Startup Layoffs — The Unkindest Cut

Watch for RollingHeads.jpgLast week, Seesmic let seven of its 21 employees go — a full third of the company. Were they in a crisis? Depends on how you look at it. CEO Loic LeMeur had raised $12M, a Series B $6M of which came in June. But do the math: 21 employees, fully loaded is around $200k/month. Tack on bandwidth, storage, other hosting costs, legal and other services, marketing expenses, T&E . . . expenses are upwards of $300k/month. And with negligible revenue, that’s pure burn. At that rate, Seesmic would hit the wall in just over a year.

There comes a point in every CEO’s life when they realize that things have turned for the worse. Accompanying that realization — along with a gnawing knot in the stomach — is the stark reality that something needs to be done about it. These are the times that try . . . you know the speech.

CEOs worth their salt — or if they’re rosey-glassed types who prefer to ignore bad news, then the COO realists who watch their backs — keep an eye on the numbers, and know exactly when breakeven’s coming . . . or when the money’s going to run out. What changes things — and probably what changed for Le Meur — is the wellspring drying up. And at that burn rate, in this climate, he would have to start raising another round in six months (it always takes longer than you’d think).

Oh — there’s one other thing. Seesmic’s Series C would probably be at a lower valuation than Series B. You want to see things get complicated (ugly, even), go through a down round. New money makes out all right (it’s called the Alternative Golden Rule), but previous investors get squeezed. (Angels often get squished.) Employee options go underwater, plagues and locusts descend, and there’s a lot of wailing and gnashing of teeth.

So Le Meur did what he had to do.

Letting people go is a miserable experience. And no matter how carefully you plan it, how humanely you handle it, it sucks. Everyone knows startups are risky, but startup hires are the most passionate, dedicated folks around. (Yours aren’t? Sorry — you hired the wrong ones!) Meanwhile, company founders think only of success. They radiate it. And they make promises, explicit or implied, to every employee ‘join us, work hard, and you’ll be rewarded.’ I’ve said those words dozens (really, maybe hundreds) of times. So when it comes down to having to let people go, a promise is broken. To them. And to their families.

Layoffs suck. But they beat the hell out of running out of money.

When all financing options disappear, your world comes crashing down, believe me. Once you’ve been there, you take a far more pragmatic view of letting people go.

I expect in the current climate to see a number of RIF announcements. I hope they’re done right. (There is a way to do it right.) Because on those occasions when they’re not, things are going to be interesting. Unlike the first bubble, today everyone’s voice can be heard — blogging, twittering, commenting, we can expect to read (and hear, if people comment using Seesmic) about some remarkably uncivil behavior, especially on the part of first-time CEOs.

Next post: Layoffs done decent.

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How Has Social Software Changed Your Life?

This is an open comments style post, so I want your comments.

The thing about my “beat”, as they’d call it in the newspaper business, is that I’m not really all that interested in “the news”. I’m not trying to cover all the stories, nor am I trying to cover most of them. I’m not trying to “break” anything or peddle products. I want to understand how social software affects my life. And yours.

Text comments will be deleted in this thread as I want video comments. ;) Click on the Sessmic Video comments link below. If you don’t already have one, grab a free account over at Seesmic.com.

This is what I want to know. How has social software benefited you? This is open ended and I want you to define what I mean by this. Some example questions might be:

  1. How you got a job using LinkedIn
  2. How you found an old crush on Facebook
  3. How blogging helped you gain support for a good cause
  4. How you used Flickr to communicate to your family on the other side of the world
  5. How you used Brightkite to track your migration habits
  6. How Twitter made the World Series special for you
  7. How you had a brilliant entrepreneurial idea from a discussion on FriendFeed
  8. How you used VC portfolio companies to attract the attention of a VC and get funded
  9. How you made a career by offering advice on a blog

These are easy examples. I want you to offer your own insight on how, sometime, somewhere, social tools have enhanced your life. Tell us your story on video. If you don’t, I’ll look like a complete idiot for this format – but I’m okay with that. :)

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The Internet is Not a Free Speech Zone

It would seem that people, by and large, think that the internet is a free speech zone. We have blogs, these are our personal spaces and we can do whatever the hell we want.

In case you missed the memo, this is not the case.

Sure, you might not go to jail (actually, this increasingly becomes possible) but as bad, if not worse, is the possibility of destroying relationships because of your actions on the internet.

It’s not a free speech zone.

A few days ago, Loic Lemeur, the founder of Seesmic and someone who I have yet to meet in person, put out a very impassioned video calling Kosso (who is my friend and the developer of Phreadz) to task for disseminating private conversation.

I find this video very honest and transparent. Loic apologizes for direct comments that may have been inappropriate. From Kosso’s standpoint, he explains in a very coherent way why the whole thing is very awkward:

Now, if you’ve made it this far and watched the videos, you can understand that the politics of the web is a very delicate thing. It’s easy for people to get twisted up, but there’s always two sides to every conversation.

A few months ago, Loren Feldman started a series of parody videos mocking Shel Israel’s videos at FastCompany.tv. Quite a number of people took offense to these videos and that particular conversation got downright nasty. What some people don’t understand is that the internet is not a free speech zone and, if Loren wanted to, he could destroy their lives, businesses, client relationships, etc.

Does that make Loren a bad guy? No, I hardly think so. I personally think that Loren is one of the nicest and most honest guys on the internet. But I know he could destroy me.

That in itself doesn’t keep me from stepping into that fray, but it’s a healthy respect valve.

So to everyone I have bitten harshly in this internet world, accept my apologies. There have been a lot of them, but to name a few: Tyme White, Mike Rundle, Kris Smith, John Havens, David Krug, Robert Scoble, Mike Arrington, Jason Calacanis and others.

Life’s too short.

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