
LivingSocial Is Laying Off More Than 50 Percent of Its Staff - danso
http://recode.net/2016/03/16/livingsocial-is-laying-off-more-than-50-percent-of-its-staff/
======
jedberg
"The company has raised more than $900 million to date from Amazon, J.P.
Morgan and Lightspeed Venture Partners."

That's the biggest red flag for me. General rule of thumb is that your VCs
won't approve an exit unless it's for at least 10x the funding you've taken,
which means they need a minimum exit of about 10 billion.

That's a tough spot to be in, and really changes your thinking. I know of at
least one company that had an exit opportunity but it was only 2x funding, so
the investors wouldn't allow it. They then slogged along for _8 more years_
until they finally had an exit that was 0.2x and it all went to the series A
investors with their preference. Founders got nothing, angels got nothing,
employees got nothing, and series B and beyond (the ones who blocked the 2x
exit) got nothing.

Edit to clarify: I'm not saying the VCs are doing anything wrong here or being
irrational or anything like that. I'm saying as a founder you need to watch
out for this because the VC has a diversified portfolio and the founder
doesn't.

~~~
pc86
A bird in the hand and all that.

Surely the VCs have the data on how often they get burned by blocking a
profitable exit. How often do they block a 2x return and later get 10x? Is it
really enough the compensate for the (sure more common) result of getting 0.2x
or 0?

~~~
sawthat
I worked at a .com era startup that went through something similar. Biggish
acquisition offers came in circa 2001, but much smaller than the theoretical
enterprise value if the product worked out.

Company finally sold in 2005, preferred shareholders got everything but still
lost money. Founders got nothing, employees got nothing. But everyone got to
keep their jobs which was better than just going out of business.

This seems to happen pretty often. Also common is founders turning down
acquisitions because they are _sure_ they can make more if they keep at it.
You wouldn't start a company if you didn't believe it.

~~~
x0x0
I "lost" well over a half million dollars because founders turned down a
$50-$60mm acquisition offer to try to hit a home run. The problem was the ceo
had been previously acquired and left before he fully vested in order to start
the company I worked at, and had walked away from $5m in the process. (Which
is crazy, right? That's a $5m bird in hand if he just didn't get fired for 2
years.) Anyway, he was really attached to the idea of building a company worth
$300m plus so instead he built a company worth a handful of millions.

It was pretty damn frustrating for me.

~~~
mahyarm
There are so many of these stories of wealthy founders turning down bird in
the hand offers and then losing it all X years later even though the company
got 'big'. I too got burned by one myself.

I advise friends now to avoid those companies as employees, because an exit
that would be very good for you might be turned down by wealthy founders.
Joining a startup with a wealthy founder means they will go huge or bust, and
nothing in between. Great if you want to do that yourself, but you usually
want to be wealthy already.

~~~
nedwin
Which is kind of funny advice since essentially you're suggesting to avoid
working for companies with successful founders.

~~~
st3v3r
Just because the founder is successful doesn't mean they have your interests
at heart.

~~~
g8oz
It's very naive to bet your future on the hypothetical benevolence of other
people.

------
dude_abides
Funny, typing "livingsocial layoffs" in google gives me these suggestions
"livingsocial layoffs 2015", "livingsocial layoffs 2014", "livingsocial
layoffs 2013"

~~~
freshyill
Don't forget 2012—that's when I got it.

~~~
txdv
I see, an early adopter!

~~~
bigheadpercoli
Damn hipsters

------
ahallock
I'm surprised these sites are still around. To me, offering your services at
50% off screams desperation or that your business is going under. I bought a
deal once from Groupon and couldn't even bring myself to use it at the
restaurant. It was a high-end establishment and the thought of pulling out the
crumpled paper voucher, which I printed when the ink cartridge levels were
low, cheapened the whole experience.

~~~
mrestko
I don't think your Groupon experience is representative.

~~~
deadlycrayon
But it's still an experience. Enough of one that he/she is willing to post
about it publicly, perpetuating how the service feels - cheap.

~~~
chrshawkes
It was a good thought too. I've known about Groupon and Living Social for
years, but have heard too many stories about the businesses they supposedly
work for frowning upon customers that attempt to use the coupons. Restaurants
putting patrons in the back or in some side room, giving them limited options
on the menu etc...

~~~
whitegrape
Seems counter-intuitive that restaurants would treat them poorly. If you're
savvy enough to use Groupon, you're probably savvy enough to leave a Yelp
review.

It's interesting how one's perspective on something differs, one sees it as
"cheap" while another sees it as "thrifty". Related to upbringing, perhaps? I
love it when I can get two $60 meals for one $60 price.

~~~
zippergz
Your point about Yelp reviews is good, but I'd say that reviews from people
with Groupons, Living Social deals, going on Restaurant Week, etc. are
generally worthless, and I've often wished for a way to filter them out. And
it's really for much the same reason that I think restaurants tend to not
value those customers a lot. First, if they'll only come in with a really
great deal, they're not likely to become repeat customers at full price. And
it's not profitable to nurture a customer base who only buys when there is a
sale (just ask JC Penney). And since they've already demonstrated themslves to
be "thrifty," they're also less likely to buy extras like alcohol, dessert,
etc. that make the visit profitable. There are few businesses that want to
attract people who care only about price, but that's the behavior that Living
Social and Groupon encourage.

Secondly, and admittedly on a much more anecdotal note, it seems that these
customers are prone to acting entitled and complaining loudly about things
that are non-issues compared to the regular clientele. Most people who don't
like Thai food simply don't go to Thai restaurants. But there's a pretty
decent Thai place near my house that tried Groupon, and got a handful of
really bad Yelp reviews from people who seriously seemed to just hate Thai
food. A couple of them explicitly mentioned Groupon, and the owner told me
that she believes that all of those reviews were Grouponers (and the deal
didn't restrict what they could buy, so they got the same food as everyone
else). Their complaints had nothing to do about the specifics of the
restaurant (which has almost universally good reviews). This serves no one.
The diners get a meal they didn't like. The restaurant takes a ratings hit.
And Yelp users see artifically low ratings for a good restaurant. If I'm
looking for a Thai restaurant, I don't care what people who dislike Thai food
think -- I already know they'll hate it.

------
parfe
Coupon circular not worth billions?

Maybe they can hold another round of funding where investors pay $30 for
"$100" in stock.

~~~
ljk
only 48 hours left and over 100 people have claimed it already!

------
swanson
NEW DEAL: 50% off your burn rate!

Hurry! This deal expires Q1 2016.

~~~
striking
That was a burn in and of itself.

~~~
goldenkey
At half off. Don't forget!

------
hyperrail
It's even worse than that if you include recent past job cuts too:

> LivingSocial will employ around 200 to 225 people after the cuts.

> [...]

> The Washington, D.C.-based company has now cut nearly 900 jobs over three
> rounds of layoffs since Thakar took over for founder Tim O’Shaughnessy 18
> months ago.

~~~
buro9
With numbers like that I bet that the people that remain are barely able to
maintain their existing systems and hold on to existing customers.

------
protomyth
"though around 120 of those jobs in customer service will be replaced through
outsourcing."

Hiring a cheap call center in some other country I suppose.

~~~
product50
So what? Would you rather have the company scale and have a chance to do well
or let it fail given their current cost structure. Think long term. If the
company does well, they will hire more Americans workers in roles which do
require more application and intellect.

~~~
tomjen3
I actually think customer service require more skills than it may appear
straight away - you have to learn to make angry people like you, or at least
think they have been treated fairly.

And I have never seen a successful startup that didn't listen to its users -
which you can't do if the people who are supposed to talk with them are in a
different continent and don't understand the language really well.

~~~
moron4hire
I agree. Customer Service needs to be an equal partner on the team with Sales
and Development. Growth is great, but it means nothing if you're bleeding
yourself dry by not serving those customers you're obtaining.

------
SilasX
So anyone been keeps it a running list of the tech layoffs? We have IBM,
optimizely, zenefits, and who else?

~~~
rb808
I miss f __ __*dcompany.com so much. There really should be a 2.0 these days.

~~~
brianmcconnell
I once owned the domain deadherring.com (with the idea of something like FC
with more in depth analysis). I regret letting that go.

------
freshyill
Wow, they'll be down to ~200 employees. They were at around ~5,000 in
2011/2012, I think.

~~~
marrone12
A lot of those employees were also via their international acquisitions, which
I believe have all been sold for pennies on the dollar.

------
robodale
...and this, my friends, is why I am bootstrapped.

------
programminggeek
Sad, met some of the LivingSocial developers at RubyConf. Not sure how many
are involved. I hope everyone lands on their feet.

------
free2rhyme214
2016 reminds me of Eminem's song "Lose Yourself" when he says, "Snap back to
reality. Oh, there goes gravity..."

[https://www.youtube.com/watch?v=vksfnZaZ0A4](https://www.youtube.com/watch?v=vksfnZaZ0A4)

------
p4wnc6
_Always negotiate severance pay._

Do not ever let an HR respresentative make you feel like it is greedy or
disloyal for you to ask for fair severance pay to protect you in the event of
unexpected job loss.

