Snap CEO Evan Spiegel laid down some classic corporate-speak this week in a memo to employees, warning them that hiring would slow down amid an unexpectedly rough second quarter.
“Our most meaningful gains over the coming months will come as a result of improved productivity from our existing team members, as we work together and help our new team members get to know Snap and learn how to contribute to their full potential,” Spiegel wrote, per Bloomberg.
In other words: Get ready to do “more with less.”
Few phrases inspire more emphatic eye-rolls among the rank-and-file, but some variation of that dreaded mantra is starting to spread across Silicon Valley.
As the tech market sags under economic pressures, the list of big-name tech companies issuing layoffs or announcing plans to slow down hiring grows by the day. A sampling of the roster: Facebook parent Meta, Netflix, Twitter, Lyft, Uber, DoorDash, Coinbase, Robinhood, Carvana, Vroom, Peloton, and GoPuff.
The pullback on staffing comes as Wall Street shifts its focus from long-term growth to short-term returns, an ominous move for startups still burning cash or barely eking out profits. While many companies are trimming costs through attrition, they still need to grow revenue to consistently reach break-even points.
“Our near-term action plan will be focused on accelerating profits,” Lyft president John Zimmer wrote Tuesday in a memo to staff outlining hiring and spending cutbacks, according to The Wall Street Journal. “Whether we like it or not, that’s the ticket of entry in today’s market.”
The belt-tightening makes for a complicated tech employment landscape, with the potential to widen gaps between industry behemoths and scrappy upstarts.
Hiring remains highly competitive, the product of limited workforce supply meeting huge demand for tech products. The tech industry trade group TIAComp reported that tech occupation job postings through the first four months of 2022 are up 40% year-over-year—a rate that will come down as hiring freezes take effect. Several cash-flush companies—Alphabet, Amazon, Apple, and Microsoft, among others—have restructured their pay policies this year to boost employee salaries amid strong competition for labor.
Meanwhile, employees at tech firms under more investor scrutiny face added pressure to produce, all while the prospect of layoffs and wealth losses loom. As Insider reported earlier this month, some staffers whose compensation is largely tied to restricted stock—a more common practice at younger companies like Uber and Block (formerly Square)—have registered six-figure paper losses.
“It has definitely reduced my stickiness to the job,” an anonymous Block employee told Insider. “There’s far less to lose if I were to leave (for) a competing offer somewhere else.”
The staffing adjustments set the stage for an uncertain second half of 2022.
The current generation of mature upstarts grew up in a spend-money-to-make-money environment. Now, companies like Uber, which stomached multibillion-dollar losses in recent years, must prove that they can cut their way to profits while keeping their workforce intact.
“This next period will be different, and it will require a different approach,” Uber CEO Dara Khosrowshahi told employees earlier this month while announcing a reduction in hiring. “In some places we’ll have to pull back to sprint ahead. We will absolutely have to do more with less. This will not be easy, but it will be epic.”
Has your company cut back on hiring, perks, or other spending in recent weeks? Want to share any thoughts about it? Drop me a line here. (Responses will not be published or shared.)
An ad omen? The huge selloff of social media company Snap led to sharp divides Tuesday over the immediate outlook on the broader digital ad business, which faces mounting macroeconomic and geopolitical pressures. As Snap shares sank a single-day company record of 43% after a warning of lower-than-expected revenues, analysts were split on whether the disclosure portends a sector-wide decline in sales growth for the current quarter. Pinterest, Meta, Twitter, and Alphabet all saw their share prices drop by at least 5% Tuesday, though each stabilized in mid-day trading Wednesday.
In another galaxy. Samsung plans to spread $350 billion across multiple parts of its business over the next five years, a seismic investment that signals its willingness to plow through global economic uncertainty, CNN reported Tuesday. The South Korean tech conglomerate will devote most of the money to its semiconductor, biotechnology, telecommunications, and artificial intelligence units. Samsung expects to spend about 80% of the money in South Korea.
Crypto or bust. Venture capital firm Andreessen Horowitz announced Wednesday the creation of a $4.5 billion fund dedicated to crypto, shrugging off concerns about recent volatility in the market, TechCrunch reported. It’s the largest of Andreessen Horowitz’s four funds, with a pool roughly double the size of the most recent one. At least one-third of the money will go toward seed deals for crypto startups.
Still flying high. SpaceX’s valuation reached about $125 billion after the aerospace outfit secured more than $1.5 billion in its latest investing round, The Wall Street Journal reported Tuesday, citing an investor familiar with the figures. The added funding comes as SpaceX founder and CEO Elon Musk faces questions about time management in light of his planned Twitter acquisition and day job as Tesla CEO, as well as scrutiny over a claim of sexual harassment made by a flight attendant. SpaceX continues to invest in developing its Starship rocket system and Starlink satellite-internet service.
FOOD FOR THOUGHT
Pinching pennies. Coinbase, the nation’s leading cryptocurrency exchange, has run ahead of the pack since its founding about a decade ago. Its latest breakthrough: becoming the first crypto company to crack the Fortune 500 list. But as Fortune’s Declan Harty writes, the once-booming company now faces serious questions about a recent swoon in paying users and broader fears about the crypto marketplace. Coinbase executives have navigated these issues before in their run, but never while running a company with a market cap of $14 billion and regulators breathing so heavily down their neck.
From the article:
In mid-May the company shocked Wall Street by announcing that its once voluminous profits had plunged to a $430 million loss. Monthly transacting users, the holy grail for measuring customer activity, fell from 11.4 million in the final three months of 2021 to 9.2 million, and the company expects that to fall further in the second quarter. The stock has plunged 73% year to date, from a high of $252 to around $67.
It is all together a stunning reversal for a company accustomed to being, well, first.
IN CASE YOU MISSED IT
Apple was the most profitable company on the Fortune 500 list this year. These are the biggest profit generators, and what that means about American business, by Will Daniel
Jack Dorsey accused of ‘backstabbing’ his own Twitter board by helping Elon Musk, ex-director claims, by Christiaan Hetzner
Exclusive: BlackRock, the world’s largest asset manager, debuts gender-lens investing, by Emma Hinchliffe
U.S. supremacy in A.I. may hinge on these proposed policies, by Jonathan Vanian
Do Kwon’s proposal for a Terra blockchain ‘rebirth’ just passed by 65%. Here’s what that means, and what happens next, by Marco Quiroz-Gutierrez
TikTok launches livestream subscription service to compete with Twitch, by Cecilia D’Anastasio and Bloomberg
Ricky Gervais’ Netflix special blasted as ‘anti-trans rants’, by Lynn Elber and The Associated Press
BEFORE YOU GO
Grandma’s got a new friend. Some nanas in New Rochelle and pop-pops in Poughkeepsie might soon get company. As The Verge reported Wednesday, New York’s State Office of Aging plans to place about 800 robot companions in the homes of Empire State seniors, part of an experiment aimed at tackling social isolation among elderly people. While the robots can’t cook dinner or fetch the mail, they’re purportedly capable of holding conversations and remembering key details about a person’s life. Nearly one-third of seniors live alone, an arrangement that researchers believe contributes to worse health outcomes. Some critics of the robots, however, argue the products dehumanize senior citizens and allow younger people to ignore their elders.
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