Months After Major Investment, Halifax Company Lays Off A Quarter Of Its Staff
HALIFAX–A Halifax-based software startup made a sudden, unexpected announcement today that it has laid off 25 of roughly 110 staff. The layoffs happened after the company failed to meet its aggressive growth targets by the end of 2021.
The software company, Proposify, received a combined $13 million from the Canada Business Growth Fund and Innovacorp between 2020 and 2021. In an interview with Huddle, Proposify CEO and co-founder Kyle Racki said that, upon receiving so much funding, the company made a calculated risk and increased expenses to fuel major growth.
“We did what many startups do once you raise cash: you hire ahead of revenue to drive growth, with the idea that the revenue will catch up…and last year we weren’t able to hit our aggressive growth targets,” said Racki.
“Our burn for quite a while was high; it was a calculated risk to aggressively hit that growth target and we expected to hit it by the end of the year, which we didn’t.”
From the outside looking in, Proposify’s growth seemed healthy, increasing by 18 percent in 2021. But that was only approximately half of the company’s lofty target of 30-40 percent growth.
The 18 percent was also low compared to previous years’ growth for the company: 20 percent in 2020 (a hard pandemic year), 40 percent in 2019, and 35 percent in 2018.
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Racki also said the $13 million in investment didn’t go as far as some might originally think, especially since some of that money was used to buy out shareholders.
“The full amount didn’t show up on the balance sheet as working capital. Some of it was used…to pay off existing shareholders, which we haven’t disclosed that amount…but it was used to buy out old shareholders,” he said.
“The other thing is we ran up expenses considerably. Our total expenses last year were over $13 million alone.”
When asked if the ongoing pandemic was a major factor in the company missing its target, Racki declined to make Covid-19 a scapegoat. Instead, he put the blame squarely at his own feet.
“I can’t really blame the pandemic for it. I take accountability as the leader and not really aligning the teams to execute on the strategy,” he said.
“The more employees you have and the bigger the company gets, the harder it gets to align them and make sure everyone really understands what is most important.”
Racki had nothing but good things to say about the 25 employees Proposify had to let go. In Facebook and LinkedIn posts, he praised their work and basically gave an open reference to any other tech companies who may be looking for new hires.
“It’s definitely a tough day, emotional day, to say goodbye to good people, some who’ve been with the company for many years and helped us get to where we are today,” he said.
“I’ve been pretty buried in [correspondence] from a number of people, both locally and in other parts of Canada, to look at who we are letting go and getting access to that list. We feel pretty confident that the people we are letting ago will find a soft landing and find the next great career.”
The Proposify co-founder and CEO also wanted to reiterate that, despite layoffs and missed targets, it’s not a sign of a company about to collapse. He notes the company still saw significant growth, despite the setbacks.
“When things like this happen, people tend to think ‘oh, the company must not be doing well, they must be downsizing.’ I’ve used the term ‘right-sizing’ quite consistently because that is the right term,” he said. “We didn’t hit our growth goals, but we didn’t shrink last year.”
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].