Hello and welcome to my weekly fintech piece. I’ll be posting this every Sunday, but in the meanwhile, listen to Alex Wilhelm, Natasha Mascarenhas, and myself riff on all things startups on the Equity podcast! And if you want this to go straight to your email once it becomes a newsletter on May 1, sign up here. The large fintech events during the previous week had a totally different tone than 2021, which was full of mega-rounds, celebrations, and high valuations. To begin with, fast, a three-year-old one-click checkout business, announced its closure after failing to obtain further financing to keep operations afloat.
The news wasn’t completely unexpected, given that there had been hints of danger, as The Information had revealed the week before. The firm had just $600,000 in sales for the entire year of 2021, despite obtaining $120 million in venture funding earlier in the year (in a round led by Stripe) and speculations that it was having problems getting further funds and, as a result, would be looking for a buyer. On social media (primarily Twitter), there were mixed reactions to the company’s death. I’ll skip the exact tweets and just say this: a firm going out of business should not be a reason for rejoicing.
Regardless of how much carelessness on the part of leadership or others inside the business contributed to its downfall, the bulk of the company’s employees most certainly worked extremely hard to help it succeed and do not deserve to be criticized or ridiculed, even if indirectly. Executive hubris, on the other hand, is a different issue. (For example, while announcing the closure of your firm, don’t refer to yourself as a trailblazer.) What’s the takeaway from this? In life, especially in the startup environment, humility goes a long way. Wait until you have something to talk about before you start bragging, and even then, let your results speak for themselves.
On a more positive (and rather rare) note, BNPL behemoth Affirm said that “the great majority” of Fast engineers will be offered jobs, as reported by the outstanding Natasha Mascarenhas. Better.com hit the news once again, this time for its, well, arrogance. On April 6, the digital mortgage lender gave corporate personnel, product, design, and engineering professionals the option to voluntarily leave the firm in return for paid severance and 60 days of health insurance coverage. When I contacted the corporation, I was told that it was losing as much as $50 million every month, which was neither verified nor refuted.
The next day, TechCrunch received a tape of a Zoom conference in which Better.com CEO Vishal Garg addressed the remaining employees after the company fired off 900 employees, or 9% of its workforce, on December 1. In a nutshell, the recording was harrowing. The executive’s tone and body language revealed no regret for the layoffs, and he even offered what appeared to be a veiled warning that any non-productive staff would be fired as well.
Garg also made a number of alarming – and damaging – admissions during the tape, including confessing that the firm “pissed away” $200 million of the $250 million it made last year and that he lacked discipline when it came to Better’s hiring plan at the start of the epidemic. CTO Diane Yu was transferring from her post as chief technology officer — a position she had just begun in January 2021 – to an advisory one one day later, on April 7.
Better.com had a solid business that was performing well at one time, as my friend (and Equity co-host) Alex Wilhelm and I discussed on the podcast this week — sufficiently enough to attract the likes of SoftBank and to be seeking to go public via a SPAC. (Not that we didn’t see the deck.) Former workers also agree that the company’s core technology is actually rather good. It appears that overconfidence and failure to account for a less favorable mortgage market thwarted what could have been an amazing development trajectory in this situation.
In any event, whatever of the mistakes its leadership has made over the last several years, it’s reasonable to conclude that, like Fast, many Better.com employees are reeling from what has happened, and my heart goes out to them. Alex and I both think that modest CEOs have a better track record than their less humble peers. Perhaps it’s because it’s simpler to be driven by someone they admire and who admires them? Of course, we’re not specialists, but there appears to be a link in several of the firms we’ve reviewed. In my humble opinion, humility should be viewed as a virtue rather than a weakness.
