Keunbo Hur

Given the unending tech layoffs, LinkedIn served as a reliable window to agony for most of us through all of 2023. I was fortunate enough to have a second reliable window to agony, well actually 8 additional windows. Given I live right outside San Francisco, every window gave a distant view to the heads that rolled I imagine through a dealer’s choice of Zoom Call, surprising meeting with the manager, or cold email (Dramatics aside, my neighborhood is tranquil and full of retirees).

But how is it affecting so many, seemingly most, tech startups? Is the business model so fragile? Before answering that question, it’s helpful to recall how most businesses start and grow.

Most businesses start with some initial investment of personal savings and loans, and assume no more investment until the business becomes profitable (I grew up watching my mother work 100+ hours per week for nearly two decades realizing this version of the American dream). This model of entrepreneurship forces a constant balancing act between time and money, favoring lower cost than shorter time.

However, with the proliferation cheap capital post 2008 saw an explosion of businesses building in a different way : venture capital (VC)-backed technology startups. These companies embraced a new M.O., heavily favoring speed over cost, favoring tenuously relevant milestones for the next round of funding over profitability.

In the last couple of years, this flow of cheap capital has slowed to a trickle, and have forced companies to pivot back towards capital efficiency. For VC-backed startups, this shift came with the realization that the next round of funding might not be coming at all, making the existing capital reserves the sole runway to profitability.

This new reality proved especially challenging for earlier stage VC-backed startups, which were birthed and nurtured in an ecosystem replete with cheap and plentiful capital.

Confronted with a drastically shortened runway to profitability, many of these companies have resorted to layoffs, viewing it as the most immediate and visible tactic to curtail expenses.

While downsizing might be an essential step at this juncture for many organizations, if there is no strategy to run leaner other than ‘put in more hours to make up for those laid off’ , they’re doomed to fail, as we’ve seen in 2nd, 3rd … Nth rounds of layoffs in quick succession at the same company.

It’s important to recognize that simply reducing headcount is not a panacea for deeper, systemic issues. A successful transition requires not only resizing but also reskilling and introducing new competencies into the organization.

In these first few posts, I reflect on my experiences in the VC-backed startup world, examining the systemic issues and key factors on the Go-To-Market side that led to layoffs at teams I was a part of and exploring what could have been done better and what else needs to be done post-layoffs in order to align with the new standards of efficiency.