The lesson of Twitter layoffs to start-ups: A big step, easy to pull an egg

Twitter has just released a message claiming that it has completed 8% of its downsizing targets, a total of 336 people. As one of the most creative companies of the past decade, what lessons did Twitter give us in addition to being lively and sentimental?

Twitter is chess a stupid step? Will Twitter end up being a crushing downfall as the experts predicted? Or is that a sign that Twitter is on the decline, with rival rivals starting to carve up their turf?

The lessons of Twitter

I don't think the above is right. I think the lesson of the incident is this: The incident has sounded a wake-up call for the rationalization of the VCS industry! As a venture capitalist, I know that our venture capital will be a certain contempt for those who do the public market investment. Everyone from the VC at ordinary times to hedge fund managers, activist investors (activist investors), double-decker equity structure of the comment on the one or two.

The fact that we have to face the grim truth is that the public market is much quicker to heal itself than the private-equity markets that we are facing – that is, startups that don't have IPOs. So I think we can still learn a lot from the public investors.

In fact, Twitter is still a great business, and it still has a limitless future ahead of it. But like many other companies over the last five years, it has done too much to expand its strategy at some level, and has carried out some pre-selection work beyond its current earnings. When you take too much weight when the step is big, of course, it is easy to pull the egg, then stop to slow down, re-recuperation adjustment and then with the egg of sadness light, it is inevitable.

I think it also indicates that this situation will soon appear in our private market. I see it as a guideline for our VCs, which may also be the "Farewell, Good Times" (RIP good Time, which is a 7-year-old Sequoia Capital article, which the reader is not aware of).

So what should we stop and look at again? I think the following aspects are the first:

• Where is your current net burn rate?
• How much do you have in your cash balance?
• What is your income growth rate, which is indicative of how many months you have to support your bankroll in this situation?
• If you need to make the next round of financing, how much money can you get from your existing assets?
• Is your last round of financing overvalued so that you will have difficulty in the next round of financing/Do you need more time to grow to the next round of financing goals?

Then we should plan to:

• If you have a huge cash balance, a strong growth rate, and enough money to survive for more than 24 months, then you can now say coasting, nothing to worry about.
• If you have a cash balance that maintains less than 18 months, there are some potential weaknesses in financing (whether because of slow growth, excessive competition, risk of user concern, and other reasons), so it is time for you to consider spending cuts. In this case, if your 80% of your spending is on the staff, then you should consider downsizing.

That sounds awful, doesn't it? Yes, you will have to cut off some of the people who may have been with you for years. But if you don't, I'm sure you'll have to cut more people to survive when the cash flow is running out. For example, when you have only a 4-month cash flow remaining, you might have to lay off 60% of people to survive.

"Goodbye, good Times"?

Before a company asked me if I should give up their current expensive office location, I replied, "should have done so!" "Because their cash will only last about a year. Another company is planning to move to a luxury office and have a long stay, and the advice I give them is to stay in the current office place, not the time.

I often see some of the books on the long-winded explanation why a business can not dispense with the space to drink coffee, layoffs and so on. "In doing so, our company's morale will be greatly compromised!" "People will think we are going downhill and resigning." "This, I beg to disagree.

Leaders are honed in hard times. When everything goes smoothly, everyone has a fondness for leadership. When reality gets tough, really good leaders still have a big gang around them. After the 2008 financial crisis and the 2000 dotcom bust, we all saw a large number of founders of start-up companies abruptly to adjust their money to normal levels.

I believe that many of us have experienced these two incidents. It's really not funny, but it's a must. After all this hard work, our start-ups will have a healthier team so we can get rid of the fat that came out of the wind and regain the momentum we had before.

So it may not be time to say "Goodbye, good times." But I am still willing to say "good-bye, excessive speed of burning money." If you don't say goodbye to it, sooner or later, everyone will say goodbye to you.

On the whole, Twitter is a great product and a great company. The news today is sad, but it will also help Twitter get healthier. At the same time we should learn from it, step not too big, carefully tore the eggs.

Note: More articles please pay attention to the public number: Techgogogo or personal blog http://techgogogo.com. Of course, you are also very welcome to pick up directly (ZHUBAITIAN1). The English version of this article is from Bothsidesofthetable., the Chinese version is compiled by Heaven Zhuhai Branch Rudder. This article starts my idonews column.

The lesson of Twitter layoffs to start-ups: A big step, easy to pull an egg