In the beginning of the pandemic, we learned which companies were unprepared to handle a cataclysmic event. Now, as the world slowly starts to reopen in light of vaccinations, we’re learning which companies that soared during the pandemic also lost their discipline amid it.
Over the past two years, tech rightfully became more critical than ever for the services that it provided to the average human, whether it was empowering an entirely distributed workforce or helping us get access to health services via a screen. It also became vulnerable. Pandemic-era growth has always had a caveat: The tech companies that found product-market fit, and demand beyond their wildest dreams, are the same tech companies that knew their win was at least partially dependent on a rare, once-in-a-lifetime event that (hopefully) would go away one day.
Every growth round, mega-valuation, impressive IPO pop and total-addressable-market bump gave the appearance of strength amid the crisis. But the same tailwinds that drove so much value creation also quieted money-saving conversations and planning for a future deceleration.
Yet, a reckoning, or at least a re-correction, is starting to play out, as shown by recent news from Peloton and Hopin.
Fitness hardware company Peloton, which went public in September 2019, announced this week that it laid off 2,800 people, a cut that also came as CEO John Foley resigned from his role. I haven’t seen a layoff of that magnitude since Airbnb laid off 25% of its workforce at the beginning of the pandemic, citing revenue declines amid travel bans and COVID-19 concerns. In Peloton’s case, however, the layoff is less of a response to a pandemic jolt and more of a deflation after experiencing a surge of pandemic-fueled demand.
Live events platform Hopin is another company that experienced a pandemic boom and is now facing market whiplash. On the podcast over a year ago, we called Hopin the fastest growth story of this era. This week, I heard that Hopin cut 12% of its staff, citing the goal of more sustainable growth. The company and CEO Johnny Boufarhat confirmed the news — offering a completely different tone than the year prior, when he said that his company would be IPO-ready by 2022.
Here’s a telling blurb from a screenshot of Boufarhat’s internal Slack message that TechCrunch obtained:
“I worked with the leadership team over the last few months on our plans and it’s clear the opportunity for us has never been bigger. To seize it, we need to reorganize to align with our goals for greater efficiency and sustainable growth. This follows unprecedented growth and several acquisitions, and these changes include solving role overlaps and duplications that crept into the business.”
In Peloton’s case, the company struggled with faulty investments, such as a 20-year lease on an office building and millions poured into potentially unnecessary production facilities. In Hopin’s case, it acquired five businesses in one calendar year — and hired 1,000 people.
I haven’t even spent words on Clubhouse, the social audio app with exploding growth (that even its CEO has admitted slowed).
Not every reality check will come in the form of a buzzy workout bike with a cult following, or a company that was so hungry that it ate five others in 12 months. Some signals of change might be subtler, like a pivot or a reorganization; hell, a solid percentage of people who are taking part in the Great Resignation have probably had the Great Realization that it’s time to jump ship from their current employers.
The re-correction all feels obvious in retrospect, but wasn’t it always clearly coming? We always knew that there was an asterisk next to any growth result from the past two years, yet we all lauded impressive growth trajectories and consistently bonkers valuations.
The final lesson from the pandemic bump, and later deceleration, is which startups are disruption-proof. It’s a question I’ve been asking since March 2020, so it’s refreshing that the answers are starting to creep to the surface, albeit unfortunately at the cost of workers’ jobs.
Like I’ve said in the past, it has recently felt more idealistic to see the return of the lean, green startup. And now, unlike before, it’s not a proactive move to start preparing for a post-pandemic landscape shift. It’s happening, and we’re watching.
Current and former Hopin employees can contact Natasha Mascarenhas on e-mail at natasha.m@techcrunch.com or on Signal, a secure encrypted messaging app, at 925 609 4188. You can also direct message her on Twitter @nmasc_.
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