Last night, we learned that WeWork postponed thousands of layoffs because it was too broke to pay workers severance. This morning, it was announced that SoftBank would “bail out” WeWork. Now that a deal has been reached, we expect those layoffs to commence.
Given where we sit between hiring managers and startup job candidates in NYC, we thought we’d take a shot at discussing how WeWork’s implosion could affect the New York City hiring market.
WeWork may have spent the last two months being dragged in the press—and while leadership, the Board, and their investors may have made some serious mistakes, the employees are the ones who will be most affected.
The bottom 98% of the company is made up of strong technologists. They’re diligent, talented workers of every discipline who drove the massive growth and rapid expansion that earned the company all the admiration and respect it rightly received before its fall from grace. These are thousands of smart, hard-working people.
How do we know they’re talented? We’ve had the privilege of a window into WeWork’s hiring process. WeWork has been one of our most engaged customers over the last few years (no surprise, given their rapid headcount increases). We’ve enjoyed working with the talent acquisition team, and with the TA teams at some of the companies WeWork has acquired along the way.
Furthermore, we have a lot of good friends that work at the company. If you live in New York City, and you’re between the ages of 21 and 50, we’ll bet you have at least one connection to the organization as well.
Because NYC’s tech scene is as close and interconnected as it is, we’ve all seen what happens when a large(ish) company goes under. That history can provide some insight into the fallout we might see from WeWork’s downsize.
Back in 2014, Fab.com, one of the early darlings of NYC tech, imploded. The company, which started in June of 2011, raised $105 million in June 2012. They went on a massive hiring spree, but by December 2013, only 150 of the 700 peak-headcount employees remained, and by December 2014, the company was sold for parts.
Obviously, this is a much smaller story compared to WeWork, but we expect some similar results. Many ex-Fab.com employees went on to work at tech-enabled fashion companies, direct-to-consumer brands, and logistics-heavy organizations. Their expertise translated directly. They now work at places like Etsy, Boxed, Bark & Co, Bespoke Post, Tommy John, 1stdibs, and Thinx.
Using Fab as a comparison point, we can anticipate how laid off WeWorkers might plan their next moves, as well as how the market will respond to all that newly available talent.
In the next two months, the talent market will see a heavy influx of WeWorkers. We’ve already seen some apply to our hiring marketplace, Underdog.io.
People with personal savings will take time before they start to look for something new, but we suspect a majority of the WeWork employees who are laid off will begin to look for a new job fairly soon.
It’s an unfortunate time for the WeWork bomb to go off. We’re approaching the end of the year. Many companies have already hit their quotas, and are planning for 2020. By Thanksgiving, lots of companies slow down their hiring wheels, with an eye on picking things back up in the New Year. Internal recruiting teams and hiring managers go on vacation in December.
You can look at this situation from two angles: maybe it’s not great timing for candidates, but on the other hand, savvy companies can use the slower end-of-year recruiting competition as an advantage. I suspect we’re going to see our fair share of companies making pleas on social media to encourage WeWork employees to apply to their org. We’re going to see investors touting the job openings at their portfolio companies. We might see a Google Sheet circulate with names and titles of those who have been laid off and are now looking. We might even see clever companies create one-off landing pages designed specifically to attract WeWork employees.
If companies are smart, they will think of this as an opportunity to shift budget and consider starting the interview process early, instead of waiting until 2020. Vacations can’t be canceled, but if companies are smart and aggressive, it should be all hands on deck. Especially if WeWork lays off as many engineers and product people as we’re hearing they might.
The number one thing talent acquisition pros need to keep in mind is that all these wonderful workers have (from their perspective) just been seriously burned. Pre-IPO, WeWork employees had every reason to believe that their equity would actually be worth something, and very soon. But in the end, we suspect much of the common stock will be wiped out. Although I can’t say I’ve had a similar experience, I’d bet that will sting for quite a while—and create a serious dose of skepticism among those laid off.
The WSJ wrote: “In a note to staff last week, Messrs. Minson and Gunningham [Adam Neumann’s replacements as WeWork’s co-CEOs] said the company would ‘treat employees fairly who are impacted.’ They acknowledged the toll that the company’s swift change in fortune has taken on its workers, whose expected IPO riches have evaporated.”
As such, we believe many WeWork employees will value future equity offers close to zero. Many will ask diligence questions that hiring managers and internal recruiters might not be able to fully answer. We suspect this will create friction between the two parties, but hiring managers who consider candidates’ perspectives ahead of time can prepare themselves enough to make the process as smooth as possible.
It’s a candidate-driven market, and we think many candidates who have been put through the wringer at WeWork will want to know more about what they’re signing up for before they join.
The candidates will place less value on vanity metrics, puff pieces in the press, and visionary founders. They will place more value on real technology, finances, and profit.
For the best shot at successfully landing a WeWorker, companies should empathize with these people, and do their best to share real numbers whenever possible. The more transparency you can offer, the better your chances of convincing a skeptic.
Anyone hiring engineers in NYC will tell you that salaries are out of whack. We don’t think this will change too much, even after a flood of new talent hits the market. There are 17,031 “software engineering” openings posted on LinkedIn for the New York market at this moment. Google, Facebook, Twitter, Dropbox, Slack, Uber, Lyft, Stripe, etc. will grab many of the engineers, and they pay on par with WeWork (or higher).
It may affect salaries for non-engineering candidates, though, as that market is still somewhat company-driven. When Fab.com did layoffs, most of the employees in NYC were non-technical. E-commerce and fashion were still strong industries in NYC, and these folks were able to find new footing in organizations in these markets. There are far fewer real estate technology companies with massive hiring needs, so we expect non-engineering salaries to decline and candidates to struggle a little more. Still, many tech companies have needs for strong sales, marketing, operations, and community people, and WeWork has that in droves.
We suspect some of the WeWork employees will leave the workforce and go to grad school, as we saw during the economic crisis of 2008. Some will leave the city, moving to the usual suspects (Austin, Atlanta, Nashville, Boulder, etc.) Sidenote: we realize that WeWork operates in many cities, but given that the majority of its workforce is in NYC, we’re sticking to how this will affect those here.
And some will go on to start companies. In fact, we’d go so far as to say that a WeWork mafia may start to come into focus in the next 3 to 5 years. What will be interesting will be what types of companies get started.
We suspect more will be bootstrapped than the average (when you’re negatively affected by investors, the last thing you want to do is take investment). Many of the employees at WeWork have strong industry knowledge in real estate, so we expect new real estate tech companies to emerge. WeWork also considers itself a strong community-play, and so we expect some community-driven companies to be formed in its wake.
In the end, thousands of software engineers, product managers, designers, salespeople, community managers, finance people, recruiters, and others might be entering the market at the same time. Be nice to them. Remember what they’ve been through. And do your best to offer a hand when you can.
As Polina Marinova wrote in her daily newsletter today: “In situations like this, it’s important to remember that it’s not only deep-pocketed investors who lose out when a bet goes bad. A lot of employees do too — and unlike the shareholders invested in the business, it’s not something they can simply write off and walk away from.”