Nicholas Mills is the president of Pitch, a productivity startup set on toppling PowerPoint. The series B startup has been in growth mode for most of its existence, but like most startups, the last few months have been a challenge. Mills saw the warning signs, and it was clear: The tech industry was quickly approaching the end of its bull run.
Here’s how he decided to pause hiring for all but backfill and a few select roles so that they could refocus on key growth areas and extend their runway by a full year without having to let anyone go.
Mills’ story, as told to Protocol, has been edited for clarity and brevity.
I joined Pitch in the early part of this year, but I had already noticed that market conditions were starting to shift in late November and into December. We were in this massive, inflated tech investment market with a large amount of market hubris. It felt very bubble-like. As we came into 2022, we saw rising energy prices, the war in Ukraine and an upward inflection in the pace of inflation. By March and April, some companies were running into an earlier need to raise capital, raising either a flat or a down round. That was further validation for us.
Tech companies are valued based on a multiple of future revenues, discounted by inflation and interest rates. If interest rates are going up in response to inflation, then the future values for startups will be less. The world started to see the impact on public tech companies: Zoom, Netflix, Tesla, they all pulled back by as much as 75% by spring. The private, VC-backed companies — particularly in the mid- to late stage — are valued based on comparable public companies.
As the saying goes, things are neither good nor bad: They just are. So we quickly reevaluated our financial plan. When I was talking to Pitch late last year about joining, there were about 120 people. And we’d hired a lot late Q4 and early Q1, where we added 40% to 50% extra head count, setting us at about 170 to 180 people. We decided we needed to reoptimize our plans around ROI and growth.
We networked. [CEO] Christian [Reber] talked to other founders, our investors, to get a sense of what’s happening. I spoke to other founders in my network, other companies at our stage. Our objective was to extend our runway by a year and minimize our [operating expenses] and costs. How do we redefine where to invest with growth in mind?
Ultimately, it was a group decision. It was me, in charge of go-to-market, sales and marketing; Christian, who as CEO also owns the R&D line; Adam [Renklint], our CTO, who’s responsible for our head count alongside Christian; [and] Åsa [Lidén], our COO.
We whiteboarded. Our first option was to do nothing. The second was to cut and streamline costs but not reduce head count. The third was to reduce head count. Head count is the major contributor to costs for a startup like us. We decided we strongly did not want to cut heads. It was a personal decision for the company. We were confident in our product and engineering resources, so we capped our hiring there.
We took quick action. When we shared the plan with our investors, they were impressed with the fact that we had moved so quickly. And we were quickly able to remove discretionary spend in areas that didn’t drive growth.
We Slacked. We decided to collaboratively put together a written overview of the rationale behind the financial plan, drafted a message and posted it in our Slack channel. We staged the announcement first to managers and leaders within the company, followed by the whole company in an all-hands on Zoom. Transparency was part of the DNA of Pitch. People felt heard and understood because they had the opportunity to ask questions.
There’s an opportunity cost to having to spend so much time hiring. The thing that's landed well internally is that we can now use all of our resources to focus on building great products. 50% of my time at [my previous company] CircleCI the first year was spent hiring. Some people [at Pitch] were quite pleased to devote 100% of their time to building great products.
Plan for the worst. Because we responded quickly, that got us onto the front foot. I know startups that are not taking action, and I think that’s risky. Have a clear grasp on your costs, the levers that are going to drive growth, and then run through some scenarios where you do worse or better, or the market conditions do worse or better.
We’re constantly evaluating where we are. As recently as the last couple of weeks, we’ve been refreshing and getting deeper on some of our financial modeling related to how we think our customer base might grow, what impact we’re going to have, as we start to add more maturity into our sales. Don’t consider your plan done and fixed. We’ve got nine scenarios, really. And within those, there are variables that we’re tracking that could change. It’s got to be a constant evaluation.