetuates the cycle, or if the customers' existing suppliers include the product or features of that product for no additional cost in their existing or new offerings, that makes it harder for the vendor. In any case, the fact that others are giving away a product for free or low cost makes it near impossible to compete as a bootstrapper, since you can't afford to give a product away, even if the startup can.

If you're selling directly to consumers (or to small businesses, which act like consumers) and not to enterprises, then it's even harder as a bootstrapper, since customer acquisition cost and complexity is very difficult and expensive, and those who have the most marketing dollars combined with products they give away or practically give away will win. Bootstrappers almost always lose in those market conditions. Yes, there are definitely exceptions to all the above, but I am finding the rule generally holds.

All this makes bootstrapping particularly difficult in fast-growth, hypey markets, which is where startups tend to proliferate. Basically, bootstrapping in an investor-led startup's game is not a recipe for success, and probably a road to ruin. You might be able to bootstrap selling ancillary stuff on the sidelines of what's happening in the hype-driven market, mostly marketing content-driven stuff, events, webinars, selling traffic, training or education, but even that stuff will come and go, and we're not talking large exits either. You can also sell consulting or advisory services in those hype-driven markets, but you have to really enjoy the consulting or advisory game and you have to mostly have relationships and connections to sell that sort of thing. Ideally, as a bootstrapper, you can go from hype-cycle to hype-cycle and keep and grow your existing customers. You can also bootstrap real products (not services or marketing content) in more sedate markets, but you'll most definitely face entrenchment of incumbents who protect their customer base, and so making entry into the market as a bootstrapper just as difficult. The key is to know what game you're playing and the best way to win at it, if you want to succeed, especially without exhausting yourself in the process.

I know someone who is actually following a different "third way". Rather than raising a few small rounds with aims of profitability (no investor will be satisfied with that since investors are looking for asset value increase, not profitability), it's about raising some early rounds, growing and getting attention fast, and quick exiting. He has been able to crack this code by building small, fast-growing, investor-led startups, but only up to a certain level (usually up to Series B), and then finding a quick acquisition exit, before the music stops. Somehow he has figured out not only how to do the quick fundraise, growth, and attention building, but also how to develop relationships on the acquisition end of the exit. While these aren't billion-dollar exits, this approach seems to work and he has a stable of investors who know how to play that game for everyone's benefit. I haven't figured that out myself.

> The past two years created a new type of hype: PMs. Until the Tech Giants (eg: Google, Meta, etc) made PMs the ‘new normal’ of how to get any product functionally built and delivered, down to the tiniest button, startups used to do just fine with no PMs. Chances are very high you could do with less (no?) PMs. Also an excellent forcing device to kill some of your internal bureaucracy.

I think the PM fad has been around much longer, to the point one almost forgets how to build products without PMs. But from my experience, I find that the prevalence and empowerment of PMs is largely turning Devs into highly-paid code monkeys, as opposed to the highly-paid and empowered value builders that they should be. Much of the busy work that many PMs are doing can be replaced with a bit of Agile/Scrum training of a few devs per team.

At the same time, I would say that having a product owner who develops a deep understanding of the domain, actively talks to customers, and steers the vision and direction is immensely valuable. But I hardly see any of my PMs doing it.

Anyway, I am seeing a lot of negative sentiment towards the prevalence of PMs these days, which I mostly share. Would love to hear any counter-thoughts or corroborations of this. Are PMs necessary? How should they be utilized?

Not an expert on PMs (is anyone?) but my understanding is the value to the business is, as you mentioned, abstracting the need to manage SWEs as value builders and instead as cogs within the Abstract Agile Machine, in this Sick Reality the PM is Programmer Remade and we are reduced to function calls. Software makes a lot of money and plenty of smarter people out there have invented roles to extract some of that (your) wealth without having to touch Vim.

Due to the relative novelty of CS I think we're still going through the early motions of trying to mesh together a web of programmers from bootcamps to MIT into one cohesive corporate apparatus... eventually we'll land on something similar to medicine or other engineering areas where accreditation is prerequisite and individual cogs have a bit more agency due to licensing etc. Hopefully.

My personal, unsubstantiated, take is that we'll come to look back on this odd time, with the glacial pace and grift hierarchy of enterprise software, as quaint. Some startups are coming around to the idea that you don't need 6 person multidisciplinary teams for generic CRUD, pay one competent engineer those 6 people's salaries and you'll get it built unless it's something special - in which case you pay that engineer 60x and their name is Bellard.

The PM ladder is undoubtedly there for MBAs to perform wealth extraction from you. And it works, for now.

If you see those "day in the life" videos going around Twitter/YT where the person literally does no work, it's always a PM. Sundar Pichai (and I think Satya Nadella too) came up through this ladder. It's a role for professional office politicians created under the guise that engineers can't figure out what to do for themselves.

> eventually we'll land on something similar to medicine or other engineering areas where accreditation is prerequisite

You are saying people will need to be certified to be programmers?

This is just gate keeping and considering how accessible computing is, it would never work anyway.

There already is gate keeping though, and that gate is manned by corporate which, ironically, is how so much bloat can sneak in at your expense.

I am not fond of gates either; for as long as your skill can produce capital value it will be gatekept in some capacity. I'd rather see that gate moved closer to our side if it must exist.

If gambits like Musk's prove successful then there is further precedent that lean engineering teams can still operate at scale - just with fewer layers of indirection and wealth extraction.

Engineering accreditation (at least at the Professional Engineer level) is not that common in the US except in civil engineering. It's basically needed to sign off on designs etc. for regulators. (You also see it with consultants who give expert witness testimony, etc.)

Even for other engineering disciplines that don’t require a PE, it’s common to require an engineering degree from an ABET accredited program. Much more common than it is in software.

I've never seen that myself but it's probably pretty common for companies to often effectively require a four-year degree from a school they've heard of--which probably boils down to more or less the same thing.

The ABET accreditation thing is interesting. Last time I looked into it there are even some things that require it for CS (becoming a patent lawyer for example).

Here's. the first job I found when I searched for local MechE jobs.

>This position requires a BSME or MSME from an ABET Engineering Accreditation Commission-approved program with a strong academic background and interest in thermodynamics, heat transfer, fluid

https://www.monster.com/job-openings/-winter-2022-entry-leve...

When searching for local EE jobs. Out of the first 5 results, 1 required a PE, 3 required a degree from an ABET accredited program, and 1 just required an EE degree without specifying ABET.

>Bachelor of Science in Electrical Engineering or related degree from an ABET accredited program.

https://lensa.com/staff-electrical-engineer-substation-chatt...

I don’t think the specialization of engineers is accidental.

I’ve worked at a number of companies and engineers are ALWAYS the limiting factor. Simply put, there’s a chronic shortage of people who can build valuable stuff.

I believe companies have sought to offload this bottleneck. Have engineers just build, and hire people to do everything else.

I share the exact same thoughts. a good PO is worth their weight in gold. PMs are often more of a detriment than anything. Developers should not be cornered off from customer needs, quite the opposite, they should be made intimately aware of them.

Not only is seeing customer struggles a strong motivator for why they do the work that they do, but it also helps with coming up with good solutions.

A poorly thought-out task list that needs 10 refinement sessions before it is actionable is very much not that.

That said, devs are not sales people, that's why the PO is there, and the PO could very well have "PM"-like people under him to handle the customer connections before getting devs involved, but that's different from the "PMs define user stories" approach I see everywhere.

The result of that is that the PMs end up in a managerial sort of role (the name doesn't help) where they boss around the PO who in turn bosses around the devs until they get fed up with the relationship and the dev lead starts pushing back, and the whole thing turns antagonistic.

I agree but let me provide some perspective from hardware system product management a couple decades ago.

We did indeed make an effort to bring engineers into customer meetings when it made sense. However, you end up with tradeoffs.

- Bring select engineers into a few customer meetings at your company location which doesn't take a lot of time and does provide some outside perspective. The downside is that they get a very filtered sample which it's easy to over-generalize on.

- Make talking to field people, customers, etc. a significant part of their job and you're essentially making them product managers, at least in part, and they don't really have the time or focus to do nearly as much active development.

(Note that this was rather long-cycle hardware development--though software wasn't really much different. There really wasn't a lot of methodology to product management at the time except whatever internal processes we put in place.)

Yeah option 2 is pretty much a no go because of what you said, so it has to be option 1. Ensuring bad generalizations don't happen would be the PO's job in that case I suppose. If there was an obvious solution we'd probably have converged on it by now, but at least where I work the PM/Dev relationship isn't really optimal in any way. Unclear tasks, pissed off devs, messy project, etc.

Back when I was a product manager, I really was the product owner in so far as I was the point person for the field, owned pricing, attended product reviews, had at least a big say in launch decisions, wrote/reviewed external comms, coordinated with field engineering, etc. But, as I say, product management meant something different than it does much of the time with modern software. I never had any specific training on it.

Sometimes we did bring engineers in to have deeper technical backup for a specific discussion. Most of the value though was probably to provide some sense that we weren't just making things up.

I've joined a startup with no PM and CEO assigning tasks to devs. I've spent two weeks chasing my tail and working on stuff other people were already working on as a part of some huge block of work dumped after a month of development or stuff made irrelevant by features being worked on. I quit after ~3 weeks.

The CEO was doing it wrong. They should have empowered you to talk with the customer, identify the pain point and a build a solution. You were right to leave.

Partly on the CEO but also partly on you. If that's a startup, you should be able to figure out what's going on by talking to the others and getting an understand what is being worked on. That is, unless it's a "startup" with hundreds of employees...

The guy running the company and playing ad-hoc PM isn't aware what people are working on and is assigning me tasks being worked on already.

Meanwhile I'm supposed to onboard to the project, deal with technical mess that is start-up with a live product and get a hang of what everyone else in the team is doing in two weeks ?

I don’t know about big tech, but on medium-sized startups, I never saw a PM that does not talk with customers regularly.

On small ones too, except that the “PM” is usually one person with a title like “Head of Product”.

imo, the #1 role of a PM is to bring the user inside the company. To be the users' advocate and voice. Anybody who is PM without talking to users and doing that role may be a 'Project Manager', but not a 'Product Manager'. Products are meant FOR users.

I believe the PM is a direct result born out of the inefficient org chart of most organisations. So in the status quo it's a necessary evil.

I wrote about that here[1] but I also think there are ways how you can reinvent structures to cut out the PM[2]

1: https://andreschweighofer.com/agile/whats-wrong-with-traditi...

2: https://andreschweighofer.com/agile/collaborative-product-ow...

The term PM is never really defined here. Is it project manager or product manager? Are we talking PMs with PM certifications like PMP or is this something else?

Product managers are the PMs being discussed. Project managers have been around for a while, and have some value (especially good ones).

PMs are essenial for B2C. You need to abstract a huge mass of end-users into discrete pain points and offer solutions.

PMs are not essential for B2B. An engineer can talk directly to the customer. Remember back when devs were called programmer/analysts? Exactly for that.

>PMs are not essential for B2B.

It depends how you want to split things up. You can almost certainly move PM duties into other roles. Product Marketing can (and often does) handle competitive analysis and pricing. Engineers can certainly spend a chunk of their time meeting with customers, talking with the field, etc. But it will take time away from engineering.

In my experience the overhead of adding the additional layer of indirection is almost never worth it. Engineers have to spend nearly as much time meeting with product as they would meeting directly with customers. And so much gets lost in translation that I would almost always meet directly with customers.

When I first started we had business analysts, subject matter experts, and customers that we talked to. Replacing those with PMs has not been beneficial from what I’ve seen.

I feel like most PMs in a B2B contexts are basically just Business Analysts. Which generally aren’t getting comped at the level of Product Managers who theoretically are supposed to be “mini CEOs”

This is really where I think the wheels came off cart for the role, because PMs are rarely given a significant degree of autonomy and are usually just a cog in the broader product org.

In my job search a few years ago I was shocked at how different the PM scope was across companies. Some places "got it" and were looking for a mini CEO. Others basically wanted someone to run the Jira board.

The comp for the role was a great way to tell what was what. Nearly a 10x difference from Jira monkey to mini CEO

> PMs are essenial for B2C. You need to abstract a huge mass of end-users into discrete pain points and offer solutions.

Maybe at some level, but I've also seen talented UX and front end/UI engineers idling away being fingers for PMs who just focus their days spoon feeding tasks to teams without involving them in solutions. I left a supposed startup earlier this year due to this.

> Remember back when devs were called programmer/analysts? Exactly for that.

I remember, and I am business PM or business analyst and full-stack developer. Like I said in another comment replying to GP, I can totally see why many orgs separate the roles. It's messy. I need to fit the following activities in my schedule:

- Doing user research / speaking to customers

- Project management

- Basic UX, up to wireframing

- Design-as-I-code skills

- And of course, full-stack development, with all that this entails

Let me tell you, it can get crazy. I wouldn't change it for anything because I love being a generalist, but I'm surprised I cope sometimes. I have about 12 years of experience where I've done PM/BA, dev, or both at the same time and I often feel I haven't reached 70% of my potential.

I also hire devs and would only maybe trust 1 in 10 with this breadth of responsibilities. It's not that they aren't smart enough - some are infinitely smarter than me -, it's that they haven't been exposed to this breadth of tasks. Many of them wouldn't want to, either.

The roles have been separated because specialization is a law of nature in many contexts.

Was an engineer, eng manager and now PM.

The important point is that someone is thinking about product vision and how you are actually going to sell/deploy to market your stuff.

If engineers or eng managers were doing that consistently, the PM role would not need to exist.

The reality is that most of the old-school engineers used to do this. As the "aperture" for engineers widened, the ratio of engineers who can actually apply this relevance/business lens to their work has decreased significantly so you need someone whose job is to be accountable for the vision and actual ability to turn code output into dollars.

As someone who moved from an open-core, engineer-driven company to a closed-source, product-driven one - this is spot on. When this article says that startups used to not need PMs, it's true, it's just that the startups that were product-focused won and the ones that weren't were acquihired by the winners for their tools and engineers.

Whether product focus came from product-focused engineers or product-focused management, it didn't matter. "Startups didn't always need PMs" really means that before PMs, engineers used to have to be product- and value-focused - they had to care about customers and profitability - and more specifically the early engineers who worked for the winners were probably better at product focus than engineering.

Also, if tech PMs who haven't worked outside of tech before read this article and feel depressed or angry, remember that there are massive sectors - agencies, health care, construction, any level of government - that need tech-literate PMs to manage vendors and contractors. You'll be the only person who knows or cares what it's like to work in tech, which is often more than enough to ship projects. If you're not looking to become a product-focused developer (which, see above), then ride out this wave of anti-product sentiment outside of startups. I promise there's space out there.

Agree. And you could argue that Founder(s), owners of the company AND product vision, should keep that role as long as possible. I see too many Founders relinquishing this role too early. One argument being: I need time to raise and recruit. True, but these having taken such massive proportions lately, Product has been delegated 'under' the Founders = 2nd priority by definition. Hence so many companies with millions in bank, over bloated teams, but not even clear PMF, let alone economic models. Economics should remain a core part of Product.

Another explanation is: we have seen a much bigger proportion of Founders with little experience in 'cross-functional work', 'integrative management' and 'user-led holistic thinking' experience. All critical to PMing. Big fund raises allowed to compensate for that, by recruiting PMs.

Again, lots of startups, at the right stage, need PMs. I am just seeing too many startups over staffed in PMs and Founders too far from this.

> largely turning Devs into highly-paid code monkeys

Maybe senior devs can organize their work, but juniors cant. That's the reason to have PMs - cost cutting. PM cuts the problems into small pieces that can be done by some junior programmer.

I'm in a consumer tech company:

1. PMs are not needed. Design+Engg launches great features and products. Design thinks about users, produces design, Engg turns into dev designs; and things are launched. PMs are useful when partnership etc. are needed (that is non user focussed activities).

2. PMs are essential in a domain driven tech space - ex. software for construction industry or rocket scientists. Here PMs with appropriate background connects Design+Engg to the industry.

1. PMs in software have been around much longer than the last couple years, in orgs of all sizes. Ben Horowitz was a PM at Netscape in '95. The author toots his own horn a lot about his achievements in the startup world - this is such a weird point to make.

But to your point:

2. I have been a developer and product manager myself. I still do both things, and hire developers. I don't think I'd even trust 1 out of 10 devs I meet with business analysis or product management responsibilities. Yes, both skills can be learned by a single person, but it takes much more than just a couple days of coaching to teach someone not only how to build something but what to build.

I have 7 years of experience in each and I still find it ridiculously difficult to juggle both skills. The context switching and the amount of skills needed (user research / talking to customers, UX, project management, full-stack development, thinking abstractly and tackling open-ended problems, vs acting concretely and solving more close-ended problems, etc.) make it very challenging.

Yes, in the 80s and 90s there were many more analyst/programmers. Perhaps the stacks were simpler, perhaps there was less competitive pressure for software companies, I can only think of hypotheses. The fact is that today, doing both is very hard even for the smartest of cookies, which is why the roles have been largely separated. This was "invisible hand" economics at play, not the whims of Google and Microsoft in the last two years (again, what a weird point to make!)

> But from my experience, I find that the prevalence and empowerment of PMs is largely turning Devs into highly-paid code monkeys, as opposed to the highly-paid and empowered value builders that they should be.

Indeed. In the first ~17 years of my career in software I never met or heard of a PM. That's a job for engineering leadership (architects or equivalent).

Nothing good comes out of having a separate non-technical person making architectural decisions. Also as you say, it disempowers engineering which is a sure way to drive out the best.

In theory a PM is not making architectural decisions

I think great PMs are invaluable. Unfortunately, I find the vast majority of PMs are nearly a net negative on productivity.

My biggest issue is that I believe PMs must be technical, but many aren't. So what I often see happen is PMs come up with designs and requirements that have 0 consideration for how much they will cost to implement. Then there is a painful back and forth with engineering where we say "OK, this is just flat out impossible" or "there is a way we could do this that is 10 times easier". It's like trying to design a car without knowing which car parts and technologies are available.

This has been my experience as well. Yet finding technical PMs is difficult, I've only ever seen two in my nearly 20 years. For SAAS non-technical PMs are the worst since so much of the offerings are tech.

Yep. and worse, it's like designing a car without knowing the car's economics. Like building a product for the product's sake. In SW/HW, a PM that doesn't also build the unit economics is a wrong management choice and a waste of resources.

Do you mean Project Manager , or Product Manager? What you described as training a few devs sounded like Project Manager. If so, I agree. But a product manager's role is different. And you are right - it's about competitive research, domain expertise, customer interviews, and a product vision.

I have not seen a single product manager do the project management details in my 25 years of product/eng career.An engineering manager typically does that. I now run my own startup, and empowering engineers to define the product does not work. You may get some interesting and nice features, but you won't get a cohesive product that solves for a domain with decent usability. You need a PM/UX pair for any nontrivial product.

I agree that product managers should set the product direction. But my personal anecdote is that they have too much say in what engineers do and when, to the extent that the default answer of engineering teams to everything becomes “talk to pm and they decide when this can go in”.

I think the dynamic that creates this is that the product org becomes responsible for delivering features/products to business stakeholders, and product blames any delays on Eng not being able to deliver on time. So then Eng decides to let product plan everything to a t, such that Eng cannot be blamed if they meet said plan. Which is what motivates my use of the term “code monkeys”…

I feel like engineering should have the freedom and responsibility to entirely own the product delivery. Product managers/owners would still decide what product should be built, and then Eng would take it from there. But I don’t think I have seen this anywhere, and not sure if it would work.

Agreed. I'm surprised you have not seen this before, though. This is pretty much how most of the orgs I've been part of have operated. Product owns the "what", and engineering owns the "how" and "when". If "when" becomes immovable due to externalities, "what" is negotiated. Some times, eager engineers will say yes to "what" and "when" , and "how" suffers (quality). Some times product defines "what" so badly, both "how" and "when" suffer.

Are we talking about product managers or project managers? Those are completely different things. As far as I'm aware the tech giants have TPMs (Technical Program Managers) for very large cross-cutting efforts but mostly have engineers do their own project management. The PM discipline is about coming up with products and working out their details between all the stakeholders. They're not running the agile ceremonies. They're getting the copy signed off legal and working up an experiment plan with data science to choose between design's three different mockups.

Everything is a matter of balance and reasonability. Yes, PM role has existed for decades actually, well beyond Tech (also often called Project Management). What happened recently is: the Tech Giants organization have become so ... well, Giants, that they had to over multiply this role, as a way to get cross-functional work done, priorities upheld, etc. Also a matter of choosing to over-specialize engineers (see how hard it is to find full-stacks now), designers, etc. And a matter of how far from the users have pretty much everybody become. I knew PMs in these Giants for literally the 'edit' button. Like everything else, the pendulum has swayed to the opposite extreme / exuberance.

Most startups will need PMs, after reaching a certain size and complexity. What I see is that too many startups, well before reaching that stage, have over multiplied PMs.

Finally, when your company is on a clear path to run out of cash, this discussion and trade-off becomes a matter of survival. Not of org concepts.

It’s shocking that a short 10 months ago the recruiters were getting recruited and tech workers were demanding 4 day work weeks. It’s always been a boom and bust industry but this last boom was surreal.

In a similar vein this bust seems also to be exaggerated.

I agree. This sort of thing becomes a self-fulfilling prophecy unfortunately, and the incentives that publicly traded companies are given do not align with going against the grain.

Based on the first chart in the story, this restructuring may be only getting started.

If intermingled with a change in the definition of legal tender (e.g. CBDCs), there's no recent precedent. Perhaps London around 1666.

So you think it’s just the start?

What’s the thing with CBDCs?

> What's the thing with CBDCs?

Potential scenarios include a digital euro/dollar/yuan that lives alongside existing paper cash, "Johnny's Cash and the Smart Money Nighmare" (search for that video which has a short half-life on YT), or something in the middle if elected legislators represent their citizens in negotiations with the BIS/IMF, https://en.wikipedia.org/wiki/Bank_for_International_Settlem....

There's an intro in this thread, https://news.ycombinator.com/item?id=32777875

And a few hundred comments in earlier threads, https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

Feels like a slow bust. Need some collapsing banks for me to even think about it.

imho structurally this downturn is much more serious than the dot.com bust. that one was a classic and contained speculative bust in a nascent domain. what we have now is a very different type of challenge. a fully developed tech universe, with demonstrable revenue streams but the sustainability and even legitimacy of those streams being questioned in fundamental ways. this is coupled with an apparent innovation fatigue and alternative growth options like the metaverse feeling completely bonkers.

most importantly, digital tech has become too important: both within countries (democracy, privacy, competition etc) and between countries (security, supply chain political control, trade advantage etc). this does not mean we should expect a wipeout, there is significant inertia in consumer, corporate and government choices, but I would not expect another boom cycle to materialize before global geopolitical stars align towards some sort of consensus of how tech is to be deployed and controlled

“legitimacy of those streams being questioned in fundamental ways”

How?

Meta lost 11 billion building second life, not because they can’t monetize fb/ ig etc.

Twitter fired half its staff because their new god king wanted to run a different company with lower costs and different standards and product direction, not because advertising performance meaningfully changed.

> How?

a simple policy change by another market participant [0] shows one of those ways. Changing regulatory / political winds are some other ways [1]

[0] https://www.cnbc.com/2022/02/02/facebook-says-apple-ios-priv...

[1] https://www.barrons.com/news/meta-calls-for-uk-govt-rethink-...

> but I would not expect another boom cycle to materialize before global geopolitical stars align towards some sort of consensus of how tech is to be deployed and controlled

That's a really interesting statement. What do you think that could look like?

the only scenario that can be ruled out is one in which the total addressable market for technology first movers is the entire planet. yet this was the thesis until quite recently :-)

so we are moving from the short lived digital Pangaea (where an advertiser even attempted to issue a global private currency) to a planet segmented into digital continents. How many continents and how connected at the physical and informational layers remains to be seen. Evolution never stops and in silico it works much faster than with organic matter.

The funding market dropoff for Series A+ startups is a big deal for startup employees assuming they can keep high 6 figure salaries at vc-dependent companies where, in recent years, fundraising has far exceeded revenue. Ex: https://tomtunguz.com/fundraising-seasonality/ . Keeping large salary for many will be HARD, eg, seeing folks have to go to wall st, and junior (bootcamps etc) was already hard without this.

We are still waiting for the other shoe to drop. Many high-burn co's did not cut, and of companies that did a round of layoffs, most followed a statistically suspicious trend of 10-20% that suggests a bunch should have done more but didn't. With hiring freezes everywhere.. a lot of pain for job seekers even before more cuts. Worse, even a regular 2-year downturn would flush a lot of startups as fundraises are generally for 12-24mo payroll, and many raised with historically horrible fundamentals (vs valuation) over the last few years.

I'm not saying end of world, but I wouldn't want to be a new grad at many seemingly shiny series b/c startups right now. When I was a new grad, I wouldn't have even known the right questions to figure out if my unicorn was really a donkey.

I think VC money needs to be deployed eventually. They made promises to their GPs within a certain timeframe.

So any money held off now needs to be invested in the coming 1-3 years. So I’m not very pessimistic about startup funding. But of course you need to stay alive until then.

I asked around similarly earlier this year. Some money goes somewhere... But likely not as much, and not widely distributed.

In my convs with GPs, most LPs are very happy to avoid capital calls right now, as they went too far in during the heyday. They will remember GPs forced them during a bad year.

When they do go in again, it is at lower valuation multiples, which can easily break cap tables of recently-raising startups. That triggers a downward spiral if they luck into such a fundraise. I bet more likely is what happened ~4 years ago was a lot of the $ went into a smaller # of stronger co's, and I'd expect even more pressure now. Big funds need big winners, and FTX style frauds and less ponzi acquisitions means return of later-stage diligence.

When LP money turns back on, unclear if at rate of last few years, which is largely attributed to dumb outside money enabled by low interest rates and startups being good risk/reward. There was fear due to lack of IPOs & historically weird revenue vs valuation multiples, but the above factors counter-weighed. So with valuation multiples cutting and low interests shrinking.. different world for LPs.

Net:

1. less $, and to fewer co's

2. This is still a historically amazing time for startups & founders, but feels closer to 10 years ago, than the last few years which supported a lot of people who were mostly providing value on paper, not in revenue.

To your second point: maybe that’s a good thing :) I had the feeling there were startups with anything meaningful and a ton of money.

Wat? Next they’ll be demanding oxygen in the office!

Anyone working in a startup right now should be evaluating these hard truths from the article:

    We raised a ‘hot’ Series A, but have not proven PMF
    Our uniqueness is more in our narrative than in our product
    We are building a feature, not a product
    We have no clue how to get solid unit economics
    We have built a high-pay ‘9 to 5’ spoiled culture (btw, ‘Startups are hard’ is not meant to be true only for Founders)
    Our top performers will quit as soon as they find another job

If you are one of the “top performers” then you should be thinking about how much you really believe the business can make it.

Startup companies in many ways are like funded high-risk research projects. They live and die by the support of their benefactors. In this case, the benefactors are investors who are interested only in one thing -- the growth value of an asset, their share of your company. If it's all inflating, then it's all good. If not, then the research project comes to an end. Whether or not they generate real revenue or provide customer value seems to be primarily an afterthought or side-effect of growing the asset value of the company. Startups are really financial products more than technology companies in many ways.

Maybe we should call these startups investor-funded businesses (or perhaps more precisely, non-revenue generating pre-market fit investor-funded technology-centric companies). Then again, maybe that's what startup means these days. In which case I guess 20% of customers generating 200% of cash might make sense.

Thank you for succinctly encapsulating what 'startup' means! I can now die in peace.

May the farce be with you

Investor funded/investor-driven businesses ("startups" in the Silicon Valley sense) are not businesses in the classical sense - they are financial products.

The startup company is the product, sold to investors. The company grows its value by growing the value of its assets, which is the shares in the company, by creating and growing the perceived value in the company's technology, team, products or services, in a growing market of increasing investor interest, even if those products and services are never delivered, sold, or offered to customers for profit or in any manner. For an investor-driven / funded business (the Silicon Valley-style tech startup), growth is most important as measured in growth of the company's value. The actual products or services of the company are just by-products of what is needed to support that growth and provide a mission, if the startup even needs to deliver those products or services at all in order to increase its value to current and future investors.

The startup company's market are investors. The market demand is determined by investor demand in a particular industry sector or interest area where there are current and future investors. Demand in that industry sector is defined by the potential interest of later stage investors or public markets in that industry sector. It is also determined by the solutions in which the company aims to offer products and services, whether or not the company currently does or will in the future.

Since the market are investors and investors are driven by the potential for future investor interest and demand, investors are very much driven by publicity and "hype" as it serves to increase the current and future value of their share of the financial product, the shares in the startup.

Current and future value have very little to do with the products or services the company offers now or in the future other than create a perception of value in the company's assets.

Case in point: https://news.crunchbase.com/transportation/autonomous-drivin...

Shows all the factors at play here:

* Company founded by kids who know / knew nothing about the space

* Investors who smell money opportunity and see an opportunity for asset value inflation

* Invest in the company, rush to multiple rounds, based on hype

* Company goes "public" using scam/sham SPAC approach (yet more proof of "startup" as financial product)

* Then the company goes bust after it goes to market because the whole thing was just asset inflation, and when the bubble pops, it goes poof

- I also find it curious that Techcrunch calls these obvious startup-as-financial product companies Upstarts and not Startups. A distinction without a difference in many cases.

Say you generate +$100 in cash. It is typically composed of customers generating +$200, and other destroying -$100. Typically you have an a) small fraction of cash-generating customers bringing in your +$200, and another b) small fraction of cash-losers explaining the -100$. The highest RoI actions are to focus on groups a) and b)

In what way would customers destroy cash? Are you mixing operating expenses with income? All customers should have some cash contribution, associated cost of service, and LTV. To say that some would net generate more cash than others is an odd way of attributing finance to individual customers. Regardless to say that 20% of customers generate 200% of cash is an odd way of looking at customer cash contribution. If you have individual costs associated with individual customers, that should be dealt with in operating margins and cost of goods / cost of service.

Maybe instead of customers that create cash vs customers that destroy cash you can think of the customers whose revenue / LTV and cash contribution is greater than their marginal operating costs vs. those customers whose LTV and cash contribution is less than the marginal operating cost. That makes more sense to me than this 20% / 200% stuff. After all what does "200%" of your cash mean anyways? Do you mean 2x cash contribution vs the money losers?

I also find it interesting that during the hyper growth cycle of startups, the revenue and cash contribution of different customer don't matter much to investors. Rather, during hypergrowth, it's just grow and acquire customers at full speed, forget about individual customer cash contribution. But when times get tight, it's not just focus on revenue, but also focus on your most cash generating customers first. This results in crazy whiplash of introducing free and low-cost plans to get early user adoption and get those growth numbers, and then later, jettisoning all those free users and low cost users since they don't positively contribute to cash or revenue. Oh yeah and also get rid of the employees too.

This sort of whiplash advice of grow-grow-grow then slow-slow-slow is part of the problem.

as you say, all customers should have some cash contribution. But if you look at 'net cash', and not 'gross margin' as you seem to describe, then customers economics can take a totally different spin. As you net cash should also include cash costs such: CAC, financing costs (especially in fintech), some costs that are often in OPEX and should be in COGS (eg: Tailored developments), etc. 200% is illustrative for logic. it means 2x your net cash balance. I am sure you got the point :)

> We have built a high-pay ‘9 to 5’ spoiled culture (btw, ‘Startups are hard’ is not meant to be true only for Founders) > Our top performers will quit as soon as they find another job

What are startups to do if devs have plenty alternatives that pay highly and offer good working conditions?

Are the alternatives still plentiful? I'm not sure that's true even now, and I doubt even moreso that will be true in the coming months.

There might be difficult times ahead in the next ~2 years, but I'm talking about a longer term. There is too much software running in the world - mostly in enterprise - and there will always be someone who is willing to pay more money and offer better conditions to devs.

> and there will always be someone who is willing to pay more money and offer better conditions to devs.

This might just not age too well, although I sure hope so :-)

Some of the thinking about getting back to real startup dynamics sounds good, but this part didn't:

> Labor market is in your favor: renegotiate compensations, starting with the B players. Whoever leaves will not be hard to replace. [...] Layoffs are disgusting for everybody. Multiple waves are not OK. Be courageous and sensible: any additional wave further depresses your team and worries your customers. And, at least a few thousands of the 175,000 laid off are surely better and cheaper than your bottom 20% performers. Probably more hungry too.

> Founders who managed to be relatively less diluted thanks to recent sky-high valuations: carve-out a portion of your own equity to compensate your pivotal talents or new hires

If you just listened to the savage management consultant type, and laid off everyone you possibly could, and then hope to take advantage of the misery of others, to hire more desperate replacement workers...

Those "pivotal" people with experience are going to see there's no loyalty nor trust in the company. Which doesn't bode well for a startup.

Uh, yeah, rather than more equity, cash is good. And, uh, let's switch to weekly payroll, given slippery slopes and the foot-dragging that the management consultant advised about payables to vendors.

Expecting loyalty or trust from a purely transactional business relationship is a mistake to begin with.

You should trust that your counterparty will abide by the written terms of the contract. Believing anything further is folly.

It's just business.

If it's only about transactional business relationships, that's a high percentage of one's energetic waking hours to be spending on it.

I think it's justifiable for employees to feel some amount of loyalty to the concept of the startup when they join it, since they are inevitably taking a significant amount of risk when joining an early-stage company (growth stage startups will be fine).

What I don't get is how not many founders believe that loyalty is a two-way street - you should expect to be as loyal to your employees as you expect them to be to your startup.

I feel like you missed the grand theme of the piece: "How to keep the lights on at your startup, by doing whatever it takes"

There's a whole ethics discussion to be had here (is it better to fire 40% and save 60%, or end up closing shop and 100% losing their jobs), but "taking advantage of the misery of others and hiring desperate workers" just sounds like you're not understanding how damn hard it is to be in the CEO seat.

The grand theme of the piece could be about keeping the lights on, and it could be about moral abdication, to be ruthless and a little underhanded, because the McKinsey guy told the CEO it was OK.

And how damn hard it is for CEOs to have to do layoffs. Especially more in rather small companies, where you do know very well the people you are taking the job away from. Zuck for ex certainly didn't hire himself, know the kids of, etc the thousands he laid off.

And still, your duty as CEO, starting with your duty to your teammates, is to maximize the chances that most people keep their job. The best way to do that is to build a healthy and enduring business & economics. At least as long as people still want to be paid with $$. And this is no bad joke: the pioneers of any industry, like were those joining tech startups in the 70s, were in it for the cause, the dream, the revenge, etc. Today this is not the case anymore: tech is a 'job' for most. Which is absolutely fine. A victory actually: it means tech has become a 'normal' industry.

Unfortunately, the recent cycle was not about 'health'. so as in all excesses, the body needs to rebalance.

It's not only the recession that will self-correct the startup explosion of the last few years, but perhaps more importantly the rise of interest rates. Billions or trillions of investment will be re-allocated back towards the other end of the spectrum (fixed-income assets).

Thanks for posting this, I think this is the most important point, and I also think it's a great thing. The downside of the business cycle is no fun, but it should be expected nearly as much as the sun rises and sets. What I believe is truly different, though, is that a generation of people have never known "reasonable" interest rates. People are acting like we're near end times when the effective fed funds rate was still only 3.08% in October [1]. Yet for decades before the start of ultra-low rates with the Greenspan years, rates were much, much higher. And there are fundamental structural changes that mean that ultra low rates will be dead probably for the rest of my lifetime:

1. The end of the Cold War brought a "peace dividend" and wildly increasing globalization. That trend has abruptly reversed. It will be a long, long time before countries outsource so much without considering the geopolitical consequences.

2. The ongoing retirement of the boomers, and a re-evaluation of many women in the workforce who have found that it doesn't make sense to make a relatively low wage just to spend it all on childcare, means that labor will be much tighter than in the past couple decades. Also, my hypothesis is that vastly increasing wealth inequality means that a lot of folks who would have previously focused on their careers now no longer see themselves as "temporarily embarrassed millionaires", as we've seen a resurgence in interest in unions.

The good thing about a renormalization of rates is that companies will actually need to make money again to stay alive.

1. https://fred.stlouisfed.org/series/FEDFUNDS

yep. And VCs will need to deliver even higher returns to stay alive. In fact, the recent exuberance allowed VCs to get rid of the 'hurdle rate' = min return to deliver to LPs before making any carried. This will probably be corrected back, as it should be. If interest rates stay high, then hurdle rates will be very challenging for VCs.

> Hours worked is the #1 driver of any worker’s output: use your right to monitor.

I don't think hours behind a screen have ever had much of a correlation with productivity for me. Autonomy, stress, being tasked with solutions that actually make long-term sense, etc. must have a much stronger correlation. The enormous erosion of trust that having my hours monitored would have would certainly impact my output.

I've spent years doing stuff that I'd better not done at all. So yeah, hours worked is not a good metric by any means.

Yes, it’s terrible advice if applied to engineering teams at least.

The number of hours that an individual spent staring at the IDE or punching commands into the CLI have no meaningful correlation with the organization’s long-term goals.

A manager who spends their time monitoring engineers’ screens is like a web developer who writes a CRUD back-end in x86 assembly. It’s the wrong level of abstraction for performing the job.

People join forces in a Business, rather than working alone for ex, because they believe the collective sum of resources = inputs will produce greater collective sum of outputs. Responsible businesses are those who maximise the outputs. Otherwise, it is a waste of resources that are extracted from collectivity ($, labor, natural resources, infrastructure, etc). Inversely, that is also why the standard business forms are not best suited for artists to thrive.

So, as business is about maximizing output: no matter how much is your productivity, which is a ratio, if you apply it to one more hour of work, then you will produce more output. So there are 2 ways to go here for high-productivity workers: a) you are paid equal for same output, and allowed to work less. b) you work as much as others, then produce more, then are paid more.

There is plenty of science that proves that choosing option a) is a shot in own's foot on the long run. Note: 80% of harvard professors thing their students would rate them in the Upper half best professors. which is of course statistically impossible. Same for how anybody = we, self evaluate ourselves in anything: how good a driver, a parent, ... a worker we are.

How much hours one puts in is a fundamental parameter of how much one produces. Stays true even with diminishing returns, as long as productivity is >0.

There is this say, pardon my french: an idiot who walks will still gets further than a sitting genius.

It also changes the focus: “what is good for the company” -> “what makes me look good and not get fired”. Following Elons antics I bet twitter LOC count is growing very fast!

Yeah; code is a liability, not an asset.

The problem is that you can only later tell what made sense long-term, who was able to handle autonomy etc.

I work for a company (as a contractor) that doesn't monitor hours worked for their employees and the team is incredibly unproductive. It feels like some have a second job while others are playing games. I'm sure you could get rid of 75% if the remaining people worked full-time for their full-time salaries.

I’d still say that monitoring hours seems like a strange idea when the company itself has trouble setting expectations and delivering goals

It's a shortcut because measuring output is too hard for any sufficiently complex work.

It's easy when you have a well-defined task that you know the average complexity for, e.g. first level support ticket responses. It's very different for e.g. the developer who looks into a ticket to find out why. Might be just 60 seconds because technical understanding + experience give you the ability to see what customer + support agents have missed. Might be 6 hours for a complicated bug and fix, might turn into a huge deal that takes days.

How do you handle that and accurately predict how much time that should take?

Basically you have just given reasoning for why there is a job description „engineering manager“.

I am actually all for monitored work hours and I clock in an clock out of my unionized 35h work contract. But frankly i expect from a sw eng Organisation more insight into their own development processes

You'd think so but if people are playing video games or not working, adding monitoring won't increase your productivity, people will just do pointless busywork instead.

Cutting down the number of people will make everyone else more productive because they need to pick up the slack, but that doesn't mean the output will be higher quality, it will very likely be worse quality since you've taken a bunch of relaxed people and made them highly stressed.

To me it sounds like a failure of management and/or processes. The people are not motivated and their tasks are not being defined appropriately.

If someone is doing pointless busywork, they might as well do real work, they're often similarly annoying.

People in bureaucracies aren't famously slow because their tasks aren't well defined, they're slow because it's tolerated. When you stop tolerating it, they either improve their attitude or get filtered out. I've found that to apply to all organizations past some head count. People settle in and do less and less. That's not a problem while the money is flowing in like water during a flood, but it becomes a problem when that changes.

I don't know how it is where you work (I guess working as a contractor skews things) but where I work this is how things go:

- some tasks are estimated - a resource bound is set per sprint/per person - tasks are picked for a sprint such that the resource bounds aren't exceeded. - people work on those tasks until the next sprint.

Now, software engineering is notoriously hard to estimate. Hard to predict you can't work for 2 days because someone updated a package that totally follows semver except not really and it takes 3 days of debugging.

So tasks get estimated with a lot of slack because hitting the sprint targets is more important than doing more work. That's a process problem.

Even then what mostly happens is that some tasks end up wildly overestimated while others wildly underestimated, to the point they end up shifted to the next sprint (at which point one must question the whole exercise).

This all assumes the requirements for the tasks were in any way clear, often they aren't.

Either way, the outcome is that some weeks there simply isn't enough work assigned, while others there's too much. Sometimes there's an issue that's on someone to fix and everyone else is waiting for that before they can do their work.

What should they be doing with their time? Improve the tests? The docs? I guess, but unmotivated people doing boring work always ends up with a shitty output regardless of how many hours they dedicate to it.

Much better to trust people to get the job done, given them a reason why they do what they do, and set processes that let them work at a consistent pace. That's what Agile was originally all about.

(I know you’re a contractor so you don’t get to choose but:) stop working in artificial sprints. In some cases they’re useful(external client stuff) but mostly they can be replaced with just working down a continuous backlog. Then you don’t have this weird artificial feast and famine game. I think from your last sentence you agree.

Agreed, kanban style is so much better than sprints

Yes I most certainly agree, I was a manager for awhile and pushed for that but it got rejected by the higher-ups. Not a manager there anymore ;)

This is the weirdest sentiment out of the entire article. "Only hire A-players" and "monitor them". I know exactly 0 A-hire engineers who would tolerate being monitored. Why wouldn't they leave to go to one of the many companies that would love to have them and where they won't have someone breathing down their neck?

Perhaps it's a take on how bad the job market is right now, but I still disagree. There are far fewer job prospects out there but way more than 0.

As other already pointed out, myself included, yhere are some risky things, eg. stopping payments without legal analysis and talking to vendors and suppliers, which I am sure the author knows need additional steps to do properly (well, I assume he does given his background).

This one advoce here:

>> Founders must go back in the trenches and own back the direct leadership on: product development, engineering, monetization and hiring

I more or less strongly disagree with. Because it highly depends on the founders, whether or not they have the necessary background to lead the restructuring. Because we shouldn't forget, it was most likely the founders that got the company in question (the article is about start-ups of sorts after all) into trouble in the first place.

True, some Founders just won't succeed at that, for lack of profile or mindset or experience. But ultimately, especially in VC-backed startups, everything starts and stops with the Founders at least until Series B. Handling well hardships is part of the role, and contributes to the making of the most successful Founders. Now, Founders don't have to do this on their own and can get help. Especially for bigger companies. Knowing how to acknowledge your own limitations, reach for help and delegate is a core CEO attribute. I have seen over and over again Founders doing that very successfullY.

> Have you even straightly asked your users: what would you be ready to pay for?

It's a bit up front, but this works. After providing some context to your customer, ask what they'd pay for. Even if they don't answer directly, they're likely to share some more information on what they're looking for or even slip a max budget they might have. Either way it's a win for you to glean some information and make the sale. You can always tailor your existing offerings to the context of your customer, and make them feel like it's specific for their needs.

Rest of the article was a great write up on the mindset shift needed to turn around from default dead to default alive.

Surveys are a terrible idea. Customers are prone to not being representative or not knowing their own biases - famously Ford said "if you ask a horseman what kind of vehicle you'd want, they'd say a faster horse".

Surveys also terrible because people answer them in 3 different ways on the whole and it’s impossible to figure out which ones are genuine:

- the participant answers the survey genuinely

- the participant answers the survey as the person they wishes they were

- the participant answers in a way they think the surveying organization wants to hear

It's not about finding what they "want". It's about figuring out what's the core problem they're facing.

Who said that asking users is done through surveys? You should be in a dialogue with your users or if there are many with key users.

I know it’s getting boring to talk about Musk, but the ongoing Twitter experiment is just so fascinating because it’s the first time in history that someone has tried to autocratically reboot a $40 billion tech company with massive regulatory liabilities.

So I’m wondering about this part:

> Elon is currently applying the playbook to Twitter:

> Scale back drastically, ideally the closest to your Series A size and cost base;

> Protect your core: engineering and science

What exactly is he doing to protect the core? It seems like it’s been all stick, no carrot. What are the incentives for Twitter’s best to stay, other than second-hand exposure to the Musk aura?

Speculation: option pools (at least pre-ipo) are generally a fixed %age and therefore relative size. With fewer engineers the ones left get a higher piece of the pie? Just a guess.

But will that compensate for the almost inevitable outcome that the next liquidity event will be a massive downround compared to the $44B valuation of the acquisition?

Maybe there’s only 25% of employees left to share the pie, but the pie itself is now only worth $10B. That’s not a great incentive when asked to work nights and weekends on capricious initiatives that come and go.

It is if stopping to work is equivalent with getting deported though. Great system the US created with h-1b

The problem is that the following is what is was intended for:

"The H-1B program allows companies and other employers in the United States to temporarily employ foreign workers in occupations that require the theoretical and practical application of a body of highly specialized knowledge and a bachelor’s degree or higher in the specific specialty, or its equivalent."

Note, among other things, the word "temporarily" and the phrase :highly specialized knowledge." The real problem is that H-1Bs are often used by companies in very different ways than their stated purpose.

I’ve never received RSUs in a public company but can’t you basically set the strike price at whatever value you want? It’s just a financial instrument after all. NOTE, I’m not arguing for backdating.

RSUs have a strike price of $0 kind of by definition. And they're income when the restriction lapses, and that's complex when the stock is illiquid, so that's not ideal (sometimes, there's a dual restriction with time and liquidity, but that's messy as well)

Stock options could have a strike price of whatever, but tax favored stock options need to be granted at fair market value. Granting non-favored options away from FMV needs to be treated as immediate income, which is messy.

Assume that's true. Ask yourself this question: Is Elon Musk the sort of person who'd fire you just before you vest so he didn't have to pay out?

Not sure, but I’d assume I’d be such a rounding error on the cap table that it probably wouldn’t be worth a milisecond of his processing time.

He spends his time complaining on Twitter and hosting faux polls to unban right-wing trolls while misquoting "vox populi, vox dei".

He can almost certainly make time for spite.

That makes the incredibly naïve (but equally incredibly common) that employees are literal resources of equivalent value.

In actual fact, excepting "cultural loyalty" (which is usually interrupted in any such large acquisition/disruption event) essential employees are typically the most transient/difficult to retain. Many are not as remuneration-driven (more likely to be comfortable & their competence is often driven by a more vocational motivating factor) & even those who are can negotiate good terms elsewhere with relative ease.

This leads to a concentrated brain-drain where the fewer engineers remaining to partake in the pie aren't contributing as much value. That ain't protecting your core.

> What are the incentives for Twitter’s best to stay, other than second-hand exposure to the Musk aura?

Fun, maybe? I'm not smart enough to work on those kinds of problems, but I do love a challenge. If I was an actual CS person with relevant experience, I could totally see myself working at that kind of company.

It's not what you do forever, but it's totally fun.

That’s the same kind of fun one can have at a well-funded startup, and it doesn’t come with the technical and regulatory baggage that Twitter carries.

From my POV, the massive scale of Twitter is nothing but downside for engineering focus in the current situation where all the moderation and legal frameworks have been blown to bits. I spent a couple of years at Facebook, so I’ve seen what the legal reality is for product work in high-volume social media. Nothing could entice me to work in a situation where I as an engineer became personally responsible for managing that. Yet that’s the de facto situation at Twitter. They’re not even taking meetings with EU regulators anymore because there’s nobody left at the company! It’s not my kind of fun if I’m being asked to make rushed decisions that can lead to multi-billion fines and/or distress and physical harm to users.

Maybe, but most startups aren't at that scale and impact yet (and they'd be smart not to build as if they were imho), so it's a different kind of fun, and t. The mental reward of getting a fire-fighting assignment and putting out the flames is something I enjoy occasionally.

I'd imagine the same exists on the legal and product side, too. They need people who love a challenge and want to see whether they can overcome it, they need adventurers. No clue if it'll be successful, but I can see the appeal.

One of the reasons MuskStuff us getting boring us that he hasn't said anything real/significant regarding his intentions, strategies, motivations, analyses and whatnot.

There was an investor case/ business plan that could have been prepared by 19year old MBAs. There was some nonspecific media bait on free speech. That kind of noncontent is pretty typical for business comms, but it's not what Musk did before. With Tesla/SpaceX/neuralink/etc... Musk told us the strategic case. We knew what he was up to, what the main risks were, the goals the milestones, the reasons.

All commentary about Twitter is rooted in speculation and smartarsery.

Maybe what you describe (reboot) is what Musk's up to. We don't know. It's like taking sides in the abusive screaming session happening in the house next door.

No one cares when

> What are the incentives for Twitter’s best to stay?

Money maybe? If the employee count is half and they have more lax firing due to non performance, theoretically it could allow them to better reward top performers. Not sure if that is practically what is happening, but Musk seems to have good enough track record previously in building teams of productive people.

Also lot of best people like to work in productive teams, and don't like teammates that slack off without repercussion.

Musk has a great track record at building top teams in situations where the company has a world-changing mission, and the company is basically the only place in the world you can work to achieve that mission (Tesla, SpaceX). That attracts people who care about that mission, and means they'll accept relatively low pay and Musk's abusive management practices.

Nu-Twitter doesn't have that. They've got interesting infrastructrure problems, but so do a dozen other companies working at similar scale. Musk's product vision seems to be incredibly incremental, e.g. the $8 checkmarks. Honestly, the only mission that Musk seems to be setting up in his public writing is the free speech bit, applying only to his alt-right pals? And if that's the mission he tries to build a team around, it's hard to see advertisers and normal users sticking to the platform for much longer.

He hasn’t shown you his hand.

The obvious stuff:

* adding features people want but are denied by ESG transnationals (privacy, e2e encryption, removing politically motivated censorship) - this is huge and a guaranteed win short term.

Stuff that will happen if the google/Apple make the wrong moves, which they likely will:

* programmable mobile phone with crypto chip and starlink carrier for recurring revenue when/if google and Apple ban Twitter app from their walled gardens

* adding crypto/stable coin based “wallet” to Twitter which cross-sells the mobile phone with crypto chip

> programmable mobile phone with crypto chip and starlink carrier for recurring revenue when/if google and Apple ban Twitter app from their walled gardens

This would be a world-class feat of engineering, which would also require that Twitter hire a set of engineers entirely different than the ones they have. It's difficult to see how they'd pull this off successfully.

Man, I was wondering about this myself, as a guy with 10 years in the phone firmware business

I don't think Musk has any realistic chance of competing with Apple. Apple has been poaching from the best of the best in every level the phone industry for over a decade now.

He could quickly and effectively crank out an undifferentiated Android phone for sure, but I'm not sure what he'd do with it or how he'd convince anyone to buy it. His phone would be more expensive to make than the ones out of Moto, Huawei, etc, and it wouldn't work as well. Maybe if he hired aggressively or borrowed people from Tesla somehow he could make a good Android phone, but I don't see why anyone would buy it.

I actually thought that by now we wouldn't really be bothering with apps so much, and computers would be more like the one on Star Trek. I don't think Musk could just toss that together any time soon though, haha.

People won't buy it because it has a fifth vestigial camera or whatever the latest gimmick is. Smart phones are a commodity at this point.

They'll buy it because 1) they don't want transnational ESG digital hall monitors spying on them and curating what apps they can install, and 2) it would have global cell coverage. That's more than enough to compete with Google and Apple at this point. People are fed up, I think you underestimate just how many people.

There's no way he'll be able to get global cell coverage IMO. Even if he pulled it off, that's a feature for fancy rich people. Most people don't travel regularly.

I don't think the privacy angle is going to help at all either. If anyone actually cared about privacy or control we'd all be using the same weird open source pocket computer as Stallman.

That said, I wish him the best of luck

A new phone platform. A crypto wallet for regular people. Two massive projects where other companies have wasted billions for zero traction.

The solution to cracking both at once is somehow to cross-sell this to Twitter users, the vast majority of whom want neither to switch phones nor to make crypto payments on the hellsite? I remain sceptical, to say the least…

> programmable mobile phone with crypto chip and starlink carrier for recurring revenue when/if google and Apple ban Twitter app from their walled gardens

This all sounds very far-fetched to me and not at all obviously profitable in any way. If Microsoft didn't manage to build a viable smartphone ecosystem I don't see how twitter will.

Microsoft? Is this satire?

> removing politically motivated censorship

Musk is quickly learning that the "censorship" is motivated by advertisers, not politics. As he scrambles to bring them back to the platform, expect the same policies to trickle back.

There are many more space with good funding(Blueorigin, Virgin Galactic etc.) and lot more EV companies with more money to burn than Tesla. It could be just luck that Tesla or SpaceX became top in their field, but having watched lot of Musk's interviews, I am biased to say that he has talent in understanding engineering inefficiencies and assembling team to solve those.

I think we may find the answers by reflecting upon: what were the incentives for the best astro-aero engineers to leave Nasa, Boeing, etc and join SpaceX in its beginning? Join Elon who had 0 track record in Space, came from dot.com SW? he paid quite poorly. Nobody believed in SpaceX. He made clear he had money for only 3 attempts. etc, etc.

Also, when you are part of a company that used to run with 7000 people, and you realize it can run with a fraction of that AND you have been chosen to be part of that fraction, that must (and should) speak highly to many.

I want to highlight this paragraph:

    Freeze all payments that would not result in an outage: rent, 
    non technical vendors, professional services, etc.

    You’ll get back to them in a more discriminate way in a couple
    of weeks, once you have a clearer overall plan

Is the author suggesting screwing over the companies you buy services from by not paying them?

Most B2B are on 30/60/90 day payment terms anyway. You should be able to get your shit together in 30days without delaying any payments.

The more prudent thing would be to scrap all subscriptions/SAAS solutions you can live without, with one month notice where you are not contracted, where you are see how to activate any break-clauses etc.

So this month you pay the same but maybe next month you cancelled some nine essential stuff and your burn rate is 1-10% leaner? shrug

> Is the author suggesting screwing over the companies you buy services from by not paying them?

In a bankruptcy or restructuring someone is going to get screwed. That’s sort of the definition of it.

Usually that happens undet proper bancruptcy proceeding (Chapter 11 or some variety of that depending on jurisdiction).

Yes. As hard and unfair as it sounds, if you have finite resources and too many expenses, at some point you have to take drastic decisions.

The big difference is in how you handle them "in a couple of weeks". You can totally screw them, or you can honor their credits.

How do you know you will actually have money in a couple weeks?

If you wouldn't have money in a couple of weeks, how does this make any difference?

Delaying bacruptcy can, and has, landed people in jail.

It may not to you, but your unpaid vendors would know to not wait on you hoping you'll pay up at the end & try to figure out a backup.

If I was providing services to a company I'd much prefer they tell me they're unable to pay ASAP then just delay as much as they can and then not pay at the end.

Doing so ruins a companies financial crediability, and it is opening thr door for your vendors to sue you for delaying bancruptcy. You can ask for drlayed payments as part of restructuring, unilaterally stopping payment is a sure way to disaster.

Just keep them in the loop so you don't end up with a nasty surprise of your own. I have dealt with this scenario from both sides, and suppliers are often pretty well situated to ride out a few missed payments. But by the nature of your situation, you are in no position to be shopping around for a new service should they cut you off for non-payment. Keep people on your side by being communicative as early as possible.

Either you default or you honor your credit and potentially rebalance credit. I your business was operated responsibly you shouldn’t be in a situation where you stop all payments to „sort out your business numbers“

Whether or not your business was operated responsibly does not affect your current best marginal decision. Assuming you want your business to survive, this may be to take the author's advice.

Ahem. You also cannot delay filing of insolvency because the law decides which marginal decision are allowed and which aren’t.

Yep. and 2 weeks delay in payment is not 'totally screwing' anybody :-)

The freelance contractors at the start/scale-up where I previously worked did not get payed for 5 months (some even 9 months). Only after Series A completed did they get their bills paid.

Wow, this is shocking... I guess they had other customers who were paying them so they could afford to keep betting for 9 months? I would have to stop providing services to customer who would not pay one invoice, but I'm probably too junior to judge.

Having actually worked as a financial advisor in “restructurings” aka bankruptcies, many (most?) of the comments in this sub thread are not correct. Pre-petition, post-petition and restricted payments (say management bonuses a few weeks before bankruptcies which are ellgibile for claw back) are treated differently. There is a strict order of preference (priority) which can be found in the bankruptcy code. Generally, employee wages are sacrosanct. What ends up happening with vendors is the following: “hey guys everything pre petition is washed, but here’s 2 cents on the dollar for your claim, AND the bankruptcy court has allowed us to use cash collateral to keep using you, soooooo, since it’s a sunk cost, how about you keep servicing us? And when we emerge the bk court requires a test of financial validation to our plans so you’ll know for sure we’re safe. “. As unfair as that is, many/most vendors take the deal. A large vendor will have a certain small %age of their customers go bk every year so they’re generally sophisticated and know how to play the game. Same for landlords. Also the unsecured creditors have a committee through which they voice their concerns. Further, if you play games and try to not sign the bk papers as a debtor, 7 creditors can band together and force you in, which doesn’t usually happen because of the game theory around that. But basically, as a general rule, don’t fuck around.

Your scenario as described is unethical, and a virtuous investor would have topped up those delinquent payments with some premium since those employees essentially funded the company with financing. In a bk, you also have access (I won’t explain this) to debtor in possession financing which is super senior to everything except basically tax liens iirc, and if there’s a working capital deficit like the wages mentioned in your case, those can be resolved.

The courts are very very strict on the bright line on pre and post petition spend and liabilities and shenanigans aren’t really tolerated. Also, the “zone of insolvency” brings significant liability to officers and directors of the company, and D&O insurance won’t always protect you against risk of this magnitude, so it’s best to steer far far away from unseemly behavior in any liquidity constrained situation. Those refs bite, and they bite hard.

Sorry you had to go through that.

Yeah, most (some?) suppliers and vendors will take the deal. It does show two things so, first those vendors of a bankcrupt start-up are actually much more sustainable, and grown up, businesses than the start-up. And two, one has to negotiate those deals with suppliers, good simply defaulting on a couple of invoices without as much as shrugg emoji in the lead up to an actual bankcruptcy proceeding.

> Is the author suggesting screwing over the companies you buy services from by not paying them?

Some companies play this game all the time - I’ve even heard it referred to as “supplier stretch”.

They pay eventually, but late to improve cash flow. The flip side is when they come to renegotiate their contract, you take late payment into account in the new offer, and they have hurt the relationship, so it’s not a particularly long term strategy (and once you have started, it can be hard to pull back to a position where you aren’t late for everything depending on cash flow).

Some companies do it intentionally. Some do it out of sheer incompetence in the procurement and accounts payable departments / processes. Personally, I almost prefer the first option, it is somewhat easier to recover from.

You also don't get to dictate the suppliers response to stretching them. If you keep stretching me, one day I'm going to be fed up and not send a shipment until you've paid. If you're truly running it tight like many are, you may have been relying on selling that stock to pay for it, shoot that's a bad spot to be in.

As I've said in other comments though, keep people in the loop and you'll have a much better time. Communicate first and make decisions based on the outcomes of that. Maybe the outcomes the same, and you don't get sent the goods, that's fine at least you know ahead of time and can react.

> They pay eventually, but late to improve cash flow.

I‘ve never understood this. If you stretch creditors out to say 120 days, then you only gain the difference in value between the amount owed today vs the same amount in 4 months, which is next to nothing. Once you’ve stretched a creditor to their limit, your payments occur at the same frequency as they would if you didn’t stretch them. So it provides a very marginal one-time benefit, at the cost of pissing off companies you need.

I mean, stretching creditors will make your bank balance look fatter, but it doesn’t mean anything because the trade creditor liabilities will remain on your balance sheet, and it’s your balance sheet that counts. Of course, it might be desirable to have cash in the bank if you’re sailing close to the wind, but you’ll be sailing close to the wind when those debts become past due, too.

Cash flow is differwnt from overall profit and loss. Stretchibg payment terms doesn't help you with the latter, it certainly does with the former. Assume you get your money from clients faster than you pay your suppliers, something quite common in retail.

One can be profitable and cash positive (best place to be in), cash positive and unprofitable (acceptable, especially for growth-focused businesses), cash negative and profitable (kind of ok-ish assuming some reliable backing by banks to cover any cash constraints) or cash negative and unprofitable (the by default dead category, excluding VC money I have the feelong a lot start and scale ups fall in this category at the moment).

It’s about cash flow - plenty of fundamentally profitable companies go bust because of short-term cash flow issues, so if you can give yourself an extra two months leeway from a financial perspective that can be huge for survival.

Another simple way to look at it: If I am buying 10,000 widgets for £80 each and expect to sell them for £100 across the next three months, I either need to have £80,000 sitting in the bank that I then tie-up in phones, or I agree to pay £80,000 in three months (maybe it is then £85,000 due to credit terms) but then I can sell the phones before I buy them.

It’s a minor example, but if you imagine you are a growing retailer and employ this strategy you can grow much faster than another retailer who doesn’t (and has to tie their cash up in stock).

Above examples are very simplistic because it’s about stock, but same logic can be applied to other purchases - most cash spend a business makes should presumably deliver some sort of value, so paying later allows some of the value to be realised before payment is required.

This is why cash flow is king.

Yep this makes sense, thanks. My background is SaaS services where you have long term contracts payable monthly. I don’t think there is a clear cash flow benefit in that case, for the reasons I gave. But I totally get it for your example. It’s a kind of leverage, right? Effectively using your suppliers as a loan facility.

What I've done to avoid being put in this situation is put in intentionally punitive late payment terms (16% + base rate AER calculated monthly), and then hold customers to it if they start to play this game. This is double the statutory rate and if they're being really arsie I start adding on "reasonable cost" charges every time I have to chase an invoice. This works because every month (or even more freqently) they get a credit note for the old invoice and a new invoice with the interest and chasing fee added. This costs money not just in the added interest etc., but also in time. The way I figure it, the payment terms on my invoices are 30 days. The "real" payment terms (before I start doing the above) are 60 days. If you haven't paid by then, you're either incompetent, insolvent, or in danger of becoming so.

It's also b2b. It's not exactly uncommon for payment to end up weeks or months late (industry depending).

I am suggesting that if your company is on track to DIE, then your utmost duty is to save YOUR company.

Although I didn't learn anything new, I must say that not a single word of this article is incorrect.

The author sounds absolutely horrible.

Meh. Some of this advice is pretty common sense.

Some of it a little cut throat.

I don’t see anything in here that isn’t in a playbook I’ve seen multiple times, do you?

Yeah I can’t say I disagree with you. The tone of it stuck me as terrible though.

> The past two years created a new type of hype: PMs.

um, no. In the 1990s, it was widely recognized that PMs "pay for themselves" at around 6-10 engineers. Obviously, the ratio depends on the kind of work, but PMs are generally much faster and better at human-human communication and decision-making, where engineers (generally) get bogged-down with minutiae and struggle to tell a business-relevant narrative, to the right people, at the right time and in a way to get better decisions made. The extreme example: https://lettersofnote.com/2009/10/27/the-result-would-be-a-c... (this "should" have been enough, and it wasn't - which is why it's a good example)

While much of the advice in here is good, some of it is really off, including a huge miss in the very first sentence. While bankruptcy has its problems, declaring bankruptcy is not the same thing as shutting down. Bankruptcy is a tool used to do exactly what this article is talking about -- restructure the business.

It isn't the right answer all the time, and I have my own personal philosophical problems with bankruptcy, but when an article doesn't even point out that it can be a part of this process, there is a big gap in the perspective presented.

you may sometimes prefer to, in other occasions need to, but certainly do not always HAVE to declare bankruptcy to do a restructuring :) As you can read, I chose to share a selection of quick-to-implement actions Founders can do. Declaring bankruptcy certainly doesn't fit those criteria.

Did not realize 'tabus' was the plural of taboo. Anyone else?

I don't think I've ever seen that word in text, and would not realize that was the definition because 'taboos' is acceptable.

He also wrote "Assana" meaning "Asana" I suppose.

> Double-down on tracking discipline and focus (don’t have an Assana yet?)

When I had to use Asana, pronouncing it Ass Sauna seemed entirely appropriate.

(Putting the miserable sauna behind an Instagantt wall helped.)

“Dedicate a street smart colleague to collect outstanding receivables.”

Could be taken the wrong way :)

(We have a running joke about ‘sending the boys around’ to a customer who owes us a lot of money and no plan to pay)

First time I heard the term Mokita… interesting in this context

Thank you everybody for your time to read my publication and all these rich comments I hope your company's are not in such dire situation to have to apply these tools. But if you are, I am happy to entertain a Q&A in this forum to help navigate at best.

> For the 20% of your customers generating 200% of your cash

I don't get this math.

This stood out for me as well, I guess it's just meant as hyperbole.

The highest RoI actions are to focus on groups a) and b)

I responded to your comment in the thread above where you posted the same response.

> I worked with Founders, CEOs and funds to save 7 companies from bankruptcy. In B2B, Consumer, and Infrastructure, from Series A to post-IPO. Saving tens of thousands of jobs, generating $2B+ in cash, and rising again, stronger than ever.

Why bother reading the article with this level of self-aggrandizing absurdity? How much fiction will be presented as fact?

This article is a worth a read from anyone who is currently operating a VC-funded technology business.

Most people running such businesses in the last few years have been applying lessons and processes well-suited to a much rosier economic environment. Many companies have not yet transitioned their attitudes and processes to suit the current economic environment.

You may feel that this article is absurd, but it legitimately tells you how deep a cut you can make to survive as a company. And the shapes this cut can take.

Another piece I recommend is "Peacetime CEO/Wartime CEO" - https://a16z.com/2011/04/14/peacetime-ceo-wartime-ceo/

Thank you for sharing in this forum and starting this thread!

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