News & Views

Growing Pains


What happens when the plethora of cash-rich, profit-poor start-ups start to grow up?

‘It’s a fucking startup’, proclaimed Fab co-creator Jason Goldberg in a recent (and even more recently retracted) rant to his employees on the company blog. Six times, in fact. The former flash sale site, which began its life as a gay dating app before making an about turn into interiors, just had to sack several hundred employees after a disastrous financial year. These volte-faces away from defeat are known as pivots in Silicon Valley, which makes Goldberg’s shifts of investors’ cash and employees’ effort into new directions resemble a lawn sprinkler. But scampering toward the Promised Land is natural with the borrowed-time business model, and is a symptom of a bigger problem with Goldberg’s protestations.

Yes, Fab was undoubtedly a startup darling when it launched in 2011, gaining $8 million in its first round of investment from a host of high-profile backers, including Ashton Kutcher. But the company had 750 employees before its unfortunate round of redundancies. 750. That’s more than most big ad agencies (and certainly more than Contagious). Though by the standard definition of “startup” (a company still striving toward a profitable business model) Fab still counts, it’s a far cry from infancy.

There’s been a lot of talk about the virtues of the startup world. Lean, nimble organisations that can make decisions free from the shackles of hierarchy and history certainly have an appeal. Even corporate behemoths have been attempting to learn from this mentality and trying to infuse the same infectious passion, pace and youthful nerve that helps these tiny tech companies prosper. This has the hilarious side-effect of executives at companies with tens of thousands of employees embracing the cringe-worthy rhetoric and giving the straight-faced ‘at our heart, we’re a startup’ speech.

Here’s our point: it’s easy to be brave when you haven’t got any responsibilities. When you ain’t got nothing but rich backers’ money, you’ve got nothing but rich backers’ money to lose. But when you’ve got the livelihood of 750 employees (likely no longer all 20-somethings wearing hoodies and willing to trade job security for free fruit and foosball) things become altogether more difficult. Scaling up staff super-fast and on other people’s cash simply isn’t a viable strategy. And Goldberg’s tantrum stands out as the marker of a trend: startups reaching awkward, uncomfortable puberty.

Airbnb is one recent victim of these growing pains. The sharing economy lodgings company, fond of growth hacks and exponential success, rebranded, unveiling its new logo. It’s been likened, derisively, to dozens of other things. The Habitat logo, a pug dog’s face, both varieties of human genitalia: the comparisons were hardly flattering. Though the internet laughed, the corporate world offered a sympathetic smirk. After all, Pepsi, Gap, and Tropicana have all faced a similar public flogging over a poorly-executed redesign.

Facebook, the poster child of the startup age, is also finding itself facing big boy problems. It’s in hot water over recent claims about its data meddling and its financial support of anti-gay political candidates, leading many to question the ethical practises of the social network. Again, it’s a challenge that the likes of McDonald’s have been facing for years. The golden-arched burger joint introduced salads to its menu and turned to campaigns such as Your Questions, Our Answers to defend itself from the accusations of high-profile detractions such as Morgan Spurlock’s Supersize Me.

And even Fab has turned to big-scale, big-bucks TV advertising to drive growth, a far cry from digital marketing tricks and meddling in the SEO rankings – and not the new world order.

But what does this all mean? People, branding and profits are where the real work begins. Businesses can be destroyed as quickly as they’re created – and startup land could learn a trick or two from its elders. And the plucky upstarts certainly won’t last the distance if they keep rhetorically throwing their toys out of the pram.

Fab might think it’s a startup, but it needs to start acting like a fucking grown-up now.