Hacker News Reader

Comment by fredfsh | Hacker News Reader

> But the technical achievement wasn’t translating into revenue growth, and by last year, with the company at 130 employees and burning through cash, Masad said he had to make a painful decision. “I looked at our burn, and I looked at our progress on our revenue chart, and it just didn’t make any sense. The business wasn’t viable.” Replit cut its headcount by 50%, bringing it down to around 60 to 70 people at its lowest point.

> Plus, Replit has another unusual advantage for a startup: a $350 million war chest. Despite raising $100 million in 2023, the company “hadn’t touched” those funds by the time it raised this latest round, Masad told me. The company is capital efficient by design, though Masad joked that as an entrepreneur who grew up watching his refugee father struggle, “one thing I need to learn is to be less frugal and start spending money.”

View on HN

Its a business, not a charity. Just because they have money doesnt mean they should spend on people who arent contributing to the bottom line.

What information do you have that they weren't contributing to the bottom line?

The CEO saying "the business isn't viable" says a lot.

That sounds a lot like the CEO is throwing 50% of the company under the bus for his own failures to you know, make the business viable.

And would it be better that the whole 100% go under the bus for his own failures?

It’s better for startup investors if it goes big or fails sooner. That’s the entire purpose of investing 100’s of millions into these companies.

If the CEO has no idea how to do that they should shut down the company or stand aside and find a better CEO, not try and milk as much money from they can by keeping the company shambling along as long as possible.

Did I suggest that? I'm pointing out the blaring hypocrisy of a company sitting on $350M in cash that opted to double the size of their company without having a clear strategy to become profitable. Then after laying off half the company, the CEO publicly states it's because the laid off workers don't have the skills they need for "the new era". I would really like to see in these scenarios the CEO accept a tiny bit of responsibility for their failures to set strategy and over hire, instead of publicly shaming 70 people they chose to hire in the first place. That's a failure in leadership, not in employees.

>the CEO publicly states it's because the laid off workers don't have the skills they need for "the new era".

Where did he say this?

If they thought they would make more money on net with the employees than without them, they wouldn't have laid them off?

130 employees making <$3m in revenue seven years in means you have to do something else. The information we all have now is that the bottom line is not very much so whatever they were contributing to the bottom line can't be that much.

You have to go find a different business when this happens.

What information do you have that they were contributing to the bottom line?

The burden of proof lies with the person making the claim (even if implicitly), not with the person questioning the claim.

$2.8m revenue with 130 employees is about $21,000 per employee.

The numbers here don't look good.

This has nothing to do with charity. Every employee can contribute to the bottom line. It is the company's responsibility to organize and empower its employees in such a way that added value is created. If this is not achieved, the employees have still given up their time and must be compensated for it.

You are welcome to optimize your processes so that you no longer need any employees. But society will still consist of people who need money. And if you don't pass on the surplus you have accumulated in the form of salaries, they will get what they need from you by other means.

Wow, so, connecting these dots:

- reducing headcount by 50% down to ~70 people = firing 70 people

- at a generous estimate of total burdened cost of $1M/person/year, that's $70M/year

- which accounts for a full 5 years of that war chest

- and, moreover, "at its lowest point" suggests that perhaps Replit has expanded headcount again since; the article mentions that it has done some acqui-hires.

Levels.fyi shows Replit salaries in the $200k–300k range, so even at a 2× burden rate, I think that this is probably a significant overestimate of the costs.

Firing 70 people when you have $100 million that you haven't touched, have raised money on top of that, and have many years of runway for the people you fired… comes together to paint a picture that is, imho, less than flattering.

Ehh. I don’t love it and it isn’t good optics, but if you can’t find a way to utilize your employeees (such as having a hard time finding a maeket fit for an existing product) then it isn’t your moral obligation to keep paying them. It isn’t clear what employees were laid off ir for what reason either.

The original sin was probably hiring those people for a not-yet-clear business in the first place…

Yes, the people who did those hirings should probably be let go as well. But eventually, it is the CEO and the board who are responsible and they seem to never pay a price for their poor action / inaction.

Yes, let's forbid startups! /s

Yeah, the point here is nuanced, but let's do an argumentum ad absurdum instead /s

Probably the _best_ advice I got from the entire startup community is, "don't scale without PMF". The saving grace here is that they didn't scale beyond 140 people, so the damage is limited. And they didn't double down on something that would have dropped the whole thing down.

But as a founder, I'd consider it a failure of planning on my part if I had to lay off 50% of my workforce (a failure nobody is immune to, but a failure nonetheless).

That's not an argumentum ad absurdum. The whole point of a startup is to try to build a business based on a as-of-yet unproven business model, which usually involves hiring people.

If you need that many people to (dis)prove viability.. I don't know. Hard to judge from the outside, though easy to judge in hindsight.

It is not a sin to hire people when you aren't 100% confident your business is going to succeed. That's just how startups work.

Some people are not in a position in their life to take any risk of losing their job, and that's perfectly understandable, but those people should not take a job at a startup.

A sustainable business can pay more employees than a failed startup. And pivoting with 150 employees is nearly impossible; all those people were hired for a different business.

Hilariously naive comment - "if you have money you should spend it on salaries". This is not a charity, it's a transaction, the salary is paid in exchange for revenue generating activities or supporting activities in a viable business. If the business is only doing 2.7mill in ARR, then it's entirely valid for the whole lot to get laid off.

It’s not about being a charity, the entire point of startups is to trade capital for time to market. If the CEO doesn’t know what to do with 130 people they don’t know what to do with 70.

What are you talking about? How does it follow that "if they don't know what to do with 130, they also don't know what to do with 70"? This is literally capital allocation, the decision was that the people laid off couldn't be deployed effectively within this particular org. But maybe they would be effective elsewhere. Don't take this stuff personally, else the working world will always be difficult.

Reply on news.ycombinator.com