I Fired 35 People And It Changed My Life—-For the Better

By Jay Valentine

Once I was the victim of VC financing and the forced steroids it injected into my company.

We had just delivered the Ebay fraud engine and were fast to becoming the standard for some very interesting fraud detection. We vaulted from almost bankruptcy to over $100 million in valuation. Our VCs wanted us to take in a lot of financing (so they could mark up their investments) so in it came.

And with it came the dreaded orders from to board to spend a $10 million round as fast as we could.

Every board meeting was all about how many people we were hiring. We “needed” people in marketing, sales, customer service (we had 7 customers), and admin. The board brought in their own candidates and “suggested” that we hire them because they were great at previous companies.

Overnight, our focus went from building a highly innovative search engine that could find things which no other technology in the world could find to hiring 2X our company employee number.

Being early entrepreneurs and a first-time CEO, I did what the VCs told us to do because we (I) thought they must know best.

Were we ever wrong!

Lesson one is that VC’s are investors, not usually operations people. And if they are or were ops people, they were the management types who hit it big at some company someone else founded. They just got rich (lucky) managing the enterprise as it took off.

Anyone can ride a rocket. Not anyone can build one that will take off.

About 6 months after this hiring binge, the CFO and I were spending most of our day managing conflicts, going to useless meetings, spending hours in totally ineffective activities.

Fortunately, a major contract we were expecting stalled. When it did, to make the numbers work, we had to lay off 35 of 120 people. I had to terminate all of them myself over two days.

While that action took its toll emotionally on everyone involved, our world changed much for the better a month later.

The CFO and I were meeting and she asked me if there was anything that I recognized in our daily activity. I told her I was working on real issues, getting customers, finishing a new version of the product and having a great time.

She as well.

We both recognized that hiring people you must manage is a very expensive proposition. They can suck the life out of an organization if they are hired to meet some plastic, nonsensical goal of investors.

We were killing the company by listening to the investors.

Our lesson came quite clearly after the 35 employees departed. We were not managing useless effort, we were managing real, effective work.

Meeting time dropped by almost 75% and we could feel the activity pick up.

The lesson was that I will never hire another person for a startup unless that person is taking a defined, tangible, load off my shoulders or someone else’s in the organization. It is far better to work two or three jobs than to hire two or three people.

And never let your investors drive you to do stupid stuff. In fact, skip the investors, sell your way to liquidity.

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