Better.com abruptly lays off 900 employees during Zoom call
These cuts came a day after the company received $750 million in a cash infusion from investors.
MORE IN THIS SECTION
On Dec. 1, 900 employees of Better.com, an online mortgage company, were asked to join a Zoom call with the company’s CEO, Vishal Garg. He began the call by emphasizing his own feelings about doing a mass firing.
He then said, “This is the second time in my career I’m doing this and I do not want to do this. The last time I cried; this time I hope to be stronger.”
Garg followed this up by saying that 15% of the company was being laid off and that everyone on the call was a part of that group. The company’s CFO, Kevin Ryan, later released a statement that corrected the percentage mentioned to 9%. This number still applied to everyone who was unceremoniously laid off during the call. Among those fired was the entire diversity, equity, and inclusion recruitment team.
In an anonymous post on the message board, Blind, Garg claimed 250 of the people that were terminated, were terminated for slacking off. He accused them of only working two hours a day while clocking in eight hours.
On Tuesday, he apologized to former employees for the way he handled the firing. This apology comes after a lot of backlash and the resignation of the company’s VP of communication, head of public relations, and head of marketing.
In May, Better.com was given a valuation of $7 billion with plans to go public next year. The company recently reached out to backers and asked for urgently needed capital to the tune of $750 million, or about 10% of the valuation.
Given its rapid workforce expansion, it wouldn’t have been surprising if this money was used to retain employees they would have otherwise had to let go. But that’s not what they used it for. Better.com received the money on Nov. 30 and fired the 900 employees the next day.
According to a company spokesperson, these funds are going to build on existing businesses and create new products.
Now this next bit is speculation. A reason why they may have decided against using the $750 million to retain employees has to do with their balance sheet.
Balance sheets show how much a company is worth based on its assets, liabilities, and owner’s equity. An asset is something that the company owns that has value. A liability is something that the company owes. Owners’ equity is the number of earnings or investments that the company has after the liabilities are subtracted from the assets.
In Better.com’s case, they added $750 million in assets while getting rid of a large number of liabilities in the form of payroll. As a company that’s soon going public, this may be a tactic that would positively affect its profit margins.
A statement from Ryan makes this more believable, “A fortress balance sheet and a reduced and focused workforce together set us up to play offense going into a radically evolving homeownership market.”
Another reason could be that the layoffs were part of the deal to make them public.
Again this section is speculation and until more information comes out, we won’t know if or how the layoffs are connected to Better.com’s deal to make the company public.