The Well Funded Layoff

Today Seesmic laid off seven staff members, after laying off three other members a couple of weeks ago.

They have millions of dollars in the bank and are well funded. Why would they do that?

Well, I went over and hung out with the remaining staff and CEO Loic Le Meur this afternoon to learn more and to try to discern the advice that Le Meur got and how many other startups are about to do the same thing. Here’s what I learned.

First, Le Meur has a really deep set of advisors. People like Pierre Omidyar , the founder of eBay and Martin Varsavsky founder of Fon.

They are telling him that the downturn will be deep and will be multi quarter. They told him it was a good idea to conserve cash and bunker down.

Translation: Le Meur isn’t the only one getting this advice. Sequoia Capital told its companies the same thing.

The thing is Le Meur is better connected around the world than most of us. He’s been seeing this downturn coming for months and has been tracking it, so he’s one of the first who is mentally ready to move. He told me that he predicts other CEOs will do the same thing over the next couple of weeks. Those who don’t, he told me, will be told by their boards over the next few months to take the same actions if the CEOs don’t make the hard decisions to do this today.

“But what if the economy turns back up in the next month?”

Well, Le Meur told me he just cut jobs that aren’t core to the mission of Seesmic. Designers. Marketers. PR. He told me all those functions are outsourceable and aren’t core to what they do. The folks sitting around the table were developers, people who kept servers running, who were directly responsible for keeping customers happy.

This is a smart strategy. First, it keeps people who are core to the mission happy because they know the CEO took steps to protect their jobs even if the world goes to hell. CEOs who wait until their hand is forced won’t see the same morale saving effect that Le Meur will see here. Second, it saves capital for potential acquisitions after other companies run out of cash and are forced to beg to be purchased the way my old company was (PodTech sold for a few hundred thousand dollars after having millions in capital pumped into it). Third, it saves capital for later when the storm clears and they will want to expand. Fourth, it gives them more time to find a business model since advertising is going to be a tough sell for a company like Seesmic right now.

But, Le Meur didn’t come to this decision easily. He literally teared up with me today. Being a leader and making really tough choices isn’t easy and this market isn’t easy to navigate for anyone.

My thoughts are with the workers who are laid off. How can we help you find jobs? Let’s have some innovative thinking about that too.

Who is next?

95 thoughts on “The Well Funded Layoff

  1. I agree with Seth Godin.

    You should never lay off talented employees if you still have a few millions dollars in the bank.

    I don’t know anyone who works at Seesmic. But, I want to ask: if those laid-off positions are outsourcable, why aren’t outsourced at first place?

    Silicon Valley companies (and American businesses in general) have the tendency to over hire when they have the money, and then lay people off when there is signs of down turn. It’s like binge eating.

    I miss the old HP, who rarely lay off people. It was a great culture. It’ll tighten its belt during hard time. But, it treats its employees like that most important asset.

    Very few company in the valley is like HP. It’s sad. (By the way, I’m not one of those HP old-timers. I’m in my 30′s. )

    To help folks who are laid off, I have been writing like mad to offer some advice (from my previous layoff experience in 2001). Please go to http://www.GeekMBA360.com if you’re interested.

  2. I agree with Seth Godin.

    You should never lay off talented employees if you still have a few millions dollars in the bank.

    I don’t know anyone who works at Seesmic. But, I want to ask: if those laid-off positions are outsourcable, why aren’t outsourced at first place?

    Silicon Valley companies (and American businesses in general) have the tendency to over hire when they have the money, and then lay people off when there is signs of down turn. It’s like binge eating.

    I miss the old HP, who rarely lay off people. It was a great culture. It’ll tighten its belt during hard time. But, it treats its employees like that most important asset.

    Very few company in the valley is like HP. It’s sad. (By the way, I’m not one of those HP old-timers. I’m in my 30′s. )

    To help folks who are laid off, I have been writing like mad to offer some advice (from my previous layoff experience in 2001). Please go to http://www.GeekMBA360.com if you’re interested.

  3. Robert, very insightful piece. I appreciate you bringing the human side to this business equation.

    Re: you comment on your brother’s bar… that’s weird b/c we have seen a 15 point jump in alcohol consumption since the beginning of the “bail out” talks.

    I think our local economy is pumping more into booz to ease their nerves – unfortunately?

    Loic, tough decisions. I can relate to the heart-wrenching a layoff can be. It is a tough decision, but it is good that you found your way to a balanced reaction to tough times.

    May peace be with you all,

    Ken

  4. Robert, very insightful piece. I appreciate you bringing the human side to this business equation.

    Re: you comment on your brother’s bar… that’s weird b/c we have seen a 15 point jump in alcohol consumption since the beginning of the “bail out” talks.

    I think our local economy is pumping more into booz to ease their nerves – unfortunately?

    Loic, tough decisions. I can relate to the heart-wrenching a layoff can be. It is a tough decision, but it is good that you found your way to a balanced reaction to tough times.

    May peace be with you all,

    Ken

  5. Robert, you should really use Zemanta. I keep noticing that your auto-generated related news articles are always way off. Plug in Zemanta for lazy blogging goodness!

    (Great post BTW – It’s bleak out there but no reason to hide behind the sofa)

  6. Robert, you should really use Zemanta. I keep noticing that your auto-generated related news articles are always way off. Plug in Zemanta for lazy blogging goodness!

    (Great post BTW – It’s bleak out there but no reason to hide behind the sofa)

  7. Just a thought: when you use the device of starting a paragraph with “Translation:” (a technique whose primary purpose is to assure one’s readers that you are smarter than they are), it’s helpful if the sentence that follows is an actual variation of the preceeding sentence(s).

    Cheers.

  8. Just a thought: when you use the device of starting a paragraph with “Translation:” (a technique whose primary purpose is to assure one’s readers that you are smarter than they are), it’s helpful if the sentence that follows is an actual variation of the preceeding sentence(s).

    Cheers.

  9. When everybody starts talking about something, then it becomes reality (“perception is reality” they say). Let’s stop talking about Doomsday and as my friend John Le suggested above, let’s move on with our lives, start working hard and stop talking loud! Putting to much emotion into it is not helping anybody… except the VCs that use the situation as a leverage point to buy cheap and cut cost, so, the blogosphere should stop making it easier for “those people”. :-)

  10. When everybody starts talking about something, then it becomes reality (“perception is reality” they say). Let’s stop talking about Doomsday and as my friend John Le suggested above, let’s move on with our lives, start working hard and stop talking loud! Putting to much emotion into it is not helping anybody… except the VCs that use the situation as a leverage point to buy cheap and cut cost, so, the blogosphere should stop making it easier for “those people”. :-)

  11. read: don’t really have plan to make money, so let’s hunker down until google is buying companies again.

    dead pool.

  12. read: don’t really have plan to make money, so let’s hunker down until google is buying companies again.

    dead pool.

  13. “Sequoia Capital told its companies the same thing.”

    I’m sure they are – I’m no economist but banks need all the cash they can get right now to avoid being someone else’s bait.

    I dunno, the companies I’ve worked in for the most part have been very Dilbertesque – they waste money in obvious places where they could save it. I mean if you layoff a non-core person then contract out that job at 4x the rate and then loose any institutional memory you would have had at some point you are just shooting yourself in the foot. There has to be a balance.

    Sometimes the non-essentials are what make life worth living. Is art essential? Is volunteering time and money essential? Friendship – its not essential. Posting on this blog – ask my wife – I bet its way down on the priority list!

  14. “Sequoia Capital told its companies the same thing.”

    I’m sure they are – I’m no economist but banks need all the cash they can get right now to avoid being someone else’s bait.

    I dunno, the companies I’ve worked in for the most part have been very Dilbertesque – they waste money in obvious places where they could save it. I mean if you layoff a non-core person then contract out that job at 4x the rate and then loose any institutional memory you would have had at some point you are just shooting yourself in the foot. There has to be a balance.

    Sometimes the non-essentials are what make life worth living. Is art essential? Is volunteering time and money essential? Friendship – its not essential. Posting on this blog – ask my wife – I bet its way down on the priority list!

  15. Robert,

    A great post and I wish Loic and the remaining team all the best.

    I believe the coming weeks / months will result in many of the over-hyped and over-funded 2.0 businesses being dumped by their investors. Over the past 18-months or so people seem to have started funding 2.0 businesses based exclusively on their ability to deliver ‘eye-balls’ – just like the bad old .bust days.

    A business needs to have a way to generate revenue – otherwise it dies as soon as the VC money is pulled.

    I love Twitter and am keen to see how the guys there are going to monetize it. I hope it works because the service is excellent!

    Thanks for the post Robert,

    Jim Connolly

  16. Robert,

    A great post and I wish Loic and the remaining team all the best.

    I believe the coming weeks / months will result in many of the over-hyped and over-funded 2.0 businesses being dumped by their investors. Over the past 18-months or so people seem to have started funding 2.0 businesses based exclusively on their ability to deliver ‘eye-balls’ – just like the bad old .bust days.

    A business needs to have a way to generate revenue – otherwise it dies as soon as the VC money is pulled.

    I love Twitter and am keen to see how the guys there are going to monetize it. I hope it works because the service is excellent!

    Thanks for the post Robert,

    Jim Connolly

  17. Layoffs at new start-ups are a horrible idea. Your company will become a self-fulfilling prophecy. Older start-ups that were experiencing trouble before the downturn are different story. They probably needed to rationalize before and are now admitting it. But for someone that just started and still believes in the fundamentals of their business plan, a downturn is just as good as a healthy environment and maybe even more so. The companies that grow during difficult times become dominant in good times.

  18. Layoffs at new start-ups are a horrible idea. Your company will become a self-fulfilling prophecy. Older start-ups that were experiencing trouble before the downturn are different story. They probably needed to rationalize before and are now admitting it. But for someone that just started and still believes in the fundamentals of their business plan, a downturn is just as good as a healthy environment and maybe even more so. The companies that grow during difficult times become dominant in good times.

  19. Layoffs are like surgery. It’s hard to imagine doing one without an emergency.

    If you’ve got people who are underperforming, who aren’t as good as you hoped and who you can’t lead to better output, then you should fire them, not lay them off.

    If you have great people, amazing people with vision, and you have venture money designed to help you grow, how dare you lay them off. Isn’t that what the money was for? And when better to grow then right now, when everyone else is getting quiet and selfish?

    I’ve been through a lot of ups and downs over 25 years and never once did a lay off. To do it with millions in the bank is a true shame.

  20. Layoffs are like surgery. It’s hard to imagine doing one without an emergency.

    If you’ve got people who are underperforming, who aren’t as good as you hoped and who you can’t lead to better output, then you should fire them, not lay them off.

    If you have great people, amazing people with vision, and you have venture money designed to help you grow, how dare you lay them off. Isn’t that what the money was for? And when better to grow then right now, when everyone else is getting quiet and selfish?

    I’ve been through a lot of ups and downs over 25 years and never once did a lay off. To do it with millions in the bank is a true shame.

  21. The thing is this. With Apple, Google, and many other amazing companies down 50% so far. With other types of well managed and profitable companies like Netgear down almost 70% start ups go back to the end of the line. I was investing in start ups but last week I went back into stocks with the high risk funds. Before Seesmic was one of my high risk investments, now Apple is, this is how things have changed. So money for start ups will dry up except for one absurd rule and that is that VCs can´t invest in public securities. So maybe VCs who by logic should be buying stock in the companies that used to buy start ups will continue investing in start ups because that is all they are allowed to do, but valuations should come down at least what public valuations are down to. Yes this maybe short lived. Yes Obama may become president and the recession may evaporate. All is possible, but you can´t run a company and believing in Santa. You have to analyze the data as it comes. Home sales collapse, car sales collapse, computer sales are next, and we are in a recession. What Loic did is sad but prudent. I did the same at Fon 4 months ago.

  22. The thing is this. With Apple, Google, and many other amazing companies down 50% so far. With other types of well managed and profitable companies like Netgear down almost 70% start ups go back to the end of the line. I was investing in start ups but last week I went back into stocks with the high risk funds. Before Seesmic was one of my high risk investments, now Apple is, this is how things have changed. So money for start ups will dry up except for one absurd rule and that is that VCs can´t invest in public securities. So maybe VCs who by logic should be buying stock in the companies that used to buy start ups will continue investing in start ups because that is all they are allowed to do, but valuations should come down at least what public valuations are down to. Yes this maybe short lived. Yes Obama may become president and the recession may evaporate. All is possible, but you can´t run a company and believing in Santa. You have to analyze the data as it comes. Home sales collapse, car sales collapse, computer sales are next, and we are in a recession. What Loic did is sad but prudent. I did the same at Fon 4 months ago.

  23. Things aren’t always what they seem. Perhaps seesmic doesn’t have the financial fortitude that you think it does.

    Healthy companies won’t be laying anyone off.

  24. Things aren’t always what they seem. Perhaps seesmic doesn’t have the financial fortitude that you think it does.

    Healthy companies won’t be laying anyone off.

  25. Prediction: Beg to be purchased the way my current company is.

    Fast Company/Inc. hot air, is just so ready for a deflation (again). The recipe: Layoffs, in “non-core”, kill the offshoot webby-social networking brands, hug all around the magazines, glide for a bit, brag about affluent audiences, kick more smaller and smaller prospective partnerships, early-bird renewals 2 or 3 issues in, watch ad revenue drop off, put on a good front, tout good single copy sales and subscription increases, but delay payment to writers, cutting back seriously on expenses and curtailing perks, expenses running faster than revenue, logistical nightmares rock morale, ill-will all around, gets a bad smell, ad revenue drops, rebrand, dropping the Wired irrational exuberance copycatting, less tech focus, less design-happy focus, more Biz Week Mutual Fund Hawking, but ad revenue drops further, single sales drop, renewals don’t renew, ad revenue drops further still. Snowball serious, and the “Conflicts of Interest King Mansueto” personal investment “miracle” brief-bump becomes a rathole headache. $35 million to lose more and more.

    But he can go Congressified bailout package, infusing it eternally, turning off the ‘investment’ radar, so it can tread water. And the world can have landfills of start-up fake-buzz-spam on video, all throw-away, all a laughing-stock 3 to 4 months forward.

  26. Prediction: Beg to be purchased the way my current company is.

    Fast Company/Inc. hot air, is just so ready for a deflation (again). The recipe: Layoffs, in “non-core”, kill the offshoot webby-social networking brands, hug all around the magazines, glide for a bit, brag about affluent audiences, kick more smaller and smaller prospective partnerships, early-bird renewals 2 or 3 issues in, watch ad revenue drop off, put on a good front, tout good single copy sales and subscription increases, but delay payment to writers, cutting back seriously on expenses and curtailing perks, expenses running faster than revenue, logistical nightmares rock morale, ill-will all around, gets a bad smell, ad revenue drops, rebrand, dropping the Wired irrational exuberance copycatting, less tech focus, less design-happy focus, more Biz Week Mutual Fund Hawking, but ad revenue drops further, single sales drop, renewals don’t renew, ad revenue drops further still. Snowball serious, and the “Conflicts of Interest King Mansueto” personal investment “miracle” brief-bump becomes a rathole headache. $35 million to lose more and more.

    But he can go Congressified bailout package, infusing it eternally, turning off the ‘investment’ radar, so it can tread water. And the world can have landfills of start-up fake-buzz-spam on video, all throw-away, all a laughing-stock 3 to 4 months forward.

  27. I’m not close enough to the situation to judge, but before jumping on the bandwagon and arguing that those positions are core to the business it’s important to know what specifically the positions were. “Designer” is broad, and “marketer” is extremely broad. Perhaps they were individuals that didn’t make a big impact on the business. Otherwise, I’d imagine they wouldn’t have been laid off(And probalby shouldn’t be there anywyas). Either that or the CEO is a masochist, :-)

    I wish Seesmic the best of luck!

  28. I’m not close enough to the situation to judge, but before jumping on the bandwagon and arguing that those positions are core to the business it’s important to know what specifically the positions were. “Designer” is broad, and “marketer” is extremely broad. Perhaps they were individuals that didn’t make a big impact on the business. Otherwise, I’d imagine they wouldn’t have been laid off(And probalby shouldn’t be there anywyas). Either that or the CEO is a masochist, :-)

    I wish Seesmic the best of luck!

  29. Calling PR and Marketing and Design, “non-core” is brain-dead. This is all labor theory of value, Soviet flavored. You produce widgets that people want, you don’t produce “core” widgets, just to produce widgets.

    Cut taxes, get governmental easy loaners out of biz, and let gamblers that risk and lose, spin their heels, apply Chicago School 1983-84 economic solutions at every turn, with serious real cutbacks. Due for a correction anyways, easy dot.com eyeballs-era VC money, easy Web 2.0 pastel-colored widgets money, easy loans. Eventually, someone has to play grown-up. It’s really just a return to fundamentals. Capitalism is not dead, it wasn’t even applied. China won’t take over the world, unless milk that kills is your idea of capitalism. Now we have taxpayer money fronting up bad loans, and bad banks. The arsonists, have been called in as the firemen. Good luck with that.

    Puritan-Work-Ethic Midwestern Credit Unionish values win out (again).

  30. Calling PR and Marketing and Design, “non-core” is brain-dead. This is all labor theory of value, Soviet flavored. You produce widgets that people want, you don’t produce “core” widgets, just to produce widgets.

    Cut taxes, get governmental easy loaners out of biz, and let gamblers that risk and lose, spin their heels, apply Chicago School 1983-84 economic solutions at every turn, with serious real cutbacks. Due for a correction anyways, easy dot.com eyeballs-era VC money, easy Web 2.0 pastel-colored widgets money, easy loans. Eventually, someone has to play grown-up. It’s really just a return to fundamentals. Capitalism is not dead, it wasn’t even applied. China won’t take over the world, unless milk that kills is your idea of capitalism. Now we have taxpayer money fronting up bad loans, and bad banks. The arsonists, have been called in as the firemen. Good luck with that.

    Puritan-Work-Ethic Midwestern Credit Unionish values win out (again).

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