Hootsuite layoffs ruffle feathers
Modest job cuts prompt speculation tech firm is ‘rightsizing’
Hootsuite, the digital media darling of Vancouver that went from a start-up with a few people in a Downtown Eastside office to global company with 700-plus employees in barely seven years, has laid off 20 people.
Although in the euphemistic world of public relations-speak that was described as 20 employees “transitioned” out of the business, the news still reverberated around social media channels.
Indeed, Hootsuite was more known for its “Hoothires,” giant hiring fairs that attracted lineups around the block, than its Hootfires.
Some greeted news of the layoffs with disdain: “My #Hootsuite Dashboard is buggy today. Guess they needed those 20 employees after all,” tweeted Vancouver rock writer Steve Newton. Others viewed it through a cup half-full: “#hootsuite — newly restructured and fortified. I hope we get to buy shares soon,” tweeted business consultant Kathy McLaughlin.
And while neither the company nor its founder and CEO Ryan Holmes was commenting beyond a written statement issued about the job cuts, likely they are more forthcoming with investors, who may be more interested in Hootsuite’s plans for an initial public offering. There is some speculation the company is “rightsizing” for profitability with an eye to preparing for an upcoming IPO, but Brent Holliday, founder and CEO of Garibaldi Capital Advisors, dismissed that conjecture. He said public markets would be more concerned about growth than profitability.
“I think the hand-waving saying Hootsuite is rightsizing for profitability for an IPO is false,” he said. “I would be worried if a tech company was trying to get to profitability for an IPO.
“I think growth is of more importance and it’s more valued in the public markets than profitability.”
In a 700-plus workforce, losing 20 people isn’t exactly decimating the ranks.
“If it’s 20 people laid off, it’s a haircut — they didn’t cut off a limb,” said Holliday. “If it’s 150 people laid off, maybe it’s about getting to profitability because they’ve burned too much money.”
Holliday says if the employees who were laid off were carrying out similar job functions and in the same part of the company, that suggests the area they were in, an acquisition or some plans, didn’t pan out.
Hootsuite has completed a global reorganization to create “a simpler, more aligned business that is purpose-built” to support the company’s more than 10 million customers, said the company’s corporate communications manager Sandy Pell in an email to The Sun.
“With this reorganization, we have merged some business units and cut others, which unfortunately meant we had to transition around 20 Vancouver employees out of the business,” she said.
When asked what type of positions were axed in Vancouver, Pell declined to comment.
Even as it announced the layoffs, Hootsuite said it will be hiring another 100 people in the coming year, although it didn’t say where those jobs will be located. And it recently went on an executive hiring spree, bringing in talent and experience that might come in handy for an IPO, including Open Text Corp.’s former principal accounting officer Sujeet Kini, who joined Hootsuite as its chief financial officer.
Ed Bukszar, associate professor of strategy at Simon Fraser University’s Beedie School of Business, said while the Hootsuite layoffs are something to watch, they are likely not a sign the company is downsizing. He echoed Holliday’s view that growth would be an important factor to public markets.
“An IPO is likely to be down the road a year or so,” he said. “Shoring up the income statement and balance sheets would help in that it would provide a good base for future projections regarding the value of the firm.
“But the IPO market would probably be more concerned about Hootsuite’s growth prospects when determining the value of the firm, and layoffs would not be positive news in this regard.
“By doing the restructuring now, managers are probably hoping that these layoffs would be distant objects in the rearview mirror when investors project the future value of the firm.”
Following Ottawa-based Shopify Inc.’s very successful initial public offering in May, Holmes said at a Vancouver conference that it would bolster Hootsuite’s own IPO plans and that they might want to speed up the timeline, according to a Thomson Reuters business report.
Bukszar said Hootsuite is clearly trying to present the news in a positive light by referring to future hiring plans.
“Given that this firm’s expertise is in managing social media, these projections should be taken with at least a degree of skepticism,” he said about the proposed future hiring.
Two years ago, Hootsuite bolstered its numbers by filling 100 positions in Vancouver. More than 1,000 people lined the street, hoping to be hired by the local start-up turned social media powerhouse.
Last year the company raised $60 million in a funding round that fuelled IPO speculation and that came on the heels of the previous year’s record-breaking $165-million US round — the largest private placement for a privately held tech company in Canada — that was led by a large Boston-based asset manager, with existing investors Accel Partners, Insight Venture Partners and OMERS Ventures.
“But the IPO market would probably be more concerned about Hoot suite’ s growth prospects ... and lay offs would not be positive news in this regard.
ED BUKSZAR ASSOCIATE PROFESSOR OF STRATEGY AT SIMON FRASER UNIVERSITY’S BEEDIE SCHOOL OF BUSINESS