Etsy grew rapidly and organically for a decade, and never figured out how to grow intentionally in an ROI-positive way. As a private company it was not particularly concerned with revenue per employee, and headcount expanded like a gas to fill available revenue. After going public it was way too slow to realize that this wasn't going to fool the public market.
I feel deranged pointing this out, but hiring triple the headcount you need to run your business is not a progressive social value. I don't know what it is.
n.b. I worked for Etsy from 2007-2014. My own values force me to own this.
To me it feels like a byproduct of an overemphasis on a certain kind of inclusiveness, in which people are elevated based on how long they’ve been around and how much buyin there is into the mission. Everyone’s opinion is valued, everyone wants resources, everyone wants to be promoted. If there’s not money constraints or a sense of practicality driving decisions, everyone gets headcount and promotions, driving bloat.
My last job was with a very mission driven startup. We were short on money so headcount wasn’t bloated, but we were plagued by “managers” with no one under them who’d been around since the beginning and didn’t contribute much. The product drifted, and we wasted a lot of time.
I switched to a new, more unapologetically capitalist company, and my team has been subject to some absolutely cold blooded re-orgs. It’s a much less friendly place, but much, much better run in terms of getting stuff done.
Not sure what the moral is. I made some great friends at the first company, not so much at the second. But the new place is in many ways a much less frustrating place to work.
From an investor's point of view this would not be ideal. Having said that, from a broader societal point of view, it's less clear.
Put it this way: as an investor, I am going to view a business that has 1 employee (on $100k) and $1m in profit much more favourably than a business that has 10 employees (on $100k) and $0.1m in profit. From the broader societal point of view though, the second arrangement could be better.
More activities across the same labor pool makes more wealth in a society than fewer activities which consume all available resources. This is why we're much richer now that 70% of workers aren't farmers.
All hypothetical. But the point is wealth can't be the only measure of success.
Wouldn't it have been fine to not go public?
That is, it sounds like, regardless of whether Etsy was profitable (in the sense of producing dividends), it was at least breaking even: it was hiring as many people as it could support on revenue, but not more, and certainly not as many people as it could support on venture capital raised in exchange for equity (or worse, debt). Is that correct?
If so, why should a company like Etsy even bother to go public? What did it gain that was worth being subject to the judgment of people whose value system is that breaking even isn't a good goal?
(I got an Etsy job offer days before the layoffs. It basically sounded like the Etsy I wanted to join died that day, and I still haven't understood why the "old Etsy," pre-IPO, couldn't have lived.)
Etsy took $85m in VC funding. Those VCs want an exit. So, in my mind, they made the decision to eventually go public at the same time they made the decision to take that funding.
I do agree with your broader point "Wouldn't it have been fine to not go public?" but I think if you want to plan to not go public, you probably should bootstrap your company instead of taking VC funding.
There was zero reason for Etsy not to be profitable. It over-hired and over-spent.
Now I am curious. What's so wrongheaded about it?
There's a certain bay area company that has a large developer office here in my rural state. They've been hiring as fast as they can for the past few years. From all my friends who work there, I get the impression that there are way more people now than there is actual work to do. And yet they continue to hire because I assume head count alone is primary metric.
People learn from their mistakes, but apparently Fred has not.
"I have heard from quite a few founders that they read the book Hatching Twitter and came away thinking that they would not want to work with me. That sucks for me but I don’t regret anything I did or said in the events that were described in that book." [0]
[0] https://www.quora.com/What-does-Fred-Wilson-think-about-Hatc...
I'd be curious to learn Fred Wilson's explanation why going public was the best thing that ever happened to Etsy.
- A hated executive team that wreaked absolute havoc in the lives of thousands of people for the sake of a thought experiment which failed, which had failed elsewhere, and could have been implemented in a sensitive and non damaging way anyway. I met a member of this cabal socially years later, and because of personal connections and the need for social smoothness (I have a family and a mortgage so I can't just flounce about) I was compelled to play nice and chat. Over the course of the conversation I realised that this team believed that they had been on a mission to save the company and that they had succeeded, that they were loved by the people they had maimed (many of whom would have had to be restrained had they been in earshot of the conversation) and that they had been removed and denied the credit by "dark forces"!
- Employees who when asked opinions about strategic decisions articulate positions that are the polar opposite of the agreed corporate position and sound lunatic (initially) but on reflection, well it turns out that these positions are absolutely as consistent and coherent as the product of 100 slide decks.
- Retired colleagues who ask about some initiative or team that is now entirely forgotten in the corporate body, but when it is mentioned I suddenly realise that it was hugely important and significant, but like Stalin's victims, it's been airbrushed out of history!
- Execs who's focus is on trivial aspects of the business and / or who openly articulate conspiracy theories about grass root business units "I bet they're itching to..."
From Wilson's point of view the pressures and outcomes that he observes are likely significantly resolved and mitigated by the IPO that they did. He probably reflects over a view that moved from immanent displacement and forced illiquidity (due to investors refusing to wave conditions and covenants in agreements that would then mean that no new cash could be generated) to a sunlit upland of board freedom (now threatened by asset strippers). This is not a perspective shared by the founders or employees or even customers, but Wilson almost certainly hasn't spent the considerable cognition required to get that idea.
And this is the problem, even relatively little companies like Etsy are staggeringly complex, there's just too much to consider for a human to fit the required views in. To get the view you have to constantly review and consider and check.. leaving no time to do, and do is needed!
Roll on corporate AI!