pipelinepipelineauthorBiz CarsonNoneDo you know what's going on in the venture capital and startup world? Get the Pipeline newsletter every Saturday.021fce003e
×

Get access to Protocol

Will be used in accordance with our Privacy Policy

I’m already a subscriber
Power

No time for denial: Shift CEO furloughs staff and warns others not to wait

"You've got to move decisively. This is when it really matters. You do not have 45 days to go through the stages of grief."

George Arison, CEO of Shift

George Arison, CEO of Shift, warns other founders: "There's no sacred cow in this kind of scenario. The sooner you move, the better off you'll be."

Photo: David Paul Morris/Bloomberg via Getty Images

George Arison started planning as he saw coronavirus begin to spread outside of China: What would happen if his car sales startup Shift lost 15% of its revenue? Or 50%? What if it had to cease operations entirely?

In the last week, those models became reality. On Friday, Arison, Shift's co-CEO, broke the news to his San Francisco-based company over Zoom that all of its nearly 130 salaried employees would have to take a 25% pay cut. Some are being furloughed. Between 30% and 50% of Shift's around 250-person operations team, who work on the ground in West Coast cities, would be put on furlough. Others will have their work hours reduced. No one at the company will be unaffected.

Get what matters in tech, in your inbox every morning. Sign up for Source Code.

"What you're doing to people is really painful because you're hurting people who most need capital right now, right? And that just really, really sucks," he said. "I didn't sleep probably one solid night of sleep in the last 10 days until this weekend because it was so horrible to do."

Arison is not alone in having to make tough choices when it comes to his business — and fast. In the last week, hundreds of startup workers have been laid off or furloughed. Real estate firm Compass cut 15%, or around 375 employees, from its workforce. Online cannabis startup Leafly laid off 91. Hospitality startup Sonder did a mix of furloughs and layoffs when it trimmed over 400 employees, or nearly a third of its workforce. TripActions on Tuesday laid off a reported 350 employees.

"There are very few companies where they have a choice in not doing this. Very, very few," Arison said.

While some companies have taken swift action, most startups founders Arison has spoken to are still just trying to wrap their heads around how fast the market has changed in the last two weeks. "A lot of them are kind of going through the four stages of grief, which is that now they're in a state of denial," he said. "My advice would be: You've got to move decisively. This is when it really matters. You do not have 45 days to go through the stages of grief."

As he was watching COVID-19 drive people indoors and away from public places, Arison knew that Shift was in a less-than-ideal spot. The startup helps people buy and sell cars online, arranging for things like inspections and driving used cars to people's front doors for test-drives.

In the wake of COVID-19, Shift moved its business to doing no-contact test-drives (where they wipe down the car and its keys before someone can take it for a spin) and it closed all of its physical hubs. During uncertain economic times, it's unlikely many people are racing to buy a car like they used to.

In the past six years, his company has raised over $300 million in a mix of equity and debt from backers like Goldman Sachs and Draper Fisher Jurvetson. Still, before all this, Arison had been planning to fundraise sometime this spring or summer in a pre-IPO round involving larger public market investors.

Now, fundraising isn't really an option.

It's become a matter of managing his startup's runway, or how many months it can survive without needing more cash. "Basically, we cannot afford — because we have limited runway — to lose any runway," he said. "If anything, we have to gain time."

Instead of laying off staff, Arison decided on a mix of staff salary cuts and furloughing employees to start. Shift has hubs only in California and Oregon, where furloughed workers may apply for some unemployment benefits. The decision keeps employees covered under Shift's health care plans — a big priority for Arison and his co-CEO, Toby Russell. To help make up some of the difference, Shift accelerated its stock investing plans so employees earn stock at double the rate. Assuming the startup raises at least $100 million later this year or early 2021, Arison plans to pay back the salary deferral.

The question for all startup CEOs: Will it be enough?

Arison says this will be sufficient to keep Shift afloat for right now. But the long term is anyone's guess. Who knows how long life will be disrupted this way? In this uncertainty, Arison warns that founders can't wait until it's too late.

"There's no sacred cow in this kind of scenario," he warned. "The sooner you move, the better off you'll be."

Protocol | Fintech

Plaid’s COO is riding fintech’s choppy waves

He's a striking presence on the beach. If he navigates Plaid's data challenges, Eric Sager will loom large in the financial world as well.

Plaid COO Eric Sager is an avid surfer.

Photo: Plaid

Eric Sager is an avid surfer. It's a fitting passion for the No. 2 executive at Plaid, a startup that's riding fintech's rough waters — including a rogue wave on the horizon that could cause a wipeout.

As Plaid's chief operating officer, Sager has been helping the startup navigate that choppiness, from an abandoned merger with Visa to a harsh critique by the CEO of a top Wall Street bank.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

Sponsored Content

The future of computing at the edge: an interview with Intel’s Tom Lantzsch

An interview with Tom Lantzsch, SVP and GM, Internet of Things Group at Intel

An interview with Tom Lantzsch

Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corporation

Edge computing had been on the rise in the last 18 months – and accelerated amid the need for new applications to solve challenges created by the Covid-19 pandemic. Tom Lantzsch, Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corp., thinks there are more innovations to come – and wants technology leaders to think equally about data and the algorithms as critical differentiators.

In his role at Intel, Lantzsch leads the worldwide group of solutions architects across IoT market segments, including retail, banking, hospitality, education, industrial, transportation, smart cities and healthcare. And he's seen first-hand how artificial intelligence run at the edge can have a big impact on customers' success.

Protocol sat down with Lantzsch to talk about the challenges faced by companies seeking to move from the cloud to the edge; some of the surprising ways that Intel has found to help customers and the next big breakthrough in this space.

What are the biggest trends you are seeing with edge computing and IoT?

A few years ago, there was a notion that the edge was going to be a simplistic model, where we were going to have everything connected up into the cloud and all the compute was going to happen in the cloud. At Intel, we had a bit of a contrarian view. We thought much of the interesting compute was going to happen closer to where data was created. And we believed, at that time, that camera technology was going to be the driving force – that just the sheer amount of content that was created would be overwhelming to ship to the cloud – so we'd have to do compute at the edge. A few years later – that hypothesis is in action and we're seeing edge compute happen in a big way.

Keep Reading Show less
Saul Hudson
Saul Hudson has a deep knowledge of creating brand voice identity, especially in understanding and targeting messages in cutting-edge technologies. He enjoys commissioning, editing, writing, and business development, in helping companies to build passionate audiences and accelerate their growth. Hudson has reported from more than 30 countries, from war zones to boardrooms to presidential palaces. He has led multinational, multi-lingual teams and managed operations for hundreds of journalists. Hudson is a Managing Partner at Angle42, a strategic communications consultancy.
People

Citizen’s plan to keep people safe (and beat COVID-19) with an app

Citizen CEO Andrew Frame talks privacy, safety, coronavirus and the future of the neighborhood watch.

Citizen added COVID-19 tracking to its app over the summer — but its bigger plans got derailed.

Photo: Citizen

Citizen is an app built on the idea that transparency is a good thing. It's the place users — more than 7 million of them, in 28 cities with many more to come soon — can find out when there's a crime, a protest or an incident of any kind nearby. (Just yesterday, it alerted me, along with 17,900 residents of Washington, D.C., that it was about to get very windy. It did indeed get windy.) Users can stream or upload video of what's going on, locals can chat about the latest incidents and everyone's a little safer at the end of the day knowing what's happening in their city.

At least, that's how CEO Andrew Frame sees it. Critics of Citizen say the app is creating hordes of voyeurs, incentivizing people to run into dangerous situations just to grab a video, and encouraging racial profiling and other problematic behaviors all under the guise of whatever "safety" means. They say the app promotes paranoia, alerting users to things that they don't actually need to know about. (That the app was originally called "Vigilante" doesn't help its case.)

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Transforming 2021

Blockchain, QR codes and your phone: the race to build vaccine passports

Digital verification systems could give people the freedom to work and travel. Here's how they could actually happen.

One day, you might not need to carry that physical passport around, either.

Photo: CommonPass

There will come a time, hopefully in the near future, when you'll feel comfortable getting on a plane again. You might even stop at the lounge at the airport, head to the regional office when you land and maybe even see a concert that evening. This seemingly distant reality will depend upon vaccine rollouts continuing on schedule, an open-sourced digital verification system and, amazingly, the blockchain.

Several countries around the world have begun to prepare for what comes after vaccinations. Swaths of the population will be vaccinated before others, but that hasn't stopped industries decimated by the pandemic from pioneering ways to get some people back to work and play. One of the most promising efforts is the idea of a "vaccine passport," which would allow individuals to show proof that they've been vaccinated against COVID-19 in a way that could be verified by businesses to allow them to travel, work or relax in public without a great fear of spreading the virus.

Keep Reading Show less
Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

People

Why the CEO of GoFundMe is calling out Congress on coronavirus

GoFundMe has seen millions of Americans asking for help to put food on the table and pay the bills. Tim Cadogan thinks Congress should help fix that.

"They need help with rent. They need help to get food. They need help with basic bills," GoFundMe CEO Tim Cadogan said. "That's what people need help with to get through this period."

Photo: John Lamparski/Getty Images

Tim Cadogan started his first day as CEO of GoFundMe about two weeks before the pandemic wrecked the world. He knew he was joining a company that tried to help people make extra money. He didn't know his company would become a lifeline for millions of Americans who couldn't pay their bills or put food on the table.

And so after a year in which millions of people have asked for help from strangers on GoFundMe, and at least $600 million has been raised (that number could be as much as $1 billion or more now, but GoFundMe didn't provide fundraising data past August) just for coronavirus-related financial crises, Cadogan has had enough. On Thursday, he wrote an open letter to Congress calling for a massive federal aid package aimed at addressing people's fundamental needs. In an unusual call for federal action from a tech CEO, Cadogan wrote that GoFundMe should not and can never replace generous Congressional aid for people who are truly struggling.

Keep Reading Show less
Anna Kramer

Anna Kramer is a reporter at Protocol (@ anna_c_kramer), where she helps write and produce Source Code, Protocol's daily newsletter. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

Latest Stories