Since January 2022, Glossier has laid off about 80 workers (or a 3rd of its company workforce), most of whom had been on its tech staff.
Though the corporate targeted on expertise when it was actually a magnificence enterprise, it isn’t arduous to see these layoffs within the mild of the general public market tech meltdown.
Many venture-backed firms imagine they’re tech firms — certainly, they had been born that manner — when in actual fact they aren’t. Leaders at these firms must study the enterprise they’re truly in, what makes these firms good, and direct their technical efforts in direction of these ends.
The elemental disconnect: Software program-enabled companies don’t essentially monetize the identical manner that software-based companies do.
Know-how firms get the richest valuations and are endowed with the best multiples of any sector. Pursuing these greater multiples means going to nice lengths to point out, each operationally and financially, that you just “look” like a tech firm.
For a agency like Glossier, wanting like a tech firm is the distinction between having a price-to-sales ratio of 5.44, like Estée Lauder, or 31.6, like MongoDB. Glossier founder and CEO Emily Weiss is aware of it, and her traders do, too.
Tech firms are extremely valued for a cause: once they work, they’ve excessive progress charges and really excessive margins. Firms subsequently typically make product choices to attain a tech enterprise profile — like investing in engineering or eschewing margin-hitting operations.
Hunter Stroll, for instance, identified that pursuing software program margins could also be one cause social media firms avoid the cost center of human moderation.
The problem with all these choices is that you’ll direct your technical expertise on the flawed issues.
However the narration modifications when you go public. The markets work by taking firms, categorizing them, after which evaluating them on well-known metrics. You don’t get to determine what sort of firm you’re.
You would possibly market your self as a tech firm, and it’s possible you’ll very effectively use expertise, but when the general public markets determine you’re a magnificence firm then, effectively, you’re a magnificence firm (at the least for valuation functions) till you show in any other case.
