When your startup turns sour (on npm)

April 2, 2019 (1145 words) :: It's time to make money, which means: cost-cutting, layoffs, and a desperate rush to turn the product into a revenue engine, no matter how much that damages reputation.
Tags: startups, working-in-tech

This post is day 92 of a personal challenge to write every day in 2019. See the other fragments, or sign up for my weekly newsletter.

There rarely a clear moment when it happens - it’s more of a gradual slide from “things are fine” to “things are not so fine, but I’m not sure why”. It’s like milk: you try it one day, and it’s fine; the next day, you’re not sure; the day after, it’s definitely sour, but you can’t point to a specific moment when it happened. The sourness announces itself in a cloud of uncertainty. There’s always the possibility that you imagined the bad taste and maybe everything’s actually fine, until all of a sudden there isn’t.

Your startup’s been burning through its VC funding and the investors are getting anxious, because they’re not convinced that your founding team cares enough about making money. It’s true, they don’t; the founders mostly just want to make a cool product. But the investors don’t care about how cool the product is. Their primary goal is to get a return on their investment, ideally larger rather than smaller, and sooner rather than later.

They demand that you get some adult supervision in the C-suite. Someone with fiscal discipline, they insist. Someone who knows how to run a tight ship. In comes a new executive whose sole goal is to plug the company’s leaky finances, by bringing in revenue, as well as cutting costs. First to be targeted is the free food: name brands are replaced by generics, dinner won’t start until an hour later, and the sushi offerings are first limited to only specific teams then cut entirely. There’s a hiring freeze for full-time employees, though contractors are still okay, since they cost less. Employees are told to be mindful of their company’s financial health when filing expense reports for conference trips or client meetings.

Everyone knows that the cost-cutting is, by all accounts, superfluous; in the long run, VCs don’t care if the company saves $5,000 a year by ditching the free La Croix. Employees joke that it’s like cargo cult programming, but for financial discipline. What the VCs really want is a lucrative revenue strategy, and this cost-cutting blitz might even run counter to that, by lowering employee morale and therefore desire to work very hard.

Everybody’s got to make financial sacrifices, you’re told, but that doesn’t seem to apply to sales, because you have to spend a lot of money to make money. The new executive has worked in sales before, so he brings in his own people to replace your current sales team, who are deemed ineffective for not thinking big enough. The office starts to feel foreign, with the new sales team hanging around in their three-piece suits and Hermès pocket squares. These people are the new rockstars; to them, anyone working on the actual product is just a cost centre.

The mood at all-hands meetings becomes increasingly tense. Employees who’ve worked there for 2, 3, 4 years are not happy, because they came here to work on a product they believed in, not cater to the whims of mercurial investors; they’re worried that this new initiative to monetise the shit out of the product will threaten the product’s usefulness and long-term sustainability. The executives nod and smile and say that these considerations will be taken into account. The next week, the loudest voice of discontent is fired, right before their latest stock grant was due to vest.

The culture goes downhill. Your monthly employee film club is no longer allowed to show films of your choosing - instead, you must select from a pre-approved list of films deemed to be consistent with company values. (Guess you won’t be watching Sorry to Bother You after all.) Long-serving office staff in service roles are fired, replaced by subcontractors from companies with names that bizarrely all seem to start with A: Adecco, Accenture, Apex, Allied. The employee-created wall posters featuring creative riffs on the company mascot imbued with progressive values are taken down, replaced by management-approved platitudes to work harder and spend thoughtfully.

Raising VC money, getting a nice big office, seeing your logo on billboards all over the city - wasn’t all that supposed to be a good thing? Wasn’t it supposed to be a sign of success? You thought so at the time, but now you’re not so sure. Your coworkers who haven’t been fired are still coming in every day, but there’s a little less spring in their step, and every conversation feels heavier. You all feel like you’re supposed to be proud of how far you’ve come, but really, you all miss the basement.

You’re starting to understand the dark side of raising all that money. VC money isn’t free money, generously funding your chance to work on a cool product - it comes with strings attached. Investors can be patient, sometimes, depending on how much confidence they have in your company, but they’ll always collect in the end. For them, the product is not the point; they don’t care that you’re creating important infrastructure for the Javascript ecosystem, or something that will help marginalised people, or a niche product that all your users love. They just want the company to make money. Failing that, they want the company to look like it’ll eventually make money so that it’ll find a profitable exit (acquisition or IPO) and investors can recoup their investment.

It might too late to save your company - by the time you notice what’s happening, it’s likely that the cancer has already metastasised. The problem came way earlier, when your company raised all that money with all its attendant expectations of growth and profit. Digging deeper, the real problem derives from your misfortune of existing within a political economy where for-profit companies are glorified whereas non-profits and public services are seen as antiquated and starved of resources. Your product should never have been funded this way in the first place, but how else was it going to get funded in this environment?

In the meantime, what are your choices? You could quit, in solidarity with your coworkers who got fired, or you can stay and fight. Either way, it might be heartening to remember that the fight goes beyond you and your company. You’re not alone. The one bright spot of capitalism is that it unites us all, even if only in misery.

This was written in response to the layoffs at npm, a Javascript package manager that inexplicably also happens to be a VC-funded company. The sequence of events described above do not refer to any particular company, but are a blend of stories I’ve heard in this industry (sometimes with details changed) as well as things I made up but which seemed plausible. If you want to read more semi-fictional writing in this vein, check out Anna Wiener’s “Uncanny Valley” for n+1 Magazine from 2016.

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