Silicon Valley venture capitalist Bill Gurley said he 'hates' small rounds of layoffs: 'You get 100 percent of the pain and very little gain'

Silicon Valley venture capitalist Bill Gurley talked about startups in today's economy on a podcast.
In the interview, Gurley said small-scale layoffs bring more pain and "very little gain."
Gurley said while layoffs are happening, access to talent for startups is better now than before.

In a podcast interview, Silicon Valley venture capitalist Bill Gurley said he 'hates' small layoffs of between five and 10% of staff, because companies "get 100 percent of the pain and very little gain."

Gurley, a general partner at VC firm Benchmark, was interviewed about startups in today's economy on McKinsey & Company's "The Quarterly Interview: Provocations to Ponder" podcast series. Gurley has backed startups like Grubhub, OpenTable, and Uber.

Rick Tetzeli, the editorial director of "McKinsey Quarterly," interviewed Gurley for the podcast. At the top of the episode, Tetzeli told Gurley he'd just received a news alert that the stock-trading and investing app Robinhood was laying off 23% of its workers.

Gurley said that, compared to 2001 and 2009, which "had broadscale layoffs," layoffs today "happen so infrequently." He noted that Robinhood's 23% cut was closer to a layoff size "that actually makes sense."

Before the 23% cut, Tetzeli told Gurley that Robinhood laid off nine percent of its workforce.

"I hate the 5 to 10 percent layoffs," Gurley said in the podcast. "You don't get any material impact to lowering your expenses. Yet you get all the cultural negatives of having done a layoff."

Gurley went on to say that cutting small parts of the workforce just puts companies "in retweet land" where they end up making "two or three" layoffs.

Dozens of US companies and startups have announced layoffs in recent months, as slow business growth and rising labor costs come to a head.

Despite an unpredictable environment for startups, Gurley said right now is a good time for people "to build something from scratch." And because of layoffs, "access to talent is way better," Gurley said, adding that hybrid work has also increased the range of available workers.

When asked if he ever worries that a company is cutting off too much of its workforce, Gurley said startups "are way more resilient than people realize," and that it's normal for a company to continue running despite cutting 30% of its workforce.

"You can always hire back," Gurley said. "I think 95 percent of the time, the failure is the other way, of not doing enough," he said about layoffs.

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