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Over the past few weeks, a variety of tier-1 VCs have issued grim warnings to their portfolio companies. For example, Benchmark Capital's Bill Gurley has an extensive memo, which says that it will be critical for entrepreneurs to hunker down.
Well, it looks like companies are taking note. Just look at Zillow.com (for which Benchmark is a backer). The company announced that it is letting go of 25% of its workforce (or 40 employees).
No doubt, Zillow is an innovator and has a great team. Essentially, the website makes it easy to get a value of your house. But of course, the real estate market remains lackluster. More importantly, the capital markets are still in a deep freeze.
With already $87 million raised, Zillow believes it's a good idea to keep its powder dry. Besides, the site is still clocking strong gains in traffic.
In fact, Zillow's CEO and founder, Rich Barton, has a blog post on the recent moves. According to him:
"One of the reasons this is so difficult is simply because the business continues grow. In the midst of the madness that surrounds us, we counted 5.4 million unique visitors to Zillow.com in September, which was a 42% increase in traffic over this time last year. Fear, value-shopping, and curiosity are driving people in record volumes to our site. The fact that we have never spent any money on advertising gives me tremendous confidence in our consumer-centric product vision and in the long-term leverage in our business model (free, open access funded by targeted, relevant advertising). While our revenues do not yet cover our expenses, those revenues have been growing at a rapid pace and we will continue to have open positions in areas that are directly tied to revenue, such as advertising salespeople."
Tom Taulli is the author of various books, including The Complete M&A Handbook
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