Namely, an eight-and-a-half-year-old, New York-based company that sells payroll, talent management and other HR services to mid-size businesses across the U.S. via subscription software, has let go of upwards of 40% of its roughly 400 employees.
The cuts are across the board, from high-ranking staffers, including a CFO who was brought on almost exactly two years ago, and a chief security officer who has spent just the last year with the company, to its entire customer success team.
In a call earlier today, Namely CEO Larry Dunivan said the company had reduced executive pay five weeks ago, hoping to avoid layoffs, but that the coronavirus and its impact on the business made that impossible. He also shared the difficulties of running a startup right now that depends largely on small- and medium-size businesses, noting that even though Namely's customers sign up for between one- and three-year-long contracts -- they also pay an additional amount for a minimum number of employees -- many of those customers are finding it difficult to fulfill those contracts at the moment.
He pointed to one client who has numerous yoga studios and who earlier this year employed 500 people but has laid off all but 15 of them in the shutdown. Said Dunivan, "We just had a stark, painful conversation and you could tell I was one of many people she was calling. [But] because I care about that relationship, I waived that minimum for some period of time so she can conserve cash."
Which means less revenue for Namely.
It's a situation that many startups find themselves in. According to Layoffs.fyi, site that's trying to track industry layoffs as they happen, at least 356 startups have now laid off 34343 employees. That's saying nothing of the many companies and small businesses like yoga studios that don't register as tech startups. In fact, nearly four million people filed for unemployment benefits last week alone, bringing to more than 30 million the nation's number of unemployment claims.
While the deep cuts are understandable in the current context, they also represent one in a series of milestones at Namely that no startup wants to encounter. Though it was once among New York’s most promising businesses and accordingly raised at least $217 million from investors, including Matrix Partners, True Ventures, and Sequoia Capital, it has seen more than its share of transition at the top. In the most devastating development for the company until now, Namely's board abruptly fired the company's cofounder, Matt Straz, as its CEO in 2018.
Accused of actions “inconsistent with that which is expected of Namely leadership,” as the company told employees at the time, Straz has gone on to launch an employee benefits startup called Bennie. But it cast a cloud over the company (which still isn't talking about what happened).
Soon after, the board member who led the investigation into Straz -- longtime Silicon Valley executive Elisa Steele -- was appointed as Namely’s permanent CEO, and at the time helped attract $60 million in new funding to the company led by GGV Capital.
Yet by last summer, she had also left as CEO, a decision that she made based on family commitments says one source, and owes partly to the relationship she had established with Dunivan, he said separately. Specifically, Dunivan said that in his previous role as the interim CEO of the human resources company ThinkHR, he was consulted by Steele on business and product strategy, and that "as sometimes happens, one thing led to the other and i joined" the company in her stead. (Steele remains on the company's board.)
Certainly, he inherited a business that no longer enjoys the sheen it once did.
As says one person with a stake in the business, "I don't think anyone is giving up on Namely but it had a modest growth plan at the start of 2020 and that's now been made uncertain because of [COVID-19]. I think the company is just trying to control what it can and to structure itself so it can operate more efficiently with a major drop-off in revenue." Adds this person, "It's like a clean sheet of paper."
It's an optimistic perspective and surely one that remaining employees will need to embrace, at least until the fourth quarter, which is when Dunivan estimates that businesses across the board may pick up again.
"This is an extraordinarily difficult time, but we look at the world through a fairly conservative lens and we're making certain assumptions about how new customers will buy, how existing customers will increase or decrease headcount, and how many businesses will be closed and never to come back," said Dunivan when we spoke earlier.
"It's my believe that the recovery will start to show signs of life in the fourth quarter and into the first quarter, and our current looks at it through that lens," he added. "But in the meantime, employers will be paying fewer people."
Faced with dwindling options, Namely is now among them.