Startup Therapy Podcast

Episode #166

Ryan Rutan: Welcome back to another episode of the Startup therapy podcast. I am joined as always by my friend and the founder and CEO of startups dot com. Will Schroeder. And we are also joined today by an entire Zoom room filled with exciting and amazing founders who we will be hearing from uh closer to the end of the show after will and I are done drowning on. Well, today we are going to be tackling a relatively thorny topic. One that is very, very timely at the moment. Unfortunately, we're seeing some, some really bad signs of the times. Uh Tech Crunch just released their layoff tracker. Uh You can hardly look at startup without seeing layoffs, you know, Cara 2500 better dot com. 5000, I think 50% of their staff. Bye bye. Um It's nuts, right. Uh Fast, which was all the talk not too long ago. 100% of their company laid off, they are, they are shuttered, uh San Francisco based Fintech and I'm not, I'm not picking on anybody. I'm not picking on anybody here. I'm just, just pointing out this is what's going on right now and big companies too. I mean, we're seeing layoffs, uh, up as far as, you know, startup companies, former startup companies like Netflix, uh, is going through layoffs right now. So this is something that's going on. You're likely going to have to navigate this. You may have been through it on one side or the other already. Let's talk about how we make it through this, uh, with some sanity and dignity for everyone. Yeah, I

Wil Schroter: think it's exacerbated because it's almost like with, like COVID, like, the whole world gets forced through the gauntlet at the same time. And so, like, you know, the reason we're talking about it right now is it's, it's not a fun topic but it's something that everybody has to consider, but we generally suck at it. So that's the problem. It's not only that we don't want to do it. We're also really, really bad at it. And, you know, the way I see it is like, early in my career when I had to do my first either, like, like, not layoffs but, like, just like firing people et cetera. I was just horrible about it. In, in my, my, my meetings were going really bad. Not that they can go. Well, again, it's a shitty topic but they were getting heated and there were blow ups and all these things and I'm like, what is going on? Like, I'm trying to be considerate and thoughtful, et cetera except I wasn't, I'd, I'd come to learn later through. Unfortunately, lots and lots of these events uh that I had to consider two main factors. One was ego, which we'll talk about and the other was safety. And when we have to part company with someone, I don't care if it's a co-founder that you're not getting along with. Uh I don't care if it's something we were doing layoffs. It doesn't matter who you're parting company with. Those are the two big levers that make or break how that's going to go. And generally when I talk to other founders or their CEO S and how they do it, they really don't consider it in a way that they need to. I wanna unpack these, I wanna get way deep into these because I want every founder listening to really understand what's going on in the room when they have to sit down with somebody and get deliver some tough

Ryan Rutan: news for sure. And, and I want to draw a slight distinction here between a normal firing and what goes off during a period of layoffs. And, and it speaks to both of these points. If when and if you get fired from a job, you have to fire somebody from a job. There's often a build up to that point, right? A, a noticeable build up, maybe notice was given, you know, if they understand their performance isn't good, whatever, there's time for their ego to accept it and the macro environment maybe isn't quite as scary as it is when there's a whole bunch of layoffs going on. So, you know, you're, you're not in a position where you feel as unsafe. You know, you're about to have to go and find another job. The individual who's being fired knows they're gonna have to go and find another job, but it's not quite the same thing. Right. When we're in a period of mass layoffs, not only do these sometimes come as a surprise and without any dereliction on the part of the person who's being let go, right? You were doing fine. The market is just killing us right now. We have to let people go. There's nothing we can do about this. And so it can often come as a big surprise, right? So there's no time to prepare for any of this. And I think that's what makes this situation even more dialed up than just a normal firing.

Wil Schroter: Let's talk about the ego component first because I think when people think ego, they tend to think narcissism, oh, this person's, they're humble. They don't have an ego fundamentally. Like quite literally, we all have an ego. Our ego may manifest in different ways, but it's ever present. And the reason that's so important when we're going through this process is we have to understand the person we're sitting across from for us. It's a meeting, it's a transaction. We dreaded it. We stay up all night worrying about it, this is their life, this is their, their view on themselves. Right. Their, their self perception, it is their view among their peers. It's their reputation. It's how they're looked at when they come home and tell their family that they don't have a job that is their ego through and through and for us to, to gloss over it. Pretend like, oh, I guess you're just getting demoted. It's not a big deal or I guess you're getting like, not, not a big deal, but you know what I mean? Like, like we have to understand that aside from any monetary side, which of course will cover like the safety, the eagle part is a big thing, like how you let get let go and whether or not you feel valued or how you see yourself presented to the rest of the company, it is a big for, you know, for sure

Ryan Rutan: and even more so in the startup space, right? I mean, I think you talked with us in the article but we are often pouring ourselves into these things, right? We early employees especially there's very little structure, there's very little security. You're, you're throwing yourself into this and you're doing it because you believe in it. Uh and you, you kind of lay yourself out there emotionally there and when the, when the bad news comes, it can sting way way more. I mean, just having been through this process in both the startup environment and outside in a corporate environment, it's very different. Uh The the ego hit in a corporate environment seems to be very different. Right? I don't have nearly as much experience there. Uh Thankfully, uh but the within the startup space, right, it people tend to take it personally why? Because they took the entire engagement personally, right? We asked them to, we said, you know, be you be a person inside of all this, right? Come join us as a team. Uh It wasn't really as much about a role, it was about taking part in something that you wanted to help achieve. And so when that gets taken away, and you're told that you're no longer part of that, it's really, really personal.

Wil Schroter: The very nature of startups is we're creating the fabric of this entity together. We're hiring people together, we're creating the product together, we're creating our own sustainability or lack thereof it in this moment together. And so we all feel a sense of ownership and that's really what we're talking about. We feel a sense of ownership of this product in this company and that contributes to our ego being attached to it. So when that's taken away to your point, it's not the same as as working at a big company. And I'm not minimizing people struggling in a big company at all. I don't want to be clear about that. I'm just saying there's a different element in this particular case. This was your baby at a company? You were babysitting someone else's baby. Right. It's not quite the same thing. And so again, there's people that are, are all in at their big corporate jobs and they, they feel a very strong sense of entitlement to that role, to that job, to that company. Totally get it. But in this particular case, it's pretty across the board among startups that our teams are very invested. By the way, a lot of the people that we're talking about aren't necessarily always just call employees. They're also sometimes co-founders, they're also, you know, sometimes actually the founders in the business. So there are a lot of people very invested in this that are affected. And I think if we fail to recognize that how invested in it, how, how much of your ego of yourself is put into this job. And we say, well, you know, we've got to let these people go and we're only doing it because we're, we're trying to make a financial decision. But at some point, we gotta flip the switch, ok, financial decisions made. Now we have to actually go through the process of understanding in, in great detail and thought how to have the right conversation with folks, how to sit on their side of the table, have some fundamental empathy and think how are they going to receive this and what can we do in that conversation to make them feel better? You know what does that look like? Not just, hey, you're a great person but hey, uh, let's talk about how this gets announced to the organization or how it gets announced publicly so we can work through it together. So you're not humiliated, which is usually a big part of this. And when that gets overlooked, people get pissed

Ryan Rutan: when they do. Yeah, when you find out as part of the 5000 person email that went out, not a good feeling, right. And look to be fair to the companies doing this. There aren't a lot of great ways to manage that process because you can't have one on one conversations with all 5000 of those people before that news gets out. Right. It's going to be about the fourth conversation, fifth conversation. A lot of people are gonna start to know it's gonna spread. And so, you know, the the tact there is we're gonna have to do a mass mail to do this. It's not going to feel good, but it's the only way that we can ensure that we have some level of control over the messaging. And I don't mean control in, in a negative way. I mean, so that we can try to deliver that empathy, we can try to make people understand what's going on and then be there to be helpful. But it's not a good feeling. I cannot imagine pushing, send on an email that's telling 50% of a company of 5000. Uh that half of them don't have their jobs tomorrow ever feels good. Um And it's sort of the only option you've got, you can't do that in a one off basis with that many people. It just doesn't work.

Wil Schroter: You bet. Also people don't remember the transaction, they remember how they felt about the transaction. So what was said and kind of how it was presented is a big deal to people. And again, on the one hand, if you're the person letting someone go, you have to rip the band aid off initially, you know, you, you can have a long drawn out conversation. You sit down, the first thing you say is, hey, I'm I'm, you know, we have to part company or however you're positioning it. Remember at that moment, the moment you say the words, you no longer have a job and I'll move to the next point you just threaten their safety for sure. Ego is definitely a part of it. Like how dare you. But next, once they get through the ego part, which sometimes goes pretty quickly. First thing on their mind, I have a mortgage, I have a family, I have, you know, obligations of health bills, you name it. How am I gonna take care of that? You've just threatened my safety. And so in that particular case, the first thing we have to do is be mindful of that, right? Like we just took away this consistent and repeatable and predictable way to create safety for this person in one instant. That's a problem. You know what I mean?

Ryan Rutan: For sure. And, and again, I'm gonna circle back to this during a period of, of mass layoffs, you're also sending them into a really, really shitty job market, right? Where there's going to be lots and lots of people who are, are looking for jobs. Right. So in, in the context of mass layoffs where this isn't just a single company doing a mass layoff. Uh but we have multiple companies, uh entire sectors doing layoffs. The safety net feels even further down, right. In a normal situation. It might be like, all right, look, this is awful. I'm pissed at them. I, you know, I didn't want to see this happen, but I'm gonna go find another job. I'll be OK in the current environment. I'm not sure that that's what everybody's thinking. All right, they're not thinking, oh, it'll just be, I'll just go find another job. I'll just go get another gig. Yes, they're gonna go and try. Uh But I think that the, the, the current for that is significantly steeper than in normal situations, which is making it harder for everybody right now on both sides of the table, right? The, the, the one piece of ego we didn't talk about here was the, the founder's ego, right? Our ego as a company or maybe it's not just the founder ego, but like everyone's ego in this, in terms of when we decide to do this. Right. How long do we push this long, do we try to say? Right. It's embarrassing for the founder. They don't want to do it. It's not only embarrassing. Right. It just doesn't feel good. Nobody wants to do this and it's not like we're just sitting back and going, ah, operationally this makes sense. Cut them Johnson. Right? Like nobody's doing that. It's not like that, right? So the, the ego gets involved and makes it difficult for the founder as well, right? Like, try to hold on as long as we can, which often exacerbates the situation, which makes

Wil Schroter: it much worse, I think for most founders, uh good times things are going up to the right. We're hiring, we're keeping people fired up, et cetera. Everyone's happy. Everyone's good. Everyone's egos are being supported, everyone's safety is being supported. The moment we flip that switch, the next thing I want to talk about is it's not just the employees, we then send a shockwave through the whole company. Sure. Some people like, well, I'm glad I didn't lose my job, but they're thinking about it. You'll never see more linkedin resumes get updated and the day you announce uh uh a layoff and all the people that didn't get laid off right instantly. Why wouldn't they, you just threatened everybody's safety. You just threatened everybody's ego because they're projecting saying shit. I don't want to be humiliated, right. Which is often how this feels. And so I'm gonna do whatever I have to do to kind of prep for my exit. So I'm not sure at the behest of this company.

Ryan Rutan: Yeah, confidence level at that low is at that time is extremely low. Right? You, you, you can't say that like, well, look, we just laid off half. So we have a plan for keeping everybody else safe. Well, didn't you have a plan for keeping everybody safe? Right? Before we had to do a 50% layoff. You did, right? So plans don't always work out. So confidence goes extremely, extremely low. And yeah, to your point, uh you know, everybody starts to get extremely nervous and uh and do the, do the right things, right? They start to protect the own safety, cannot begrudge anybody then

Wil Schroter: as they should. So let's talk about a couple of things that, that we actually do about it, right? Because I think that that's the important part here is like we're freaking out. We know ego and safety are, are both being kind of rattled and what are we actually gonna do about it? And so I think the first thing is when we think about how we're going to have these conversations with people, I think we should put the skunk on the table and say straight up, how are we gonna deal with this, the ego issues with this person, right? Like like what's unique to them. And again, ego isn't a bad thing. We all have it so we have to walk through. What does that look like? Does it, does it matter to this person kind of how they're, they're, they're told publicly how they're leaving? I mean, it does to extent, but this is this a particular issue if we have to demote somebody, which happens all the time, I'll give you a great example because this is all the same thing uh company is taking off. We always, we always joke that the one person that took a finance course in college somehow became our CFO we now have 200 people, right? And like they're clearly not qualified. So they're telling everybody that they're CFO of a company when in fact, they were never qualified to do this. I wonder if I'm talking about myself right now. Anyway, I'm also a CFO but also, you know, the, the, the company uh out outgrows itself, right? Which as it should and that person is no longer the most qualified people to do it so that they have to take a demotion ego that's humiliating as hell. Even if you didn't change their comp if you don't, if you don't consider the fact that their ego is gonna be incredibly bruised, like what they told their grandmother they do and grandma was so proud of them, right? Just changed what, what they told their friends at barbecues, they do just changed. Those are all facets of their ego within, in the company, all the people they work with. Right. They were the CFO and now today they're like the V P of finance or something like that. Right. Which is a perfectly good job, but it's not the CFO and I think when we make those changes, if we just think about it, well, they haven't lost their job, you know, they're, they're put in another position. That is, that gets you nowhere.

Ryan Rutan: Yeah. Honestly, sometimes that can be worse. I, I have seen people suffer far more from demotion than they have from being fired when you're fired. That's a one time event. Right? It happens. You, you socialize it, you move on, you get your other job and that's what you talk about from now on. You don't see the same people day in, day out. Who remember that? You, you're the CFO and you're now the V P of finance or whatever else. Right. So, very different situation. Yeah. I actually think ego is far more harmed by demotion than, than being let go in some cases. Safety less so. But ego more so. Right.

Wil Schroter: And I think from, from that standpoint, like you see this a lot actually with co-founders, ok. So this isn't even like just an employee, so to speak, an actual co-founder doesn't grow up at the same rate as the rest of the organization again because you were just two idiots. In college at the time. And, you know, the thing is taking off and all of a sudden you have to have that tough conversation and they're the co-founder, right? They're not just like a, a person that you hired in their mind, they're untouchable. And now you have to have this really difficult conversation in and manage their ego. So, as part of that, I think a big part of it is saying what would put them in a position where we can minimize the eagle loss. And some people overlook that and they were like, no, you know what? They, they had their chance to take this shot, they missed it. You know, we're taking them off the field and you couldn't do that. You just

Ryan Rutan: really great recipe for burning bridges that it

Wil Schroter: didn't end well. Which is the whole reason we're doing this episode. Sometimes you need to, to send a message or teach a lesson and you even have to be mindful of how you do it, right? You just can't use the stick frankly, the way you used to, um the other side is, is safety and I don't think people appreciate how important safety is until it's taken away. Right? It's like like anything in life, we, we take it for granted.

Ryan Rutan: Yeah, it becomes, it becomes the, the, the baseline, the the low water market of course will be

Wil Schroter: safe. And then when you shake that and again, we just talked about it, you shake it for uh folks that just got let go, of course, and you shake it for the folks that stay in both cases. It's our job to reinforce that, right? So safety for the person, we just like go, we just walk down the list. We're saying, do they have benefits? Right. You know, obviously benefits, severance, et cetera. Do they have outplacement? Is there a way that we can say, hey, we can't afford outplacement? But my role at X is your role at X. You know, I'm happy to share who I know and make a few calls for you. I do that all the time when we let go of people and I feel great about it and the person at least understands that I'm not being a complete jerk, right? They're not happy about the outcome, right? But they at least understand they at least understand that I feel for them that I care about them that I'm being treated like a

Ryan Rutan: human with dignity in the situation, right? Not a great situation, but just because it's a bad situation doesn't mean it can or should be handled badly.

Wil Schroter: You bet. And I got to tell you in some of what I would consider to be the dit situations I've had where people were so arrogant going into what they didn't realize it was gonna be a firing break down and cry, you know, grown men break down and cry in the um uh, in the conference room type thing. And at first I didn't understand it. I mean, I saw what was going on but I didn't understand why and I was like, I just threatened that guy's safety. Right. And in, in the most meaningful way this person's got a family, they've got, like I said, uh, health bills that they've got to take care of and everything else like that. And I just pulled that from them. I can't just get out of my chair and walk out and pretend it didn't happen, right? Like if, if I'm half the human, I'd like to be, I've gotta support that. I've got to back that up. I've got an entitlement I believe, to that person to try to make sure they're OK to the extent that I can. Yeah.

Ryan Rutan: And again, I, I'll say it one more time in, in a situation where there's mass layoffs, our ability to control some of these outcomes to be helpful may be reduced. But again, to your point, we do what we can. Uh and, and we have to try as much as we can to make these uh you know, dignified uh endings for people and help them move on as, as best we can. The, the other thing that's been interesting over the last couple of years is how many other like shared context we've had in, in like the course of a normal firing, right? We, we often may have just that person's individual context and we may or may not know everything about them depending on how close we were to them in the reporting line and so forth. But we've had a bunch of really shit shared context over the last couple of years, right? Global pandemic financial collapse, you know, high uncertainty, mass lay offs, all this stuff that's going on. Uh And so we have to remember to take all of that into account, right? If you walk into one of these meetings, now expect people to be a little more easily triggered, a little more gun shy, a little more sensitive, a little less uh you know, uh sure about their future safety with good reason. It's been extremely uncertain times. So, you know, we've, we have the, I was about to say the benefit of the shared context. We, we, we, we share the downside in the shared context and it's important to, to maintain some level of perspective on all that as we're going through these things as well.

Wil Schroter: Yeah, I think from, from my standpoint, what's often missing is we get so worked up right now, let's say, you know, we had a company and, and we have to let folks go, we get so worked up with the event of it, of what we have to do that we lose sight of the details which are again, these, these very human reactions. And so we're fired up, we're stressed, we just want to get this thing over with and then all of a sudden we do it, we do a layoff and shit really comes apart. Our internal staff goes nuts. Like I, I, if you ever want to see a staff get activated as fast as possible, announce layoffs in the company, right? And literally everybody that was maybe not on slack or whatever is on slack 24 7, chained to it the whole time. And it's, it's, it's as distracting as it gets. We have to manage that. We have to get in front of that. Right. We have to talk through it. And in many cases, at a very individual level, I'll say this. Nothing says more about how a company treats the people it keeps, then how it treats the people, it lets go because the people that it keeps look at that and they say that's how I'll be treated. If things don't go well, if they look at that and it looks like those people were treated well with kindness, with fairness, with respect, then they stop and go. Ok. I obviously don't want to be let go. But at least I, I, I know that that's a, a supportive path. If you will. You do the opposite. Where, what was it? I, I wanna say it was bird. I think it was Bird at the beginning of COVID. Yes. Like played a recorded message to 400 people that were all getting fired. To say like by the way, like a two minute message like that's how all of those people remember, Burt? Shit. That's how I remember. Yeah.

Ryan Rutan: Right. Yeah. Yeah. So I it was a, it was a fantastic lesson in how not to do that.

Wil Schroter: But what message does that send to the people that you have, you know, still in the company?

Ryan Rutan: Not a particularly positive one. I mean, they may feel they may feel fortunate for about eight seconds that they weren't part of, of being let go and then they're gonna go. Yeah. But do I want to be here like this? This is, this is what I signed up for. This is how I'll be treated when and if uh this goes wrong and if this is the type of leadership that they're, that they're putting forth in a moment like this where they know everybody's going to be watching. What in the hell are they doing when nobody's looking?

Wil Schroter: It's, it's unbelievable. And the other side of it too is all the people that we let go of even. It's just one person, by the way, they have relationships with all the people that are still here. They should decide to like disconnect from everybody. So all of those, all those emotions are pouring out. If we let go of 20 people, we just sent a powder keg of 20 different people influencing the rest of our organization in not a very positive way. Right. Conversely, if we leave those people, 20 people and we say we're going to be as supportive as possible. We respect their contributions, we respect what they've done. We would highly encourage anyone everyone here to help them with their journey. Here's what we're gonna do to kind of go above and beyond what we can do. And it's really important for us that they're OK. That's the kind of message you want to send, You wanna send. The kind of message that says yes, we realize this sucks, but we do everything in our power to make it better. I think that's a, it's just, it's so overlooked and I think what we're about to go through right now, Ryan with all the layoffs happening and everything else like that, we're about to see a master class in poor performance on this. You know, something that's really funny about everything we talk about here is that none of it is new. Everything you're dealing with right now has been done 1000 times before you, which means the answer already exists. You may just not know it, but that's ok. That's kind of what we're here to do. We talk about this stuff on the show, but we actually solve these problems all day long at groups dot startups dot com. So if any of this sounds familiar, stop guessing about what to do, let us just give you the answers to the test and be done with it. Added thoughts from you, buddy. There we go. I'm just scared. Talk about them. Just fair. Fair. I don't know if I'm, I'm, I'm trying not to read the news and I don't know if this is reckless or, you know, it's a protection that I'm putting on. Um, not let fear take over me. That's, that's what do you see Ed if you don't mind talking about it, what, what do you see unfolding? Like when, when, when you project that fear, what does it look like? I don't see that. What I see is like uh when everyone talks about almost like COVID, you know, um you guys said that it's something happening at the same time and try to avoid like news. So because it's, it's, it's a little bit, it's everything that you said like ego and security are some of the most deep human resource. It's our, our unconscious mind, our limbic brain has all those things inside. So I don't and it happens by itself. It has its own power. I we cannot let that power take over our smart brain and agreed. You know, that's what I'm trying to do. It's something, something that's interesting there is we've been talking about it from the call, the employer staff side, but it's clearly affecting us as the founders as well, right? Our ego and safety is being threatened as well. Things are tough, fundraising environment is gonna be tough. Customer environment is gonna be tough. Well, by the way, that's also our livelihood. We may be the person letting people go, but we're also responsible for all those folks. So, right now when we're looking at all those, uh, layoffs and those notifications, we're all thinking the same thing. Which is, are we next? Right. You know, what does that look like? How will we handle? What, what will I have to do? It's, that's some tough stuff. Really tough. What I find is that, uh, like from my side is like, I'm, I'm, I'm, I'm just starting a company. I'm betting a lot of things in my life on these. I'm, I have some, you know, financial resources that I thought that would, it would last a little bit long so I can, you know, focus on it by myself and maybe I have to change my plan. So it's, and I know that a lot, a lot of people in my situation as well overnight, the world had to go from offense to defense. And again, we've been through this before. I think the difference is considering we went through it in the dot com crash, we went through it in the financial meltdown. It still sucks. The only benefit if anything is we kind of have a little bit more of a playbook. We kind of know what the other side of this looks like now where last time we kind of didn't when it happened in the dot com crash no one knew exactly how to deal with that. We all saw it coming but no one knew what to do. Financial meltdown happened fast but we weren't sure if it was anything like the dot com bust this time around. We know exactly how this is gonna go. Everyone's gonna freak out. You're gonna see mass layoffs. You're going to see everyone cut their budget, um, left and right. If you haven't watched the earnings, uh snap, just re reported that their earnings were way off the mark, which then took all of the other social media companies down. Snap, lost 47% of their market value in like 24 hours. And this is the initial shock. What happens is all of us, all us founders will all tighten up our expenses. Everybody will go on a hiring freeze. You almost have to at this point, everyone will go on a hiring freeze, everyone will tighten up expenses and we'll all play defense for a while. And by the way, that's not necessarily a bad thing, right? In other words, the world getting sober for a minute and getting responsible isn't necessarily a bad thing. And inevitably after the dot com bust after the financial meltdown, you saw more quality startups come out of that than ever before because we run fast and loose and all this funding is flowing, it breeds so much irresponsibility and now people just have to sober up and I think that's important Ryan. What do you

Ryan Rutan: think? Yeah, I, I'd echo that. I think we've gone through some periods of, of relative good times for startups. Funding was everywhere. It, relatively speaking, lots of rapid growth. And now we're feeling the effects of some of that, we ran a little faster than we should have and now it's gonna catch up with us. Um Of course, exacerbated by things like global pandemics and, and financial market collapses. But some of this was going to be kind of natural attrition. I think from just having pushed on growth harder than we should have in some cases in, in lieu of things like profit stability. We talked about this a couple of podcasts ago. Uh And I think that there's, there are some lessons to be taken away from that in terms of, you know, growth is great, but let's let's do be responsible about it and let's make sure that when things change and we can never see the future. But I think that if we look at this, some of these companies began to have to, to, to pull back and make major changes when even just a little bit of market change occurred, which to me says they weren't nearly as resilient or as stable as they should have been. Uh And I think that's where the real lesson is that the people who are going through the layoffs right now. Sure. Like look, we said, some companies market caps got slashed by, by 50% or more overnight. You're going to have to do something. Right. That doesn't, that doesn't come with zero consequence. Um, but companies whose market caps didn't really change, you know, six months ago, I'm talking, you know, turn of the turn of the year, uh, who were, were pulling back at that point? Probably a slightly different story. Right. That was probably more of a, we grew too fast. Uh We were a little irresponsible with what we've with, with how we, we position things and now we're going to pay a little bit of a price for it. Right. Agreed. Growing pains happens. It

Wil Schroter: does Derek. Uh So uh Derek, you're saying any suggestions for some creative options to try and ease employees out of turning them into a part-time contractor for a short time or anything along those lines? That is an awesome question. We get asked it a lot and I think it's an awesome option. Let, let me build on this a little bit. First thing I would say is this, there is a massive massive difference between cutting off somebody's entire salary and paying them half. You cut off my entire salary. I'm just straight up fucked. Right. But if you give me half it at least gives me a minute to go, make some, you know, make some changes, make some adjustments. It gives me a little bit of lifeline if you will. And so if you have the opportunity to move people to part time versus full time. I think it's a great move and I'll give you some other conditions there that I think Derek that might be helpful. One is, there's a lot of folks you just don't want to let go of, right. Maybe you work really hard, hard to find this developer and you paid fees to get them et cetera like shit. I can't afford them, but I also don't want to lose them. Well, keeping them on contract. Keeps that, that conversation going, you know, keeps the contributions going. And if it turns doubt that you made the wrong call in three months, you wanna kind of change back to full time. Ryan, you and I have been there before we've done this, then it keeps it going. There's a huge difference between saying we don't want you sending that message in saying we can't afford you. Those are two completely different messages. I'm going back to ego for a second. We people understand we can't afford you. Like they have at least a general understanding of what's happening right now. But saying we want you, we just can't pay you as much right now. Still not fun, threaten safety, but it's, it's night and day different. So what I tell folks, even if things are going pretty well right now, right? You know, you don't see like a near, near, near term issue, but you wanna be able to kind of help control your burn rate a little bit. Now, it would be an opportunity to maybe change up some of those assignments. Derek, does that make sense to you? 100%? I've, I've, uh I know during COVID, I heard of a couple of companies, you know, even sort of cutting pay but then offering to, to put it back in if, if conditions improve later, just to, you know, go to your point ease in. I think trying to avoid the reactionary response, as you mentioned is kind of my priority. And so ways that I can get ahead of that by maybe offering these kinds of options, I think is the stuff that I'd be interested in. Derek even building on that too. That also gives a little bit of confidence if you will for the existing folks showing that, that you are mindful of, of, of their income, of their relationship, et cetera. And I think you'd be very open with folks saying look, things have slowed down, right? Like we have less money so we have less money to pay, but we understand that uh people's jobs are important and we wanna try to do what we can, we're gonna try to make as many concessions as we can to try to keep the team together. But the team needs to understand what's happening. I think what happens is so especially now because this is just the beginning of it. Like this is like the first Salvo and all of these employees who were, I mean, part of the great resignation where everybody was like, oh, I can get a better job. The polar opposite just happened right where the rug just got pulled out from everybody. And this is where people are starting to sober up a little bit going. Oh, shit, what just happened? And now people are gonna start to think, well, is my company safe? It's our job to convey that to explain that we are safe or that we're not, but here's what we're gonna do about it. They want to know that we're on the job.

Ryan Rutan: I want to add just 11 or two things to that. And that was that, you know, think about what your motivations are for doing this, Derek. So if it's, you know, you want to help protect people and give them some safety, talk to them and find out if that's enough safety, right? Sometimes, you know, handing somebody half a bicycle isn't gonna help them, right? So if they were, if their life is predicated on their full salary and that's just not gonna work, then you know that you've got a ticking time bomb there, they're gonna have to go find something else, which may be all that you want to do if all you can concerned about is easing them into something else that can work out fine regardless, just be aware that you are likely to lose that resource at that point. You know, have the honest conversation with them about how long they could sustain that at a half salary and be honest about how long you think it's gonna take to get them back to something full time or if that really is just you easing them out, be open and honest about that too. Right. Let them know what their, what their time clock looks like. Um And depending on whether it's somebody you have to replace or not. So, um but just as you enter into this, think about what the strategic outcome you're trying to create is and be aware that, you know, some people may accept that short term and then immediately be spending half of their day on linkedin looking for that other job to replace what you, what you're doing with them. Um So just be careful about which roles that happens in. But yeah, I think it's a totally fine thing to do. Um Just pursuant to that. It's a really interesting time to go hiring right now guys. I mean, like with caution, but in terms of what's available, there's a lot of, there's a lot of people out there with a lot of really great skill sets who otherwise may have been unavailable because they were previously employed and or out of your price range who may be rethinking what a reasonable salary looks like in light of a $0 salary. So uh not trying to put a, a sunny spin on a shitty situation. But look, if you are in a position where you are growing, you do have cash you're ready to hire. Um, not, and not a bad time to be doing that. And, and I

Wil Schroter: think some folks are asking about that. Uh, Andreas, you're saying, you know, I've got some worries about this summer where you hire a lot more people in the midst of this uncertainty. How many people are you thinking about? Uh, well, that's the thing. I mean, the summer is our best time of the year. Um, we, I mean, I'm, I'm right now I'm hiring, I've had a, like about 100 interviews and I'm hiring, hiring like, yeah, hiring like seven or eight people, um, more or less full time because we need those people. Uh, if the summer is gonna be really good, if, if we don't, if we don't schedule people, we're screwed. Right. And we, we, we have a lot of people coming to our museum and we don't have enough staff. Everyone who is gonna work is gonna hate me afterwards because it's gonna suck. But if I schedule too many people, I run the risk of, of having it too big of a salary cost. And, you know, it doesn't really help that, that Sweden applied for NATO membership and Putin doesn't really like that, you know. So we, we, we're in a pretty uncertain time. That's more uncertain than maybe most countries. Here are my thoughts. Uh first would be, this is a great time to hire people on a contract basis. Whereas before, and this will speak to what Ryan said because I, I wanna make sure we talk about the timing of this before when the job market's tight, meaning it's really, it's really hard to find people. Then we get into a situation where, you know, we, we can't mess around with contract terms. We have got to pay full boat top of market, et cetera. It's the supply and demand curve. But then all of a sudden things change and now people, just thousands of people just got let go. And they're saying, hey, I just want to be able to fix my safety issue. I'm more open to a contract position or something like that. And the truth is when there's a straight up hiring freeze for most startups, those are your only options. And so I think where you couldn't have this conversation maybe even six months ago, now, it's going to be a fairly common conversation that people are going to see where you say, hey, I can't bring you on full time, but I can bring you on on a almost fully loaded contract basis and we'll take it month to month and, and we'll grow into what will essentially be hopefully a full-time role. Ideally, we'd always do that because then both parties can kind of test each other out. But in a tough job market you don't have that option. Yeah,

Ryan Rutan: I'm a big fan of play, testing the relationship before we jump in all the way. Right. So, if you can, if you can go contract to hire, it's great for everybody. Right. Find out, does this person do what we need them to do, find out when that person does what we need them to do, do they enjoy it? Do they want to be here? Right. And yeah, find that fit before you make it permanent when you can the other, the other good news here and this has nothing to do with the the current situation. Uh This goes back a couple of years to, to COVID where everybody all of a sudden went remote. We started seeing a massive uptick in the number of part time contracting positions available and the number of people who were completely satisfied with having a couple of jobs instead of one and getting to flex their superpowers all day instead of a couple hours a week and then filling the rest of their time just to punch the time card. And so it was a net positive for a lot of people. And so I think again, we can look for those, those folks and we can create those situations where full-time employment doesn't have to be the answer

Wil Schroter: for sure. All right. Uh Adam uh thoughts on these market effects for a company just getting out of the starting blocks. Is that where you're at right now? Yeah. Uh, I'm, I'm about nine months in and it's just me. Um, so hiring would be nice. Uh, but also, like, I just don't have the, the cash for it. Um, yeah, I guess I'm curious, like, should I be pulling back? Like it, like, it's not a great time to be pulling back, but also, like, you know, I, I have no idea. Well, that's fair. Let, let's talk about two things that are invariably happening that we all have to contend with what whether, whether we, whether we want to or not. The first thing we have to contend with is there just became geometrically less investor capital in the marketplace and you may be looking at this going. Well, hey, that's gonna be a problem because I'm raising or you may be looking at it going. Oh, why would I care about that? Because I'm not raising. Here's why that matters. In either case, number one, obviously, if you do need to raise, it's gonna be harder than, than it will be that eases up over time. But just remember the shock just happened. Most investors are high net worth investors that are investing their personal capital and they all just got cleared out. It doesn't matter who you were, you got cleared out. So the last thing on your mind is let me go back to the casino and bet even bigger, right? So that's gonna take a minute for that all to kind of settle down for a minute. The other side of it is you have a lot of companies that are all pulling back at the same time. So you like Ryan was saying, you're gonna have a flood of talent on the market because of that. Adam, you have an opportunity where you're gonna see way more resumes than you've ever seen in your life and way more willingness to work under your terms. So that does work in your favor. The other side of this though is that consumer spending will implode, corporate spending will implode for in the short term, right? Everyone's losing their jobs, everyone's freaking out about losing their jobs. They're all gonna pull back all the money that was in the market will get taken out of the market for a minute. Uh Inflation is not gonna help that either in the US with that said, there's no way to look at this and say my revenues are going to be exactly the same even though, you know, it's gonna be easier to, to, to find people. So you kind of have to look at both and say, well, I'm probably gonna bet that 10 to 15% of my top line is gonna dwindle just by virtue of there being less money in the market people spending. And so I have to account for that. So maybe I'm holding back on some of my hires just based on the fact that I know it's gonna be harder to make a dollar over the next 12 months. Does that make sense, Adam? Yeah. Makes, makes total sense. Uh, I, I think, you know, we're, we're not generating all that much revenue, uh, just yet. So here's the way it starts. Yeah, exactly. So, here's the thing though right now for the next 6 to 12 months we all move to defense. We keep things tight. We circle the wagons and we just focus on longevity. You don't need to grow like crazy right now. You need to be around long enough to grow crazy a year from now. And that's the part, that's what you're hearing from all the V CS and, and founders like us saying, just keep things tight for a minute so that we can weather this, see how long it's gonna last, see how intense it is and then do something about it in the past. These things in, in my estimation lasted about 18 months in the startup world where things were kind of apocalyptic and then everything got shaken up. And at the end of that 18 months, it was like coming out of a long winter into the most beautiful spring because all of a sudden everybody was excited to, to invest again, everybody is excited to build startups again, the prices on everything came down geometrically. It was one of the most fertile times to build companies. If you look at post dot com bust, how many amazing companies came out of that? It's insane. You look at post financial crisis in the US, post that bust 2007, 2008, all the major companies came out of that crisis. This does have a bit of a silver lining. This just isn't the part where it feels very silver. Uh What does this mean for a company that 100% needs to hire in order to grow? Kind of some of the same issues? Is it change in some kind of leverage they brought up though? Um that I could see making sense and I just don't know how to acquire is the fact that there's like this talent that wasn't available before. Um Obviously through linkedin and other platforms, I feel like I can, we can find that, but I don't know exactly how to use this to our advantage because we're so small that, you know, well, you guys obviously know the situation where we're so small that I feel like we can actually take advantage of this situation, you know, and, and, and again, we all feel weird when, when we thought talk about taking advantage, but that is what we're saying. We're saying that the world's about to make a monumental shift. And for startups in particular, this is actually a big advantage to us because we get access to a lot of resources that we couldn't either afford or procure five seconds ago. And so a big part of that is just publicly getting the word out there as much as you can that you're looking for those folks because remember a massive amount of talent that was not looking for a job, wasn't trying to network to find you is now all looking to find you. So the biggest part is about being very present and, and whether that's posting ads on upwork, even again, if that's where you're finding some of this new talent. If you're posting stuff on linkedin, if you're posting it through your socials, et cetera everywhere, let the world know that, that you're hiring and trust me, you're gonna see more amazing you've ever seen in your life. Talk

Ryan Rutan: directly to founders of companies who would have employed people that you would like to have been in touch with because to Will's point, we're always trying to help people land as softly as they can. So if we know there's somebody who's interested in hiring, we're going to give them those names, we're going to make those introductions. So leverage that founder to founder connection. If they had to let people go, if they've, they've downsized, reach out, talk to them and find out who amongst that teams. Like I'm looking for somebody who's a rock star in packaging. I need somebody who can just go sell roots in retail, talk to them and, and find out who, who they had that they let go that they would recommend and the likelihood is you're gonna get, uh, you're gonna get plenty of response from them.

Wil Schroter: Right. Uh, Michael, take us home. Uh, what are your thoughts on deferred or partial deferred payment? What were you thinking there? You know. So, so my particular situation is that I have a, uh, I have AAA very talented de source and, um, he's so talented. In fact that as the pro product manager, I can't always keep up with the guy. Good problem

Ryan Rutan: to have, by the way.

Wil Schroter: Yeah, it's a great problem to have. Um, that said he's, he's full time, you know, and, and he, he's like 45 hours a week. And um, I, I wanna make sure that even in times if I need to draw back a little bit, let's say cash is tight or even if he's just outpacing, outstripping our, our, my ability to keep up with them, I wanna make sure that I have the availability because he's so good and he's done such a great job. I don't want this guy leaving and I, and I want this guy to, to stay on the bench and warm and potentially ready to go back in full time. That said it's hard, you know, I, I'm wondering like, um, and, and, and, and while this is the specific instance that I was thinking of, I was also thinking that this question is also applicable to, um, it could be any employee when cash is really tight. You know, it, it, it, instead of, uh, like, like you all were talking about bringing down salary, like maybe 50% to keep them in or to give them some runway to figure things out. Similarly. I was wondering like, ok, if you bring their salary down, let's say 50%. But you say, look like we're anticipating, ramping back up. The, the thing is, is that it's, it's you're anticipating, which is always, uh there's, it's always risky. Um But to, to, to say like, you know, we want to defer like maybe X amount of your payment is gonna come back and you can, you can plan that so that it's, you know, comes back to them in some capacity. So I was like, in terms of like a payment strategy, like, or, or, or like, uh you know, a way to keep your resources on board full time while either managing cash or other expectations, like not being able to have them actually doing work full time, but you still to make sure that you have access to that capacity as necessary, um you know, in, in planning things looking forward. So, yeah, that, that was my question. You know, it's a, it's an idea that's crossed my mind. It's an interesting one. I, I don't know how viable it is. Um uh So I, I just thought I'd toss that out there as a sort of another another uh you know, opportunity or option uh in terms of working with like a small team. And by the way, I'm a very small team like 33 people basically. So thank you for your, thank you for your insight. Appreciate it. I appreciate that. Um And, and actually I think uh uh Adam, you just mentioned this in the chat. I was gonna say the same thing. One thing we've been really successful with in past companies when things were tight, like being between funding rounds or something like that where we didn't, we didn't want to let anybody go because if we were just about to get our next round, we're gonna be back in a different situation where we had to hire again. So one of the things we were successful with is we pared down compensation for a determined period of time. In other words, we said I'm making this up salary are gonna be 50% for the next three months. And obviously, if, if that doesn't work for you, you know, we by all means help you try to find your next gig, but we'll also keep you on until you do. You know, so you have some cash coming in. But in the interim, uh while that's happening, we're gonna create a significant cash compensation to make up for the delta there so that you recognize, we still wanna reward you. We still want you to be part of the company. We just don't have cash and, and that's just, that's binary. We either have it or we don't. So when you say cash compensation, do you mean like uh like like sort of a uh an additional, maybe small bonus or something? Just to as a, as a? Ah. Ok. Yes, because we don't have cash. So, so we can't do that. We uh let's say, let's say the person was making $100,000 a year and we say, look, this sucks, but we can only pay you the pro rata of $50,000 a year for like the next three months while we're doing a capital round or while we're trying to figure things out again, it's better than 00 has got a very finite ending. They're recognizing we would like to, to keep you here. We're gonna try to make up for that other 50,000 with as much uh stock compensation as possible. Does that pay their bills? No, but it sends the right message that you still want them there. You, you're not incentivizing people with stock that you wanna lose, but you're just making it clear that we want you here, we want to pay you and as soon as we have the dough, that's exactly what we're gonna do and maybe they leave anyway. But if that was, if that's the case, that was gonna happen anyway. But I think that's a very simple if you will mechanism to create a little bit of compensation and really send the right message at a time when you don't have it. You don't have a lot of leverage. When they come back to the table, they would be at their 100 then they would also have their stock options that, that, that you provided to them. You bet, you bet. Ok,

Ryan Rutan: great. Yeah, I've actually seen a combination because I've not done it myself, but I've seen this done in combination where there was deferred comp that was um made up for with stock grants. And then at a point where the company could prearrange price, they would, they agree to basically buy it back for that deferred salary, right? And so it was a way of saying, look, we can't pay you now. We don't want you to just fully trust us with deferred comp. We'll give you equity in lieu of the deferred comp. And when we can, we will try to make up that deferred comp and buy back the equity and that was at the, the employees option, right. So the, the company got to the point where they had the cash, they said we'll buy it back now if you want to sell it to us. Um And I think about three quarter of the people actually said no, they wanted to keep the cash at that point because the company started to move. Um, you know, I've never done that, but I've seen it, seen it done as a way. Look, look because if it, if it's we can't pay you today, we'll pay you, we'll pay you tomorrow, right? Not, not always necessarily a ton of confidence in, in that being able to happen. At least being given some equity makes you feel like you've gotten something in return for your time so it can be and a slight additional lever for that conversation.

Wil Schroter: I I think with all this guys, it's just about being thoughtful about trying to like think ahead for those folks and try to help plan their future as well. Um And not just thinking about, hey, this is how it affects us thinking we have to affect these people, not just now, but we have to affect these people for the next few months. Like it, it, it's our responsibility to try to take care of people in that way we can choose not to do it. There's a million things we can choose not to do. But I think as we get smart about this and we learn more about this, we start to get good at it. Like anything else with that said, uh we're gonna let you guys go. Uh This was awesome. Hey, uh I'm sure I speak for Ryan on this one. We love when you guys come on the show. Honestly, it's the coolest thing. Otherwise I'm stuck talking to Ryan the entire time and you know how that goes most

Ryan Rutan: of our week.

Wil Schroter: Uh All right guys, it's good to see you. I'll see you online by a gang. So in addition to all the stuff related to founder groups, you've also got full access to everything on startups dot com. That includes all of our education tracks which will be funding customer acquisition, even how to manage your monthly finances. There's so much stuff in there. All of our software including BIZ plan for putting together detailed business plans and financials launch rock for attracting early customers and of course fund for attracting investment capital. When you log into the startups dot com site, you'll find all of these resources available.

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