Will you be laid off by your startup?

Startups seek growth. Growth happens when startups are able to profitably sell a product and then invest the profits back into the startup. For that, startups run experiments to find the right product for the right market. These experiments are just informed trial-and-error-based iterations to find the right product, market, pricing, revenue streams, production procedures, cost, etc.

Layoffs before PMF

A very early-stage startup, one that has just raised a seed round, has 12-24 months to find the Product-Market Fit i.e., the right product for the right market for the right price. To solve this puzzle, these startups run one or two experiments at any given time to find the PMF. If they are successful, they get more money to scale up or they die.

If you have been working at a startup, at this stage, for around 12 months and there are no signs of the PMF, you will probably be laid off, unless you are in the core team of 5-6 people and are willing to work for a pay cut.

What are the signs of PMF?

Marc Andreessen describes it best - "The customers are buying the product just as fast as you can make it -- or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can."

Layoffs after PMF

Once a startup has found a PMF or is very very certain to find the PMF, they raise more money to grow as fast as possible. They raise funding rounds termed - Series A, B, C, and so on.

In this stage, startups usually use a bi-modal strategy to grow.

Mode 1: Growth as a result of scaling the initial product by investing in sales and production resources.

Mode 2: Growth as a result of new products that are invented by running more experiments.

Mode 1 Layoffs: If you are working on the Mode 1 side of the startup, you will be laid off when the assumptions that worked at a smaller scale start failing on a larger scale. This may happen due to failure to scale up production, and sales, or incorrect assumptions about the size and the paying capacity of the market.

Mode 2 Layoffs: If you are a part of an experimental product team at a startup, your job is to help get to PMF through experiments. When you have been working for 8-12 months and there is no hope of PMF, you will probably be laid off, unless you are at a leadership level, in which case, you may be given a chance to run one or two more experiments and then laid off if failed.

Heuristic: Growth is usually uncomfortable. If you have been comfortable in your job for the past 6-12 months, you will probably be laid off because there is no growth.

Any thoughts or additions are welcome in the comments.