Flexport will lay off 20% of the company starting Friday, leaked memo says | Hacker News Reader

Flexport will lay off 20% of the company starting Friday, leaked memo says

businessinsider.com

56 pointsseasicksteve56 comments

Burried in Petersons mail is one nugget every B2B start-up needs to take to heart:

>> It's clear that our customers want us to be a profitable company they can rely on to solve important problems in their supply chain.

An endless stream of VC money allowing you to sell dollars for dimes does not achieve that.

Also, I had a feeling that Flexport might run into problems one day, when Softbank invested, Softbank being such a harbinger of problems its only saving grace is setting Saudi money on fire. Also also, Flexport is the most impressive comoany coming out of YC if you ask me. All they have to do, is to aim being the next Schenker, Kühne & Nagel, XPO... instead of being the "global trade disruting tech thing" and they'll be fine.

> Also, I had a feeling that Flexport might run into problems one day, when Softbank invested, Softbank being such a harbinger of problems its only saving grace is setting Saudi money on fire. Also also, Flexport is the most impressive comoany coming out of YC if you ask me. All they have to do, is to aim being the next Schenker, Kühne & Nagel, XPO... instead of being the "global trade disruting tech thing" and they'll be fine.

One very underestimated aspects of the logistics business is trust. Specifically trust in your carrier/forward-freight/etc company.

The least thing that you as a SME and/or a BigCo. wants is to have one of the companies that deliver your physical goods (that implied some manufacturing and other resources in advance) being carrier for some unstable company[1] in terms of cash with financiers (e.g. Venture Capital) that characteristically has the reputation to make it or fail.

[1] - Of course airlines and some other companies has those two issues, but differently than most of VC business, in some cases the government and/or the market will come for a bail out.

I think this is an interesting point - I work in supply chain and commonly when tendering companies will say things like:

"We have been profitable for 20 years straight"

Being profitable in SCM is a sales point, being unprofitable is a risk.

> "We have been profitable for 20 years straight"

I don't know why this is more of a thing for other fields as well. I like my suppliers to be profitable for decades. All the new and shiny is ... well, new and shiny. Long term, I want stability, not new and shiny.

I have a close non-business connection to a reasonably large Intermodal carrier that serves the rails and the ports in the northeast US, and featured very prominently on their website page header is the number of years that they have been in continuous operation.

Fluffy promises of service or growth or expansion are either completely absent from their corporate Identity material or buried on second and third tier links away from the simple and straightforward proof that they have quite literally delivered, for the past two plus decades.

> aim being the next Schenker, Kühne & Nagel, XPO... instead of being the "global trade disruting tech thing"

But that's the entire game. Being "tech-only" is attractive due to the magical thinking that drives its valuations, particularly in stodgy, capital-intensive industries like logistics and real estate (WeWork).

Companies like Schenker have tens of thousands of employees too, some unionized and some not. Startup companies aren't equipped to handle things like organized labour strikes.

> An endless stream of VC money allowing you to sell dollars for dimes does not achieve that.

It depends on who your customers are: if you're consumer-facing then perhaps an acquisition (with or without an IPO first) is just fine as you may be rolled into other product offerings.

Also, if consumer-facing, clones may pop up (even open source), so if you go broke then folks can perhaps transition somewhere else.

Softbank is the VC worlds' equivalent of the kiss of death.

Which raises the question why they are not involved in the eVtol sector, doesn't it?

Maybe give them a hint ;)

Also: AH is in Flexport as well, so that's two of those long shot investors.

I'm out of the eVtol stuff now, so they can talk to Softbank themselves ;-) Just wondering if Softbank not investing in something means the thing has actual potential or it is so far beyond hope even Softbank avoids it.

Flexport is intersting, on the one hand they have a solid future in the freight forwarding and 3PL sector. On the other hand they attract investors by selling themselves as tech disruptors. Not sure if that mix doesn't create quite some tension down the road, that go beyond 20%+ layoffs.

I definitely think there is a market for their services but the silly money approach won't play well in the logistics world where everybody else is running as lean and mean as they can. It's a world that I've had some business in (but years ago), your typical manager/executive in that world is very much feet-on-the-ground and a shaky promise that you are going to be in business a year or two out would already make some class of customers doubt about about whether this is the right time to bet on you.

Ironically, Flexport could do very well as a lean business, but I'm not so sure if it can succeed under competitive pressure if they don't get their house in order quickly.

Initially, meaning years ago, I saw Flexports strategy as positioning themselves as an acquisition target for a legacy forwarder. We'll see if they can successfully pivot to being a modern, lean logistics conoany able to stand on its own feet or not. Wouod be a shame if not, but then most investors, at least it seems so from the outside, have been investing based on the assumption of Flexport being a "tech" company. If those investors don't go along with a more cobservative, logistics focused path, well, Flexport might be in deep trouble.

This is a fairly common occurrence, a company taking on investment not realizing that this is giving them both an opportunity and a massive change in direction as well as reduced options. Because to keep those investors happy a lot of those 'lean' landing strategies are no longer on the table, it's a bit like a junkie getting a first shot of a new and dangerous drug. The drug isn't free but you don't quite realize that at that moment in time. But once your initial supply runs low and you need more it turns out that there was a price to pay after all.

CEO's believing that investors and company/founder goals are aligned are in for a very rude awakening except in the 3% or so cases where it all works out. For the rest of them that initial boost can cause spending and a company profile well in excess of what is sustainable and the step down to a sustainable level may well kill the company. That's sad, but what's even more sad is that a company in the same space that was run in a responsible way without playing the VC game may well end up being outcompeted before the VC money runs out in their funded competitor.

The main reason I bootstrapped my, now defunct, attempted start-up. I didn't want a boss, so why would I take on something even worse, an investor? I wanted to be able to settle for a profitable boutique kind of thing, only a small number of investors would be fine with that and I had neither money nor time in finding those.

You nailed it with your last sentence, VC nacked companies can simply out spend competitors, upsetting markets by virtue of having, or rather having had, endless money. And then some still go bust. And there is a complete generation of people thinking that is just normal, a good thing even, and see funding as a success for a company. Hopefully that changes now, but we'll see I guess.

I do tech DD and get to see the other side of the table as well, which can be pretty interesting. Some VCs are cautious and spend wisely, others are reckless and will throw money away in the hope of a jackpot. I've seen business cases that were so broken they essentially amounted to VC subsidized re-sale of luxury goods and yet nobody thought twice about it. I think I understand the rationale behind about the 50% or so of the deals that I see. But - and this is where it gets really interesting - I've been wrong on a low number of occasions too (from the investors perspective, they made out like bandits) and there is a pattern here: VCs don't necessarily need for the company to work out long term, they just need for it to work out until they sell their shares. This is known as the 'bigger fool' theory and you have to wonder how many of the 50% of the deals remaining falls into that category.

Finally: some VCs have a model that drives them to do this, they get paid over 'funds under management', and whether or not that eventually works out or not doesn't matter all that much, they get paid in the meantime. It will ultimately affect their ability to launch new funds but by then they usually have three funds in flight due to the delay between launching the first fund and the problems in the investments catching up with them, companies with money to burn can take a long time to fail.

I always thought that finding the "bigger fool" is annactual VC strategy, simply because it explains so much! YC play this really well, don't they? Getting in very early, having a lot of clout, making it easy for their portfolio companies to find invetstors, spreading their bets far and wide. Coming back to Softbank, they seem to be one of those "even bigger fools", short of a SPAC / ICO, don't they?

All in all, I realized I am quite happy doing a specialized job at big corp, not having to worry (I'm still interested, but is doesn't directly affect me anymore) about those things.

Edit: Always a pleasure running into discussions with you!

I think the 'bigger fool' is more of a 'plan-B' than a main strategy. And it only works so often.

Edit: likewise.

Well, at least they have a plan B, and, presumably, also a plan A!

That is two plans more than some!

> With more than $1 billion in net cash, following this change, Flexport is now in a great position to take advantage of the opportunities in front of us to return to profitability as soon as the end of next year.

This feels like a tone-deaf statement to make in an email laying off 1 in 5 of your company.

"We're letting you go, but look how much cash we have!"

The message is for the stock market, they're talking past the laid off people. I hope the have a more appropriate message for them.

They don't need to talk past the laid off people to the stock market. The stock market loves layoffs.

Why would the “stock market” care? It explicitly talks about reassuring costumers.

It cares because: running out of cash is a bad idea for any company and running leaner says that you will have more runway. Whether or not it will be enough runway as perceived by that very same stockmarket will determine your share price. If there are no buyers for your stock the price will drop like a stone, so this is both a message to current shareholders 'don't sell, we'll make it' and potential buyers 'sellers are missing out on a great deal, you should buy our stock'. Of course this is more impactful if you are publicly listed (which Flexport isn't). But it will impact their ability to raise money, at what valuation that will happen and how existing shareholders will be diluted.

It may all not work and they may still go bust but that's their current messaging in ELI5 mode.

It may also be that Flexport - in spite of earlier messaging - is quietly planning an IPO. I think that would be a fairly stupid move at this stage but who knows.

https://www.cnbc.com/2022/05/17/we-can-be-one-of-worlds-bigg....

Another audience for these messages is their customers: if it turns out that Flexport's future is insecure they may well take their business elsewhere or stop considering using Flexport. That can reduce their runway even quicker.

"Stock market" is normally used to refer to shares of public companies traded in stock exchanges. They don't need to make public announcements to communicate with private investors. There will be time to make the IPO attractive when the IPO comes.

This is a quote in the article: "It's clear that our customers want us to be a profitable company they can rely on to solve important problems in their supply chain." I'd say they are the main audience.

Yes, that is what it normally means. But: the stock market has effects far beyond the stock market itself and Flexport supplies enough companies that are listed that their status can have significant effect. That's why you see publications like the Wall Street Journal reporting on them.

>But: the stock market has effects far beyond the stock market itself and Flexport supplies enough companies that are listed that their status can have significant effect. That's why you see publications like the Wall Street Journal reporting on them.

You are way overestimating the importance of FlexPort.

I've worked in that space, you are most likely underestimating the importance of FlexPort as a bellweather for whether (heh) or not FlexPort is able to materially change the freight forwarding business which has been solidly stuck in the past. A very small outfit that you've likely never heard of made massive changes possible in container shipping in the 80's and 90's, but that whole world is held together with duct tape and baling wire when it comes to IT. So FlexPort is an interesting company to monitor, it will either cause a revolution or it will go under. Obviously some investors (not the ones known for being cautious) thought it was a good bet. Some see this as a negative signal (myself included) some think it will go the other way. Regardless, their name is in play, whatever their actual effect on the whole logistics world is in terms of volume, what matter is how they deal with the parties that have signed on and whether or not it gives them a competitive edge.

They've been in business now for a decade, have multiple billions in turnover. True, on the whole that isn't 'significant' yet but it is a pretty strong indicator that there is something going on there that bears watching.

>It cares because: running out of cash is a bad idea for any company and running leaner says that you will have more runway.

They are a private company, they have no relation to "the stock market". Maybe "Wall Street"?

Right, I really mean investors and customers, sorry.

The messaging is purely for stodgy industry customers that might perceive Flexport as yet another hire-and-fire Silicon Valley disruption fever dream.

Or, even better, "you're the ballast we need to drop so we can finally soar to greater heights!".

So much for those recurring flexport hiring posts then on HN.

I hope those laid off land on their feet at even better gigs.

Theyve been advertising theyre hiring on HN for years lol

I used to work at a startup that kept hiring people until it got shutdown.

One person worked there for 2 weeks before getting fired. Another hadn't even started yet.

I knew it was going down but since they were still hiring I thought I had all the time in the world to find something else.

I worked somewhere that hired a new Head of Eng, who moved there FROM INDIA, to lay her and 2/3rds of the company off the next day.

Was insane.

Crazy how much money these companies have to just be able to keep hiring and hiring then just cut 20% suddenly.

Meh. I think Flexport proved what their word was worth when they rescinded loads of employment offers. Not an ethical company to deal with.

To be fired in the latest layoff a few weeks later.... Not sure what you want them to do?

Often established businesses that find themselves in a precarious financial situation will announce a hiring freeze several months before resorting to layoffs.

It's a much easier decision than laying people off, and much easier to reverse, so it can be taken a lot earlier. And you'll get a modest but relatively painless reduction in headcount due to attrition, if the rest of the job market is buoyant. It also means, if layoffs are needed a few months down the line, there isn't anyone being laid off on the day they join the company.

Of course, there are some situations where this doesn't work so well - for example, if employees will interpret the hiring freeze as a sign layoffs are inevitable they might suffer months of sleepless nights worrying if their neck will be on the chopping block.

AFAIK there was a hiring freeze mandate from the board and the previous CEO ignored this. Hence was fired...

The new CEO had to rectify the situation. Its a horrible situation but at the end of the day, it was going to happen

Don’t make employment offers and then rescind them? Seems pretty obvious

https://archive.ph/XVjfM

The "slow burner" version of this is company is Australian company https://www.wisetechglobal.com/ which at 25 years old and is bootstrapped (for the most part) to a unicorn.

Flexport is offering actual forwarding and logistics services, Wisetech global only the software needed to run those services.

That being said, CargoWise one is actually one of my top recommondations when it comes to logistics software. Cloudbased, reasonable pricing, all tue necessary functionalities available out of the box, great customs integration worldwide (including other trade compliance things like embargoes), providing instant transparency and trackong across multiple compabies if your partners also use CargoWise (they just open the database of / for your partners for your shipments), covers air / sea land trabsportation and warehousing, has automatic access to the global tracking data for air and sea freight...

The only eeakness, if you want to call it that, is in specialized warehousing solutions (multi-box articles come to mind). But then I never went deep enough to find out howuch customized development can be done. Worst case, you link a specialized WMS, CargoWise interfaces are good as well.

The letter sent to employees is at https://www.flexport.com/blog/flexport-ceos-note-to-employee...

That’s not the letter. Take a look at the date of the blog…

The date is yesterday about layoffs happening today?

I've seen so many Flexport is hiring on HN over the past few months. Interesting how a lot of VC companies seem to be mega-hire mode, only to flip the switch to layoffs.

Lots of people who will regret having worked hard for them tomorrow.

Does flexport have an edge or are they an also-ran in their sector? shipping companies have their own advanced systems already

The value of flexport has always been in the 1 stop shop nature of the platform.

Please delete this. I (I meant this comment, not the original post) @dang

Why?

I made a comment, and in retrospect and within the edit time window I wanted to delete it. Was not commenting to delete the original post, only my comment.

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