Monthly Archives: April 2020

How To Find A-Players In A Downturn

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I recently wrote about why hiring is harder in a recession than it is during an economic expansion. But, just because it’s hard (it is always hard) doesn’t mean you shouldn’t try. You should always be looking for A-Players to bring onto your team.

Hiring obvious A-Players is really hard because everyone else knows they are obvious and they will be extremely sought over (and very expensive). That doesn’t change in a recession. 

So, if you want to find the A-Players that are available, you can’t look for the obvious ones. You have to find the diamonds in the rough who don’t look like precious stones.

To find A-Players in a downturn, look for people that other people in Silicon Valley would discriminate against.

You want to find people that were passed over by other tech companies for reasons other than their talent and give them a chance. 

You can start with women and minorities. They are still very much discriminated against. Of course, few people in Silicon Valley will outwardly state that they want to discriminate against women and minorities.  And many companies even have active programs to reach out to them. You might not have an advantage in landing female and minority A-Players because there are a lot of other companies competing for this talent pool.

In addition to women and under-represented minorities, there are a lot of other categories of people who are actively discriminated against in Silicon Valley including:

  • Boomer generation (people born 1946-1964)
  • People that went to third-tier universities
  • Religious people (even slightly religious people)
  • People who are politically conservative
  • People with thick accents
  • People who are overweight
  • People who smoke cigarettes
  • People who are socially awkward

Let’s take a closer look at each of these categories.

Hire people over 55. 

Tech companies tend to be extremely biased against people with grey hair. This is especially true of older people who are seen as “past their prime” or recently part of a company that crashed and burned. It is extremely rare for a tech company to hire an individual contributor that is over 45.  And this trend is likely more pronounced during an economic downturn. 

There are plenty of people who, in 2008, ended up taking the Director-level job at Digg instead of at Facebook (even though they had job offers at both).  The ones who went to Digg are seen as past their prime and the ones that went to Facebook are living on their own private island and serving on the boards of directors of hot start-ups.  Just because the person made a wrong financial choice 12 years ago does not mean they cannot add immensely to your company.

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Is it ethical for tech start-ups to take a CARES PPP loan?

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There is a lot of debate about whether it is ethical for technology companies to take a CARES PPP loan. There are a lot of good arguments on both sides.

There are a lot of venture-backed start-ups that have over 12-months cash in the bank. The question is whether is it ethical for them to take this government money. The argument is that there is a limited pool of cash and that many local businesses are struggling and need the cash more than venture-backed start-ups.

This is a very complex ethical dilemma.

Before we get into that exactly … let’s dive first into the question of whether it is ethical to take government money at all if there is someone more needy than you.

One example is QSBS tax credit. That is a significant tax rebate that is given to investors who invest in a qualified small business (including most venture-backed businesses). It is an extremely generous credit and most of the people who take advantage of it are very rich people. Is it ethical for these people to take advantage of the QSBS tax credit?

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5 Reasons Why Hiring in a Recession Is Harder Than You Think

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Hiring is always hard. And if you want to hire someone that is super talented, hiring is always really, really hard. And the stakes are high because the employees are the lifeblood of the business. They are what allows the business to compete. To improve. To grow. 

Some people think that hiring and recruiting in a recession is easier than during an economic boom. But it might actually be harder. 

Here are 5 reasons why hiring in a recession is harder than you think: 

1. A-Players are harder to find because there are more C-Players looking for jobs.

While every employee is vulnerable in a downturn, companies usually let go of their C-Players to save money.   

C-Players are the least-productive employees at the company and companies generally let them go in the first round of lay-offs.

A-Players – those employees who are 5-10x more effective than the average employee – are rarely let go during a recession. They are the company’s best employees. Management should be willing to do anything to keep them around (and if a company does lay-off their A-Players, it has made a huge error and will not thrive in the recession).  

So, with a mass exodus of C-Players from employment and about the same number of A-Players available, the talent pool gets diluted. You are going to get a lot more C-Player resumes in proportion to A-Players than you would during an economic expansion. This makes it harder to identify and hire the A-Players that are available. 

The noise goes up but the quality stays the same. 

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There’s no good way to lay-off employees in a recession, but some ways are better than others.

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A recession forces almost every business to make difficult decisions. 

Whether it’s cutting back on discretionary expenses, finding a smaller office space to work out of, or (worse case) letting go of freelancers and employees, companies must do whatever they can to survive. 

SafeGraph is in a fortunate position entering this recession (we are still hiring and were profitable in 2019). So we will not have to go through the grueling pain of letting our colleagues go (but I have been there before in past companies). However, many of the 100+ of the companies I am an investor in had to do layoffs in the last month and I wrote this piece for them.  

There is no good way to lay-off employees during an economic downturn. But some ways are better than others. 

Here are some rules and tips for those companies falling on hard times during a recession…

Never, ever, lay off your A-Players.

This may seem obvious (why would any company ask its best people to leave?), but countless companies tell their highest performing people to go. This is really, really bad.  

If a company lays off just a few A-Players, first, it loses all of their contributions. Great employees are great because they bring a lot more value than average employees. 

But there are second-order consequences too. The remaining high performers will become fearful for their job when they see A-Players let go and will start looking for work. And once your high performers are looking for jobs, they are not going to be focused on helping the company. 

A company that is experiencing hard times and distress needs all its amazing people focused on making the company better. Never lay off your A-players.

And even if your A-Players are in an area of the company that you need to lay-off (like maybe you need to cut your restaurant marketing team), keep the A-Player and move them to another team to make a contribution. 

Photo by Marten Bjork on Unsplash
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Here’s How Your Start-Up Can Not Only Survive the Recession But Actually Come Out Stronger

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Photo by Becca on Unsplash

It is April of 2020 and we’re entering a significant recession.  As they say, winter is here. 🥶

While each downturn is different, there are common ideas and practices that have been proven to work from one recession to the next. 

Here are some of my thoughts from a geezer that has scars from the crashes of 2000 and 2008.  Some of these are obvious and some are non-obvious but hopefully, they will help you manage your business successfully and grow while others merely try to survive. 

Get the CFO on your side.

The CFO has much more power in downturns than you think — do everything you can to get her on your side.  If you are selling to a company, see if you can sell to the CFO. 💸

If your product can save the company money, they are going to be much more interested in using your services. In a recession, finding cost savings becomes very attractive. If the CFO is your advocate based on the numbers, you are going to have a much easier time selling.  🤑

Photo by Amy Hirschi on Unsplash

For example, open-source solutions (starting with LINUX) really took off following the dot-com crash. This is because companies realized that they could replace super-expensive SUN boxes with cheaper (yet still powerful) LINUX units. Many for-profit companies benefited from this trend.

If you are a SaaS company, prioritize customers that are doing what you are doing in-house.  Often you can find companies that are paying over $1 million dollars a year to do what your software does for $60k.  And yes, your software might only do 80% of what their in-house solution does… but is that extra 20% really worth $900k+/year? Probably not. 

This is also true in the B2C world — in downturns consumers look to save money. Groupon was the breakout company of 2009 because they rallied around saving groups of people money. Sometimes capital constraints can spur innovation. 

If you can find a way to save your clients’ money and get CFOs on your side, you can grow your business during a recession. 

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