Zuckerberg addresses Meta’s layoffs

What a busy week! Thank goodness for daylight savings time, right?

If you haven’t already, make sure to check out the full interview I did with Spotify co-president Gustav Söderström for The Verge’s Decoder podcast. Subscribers of this newsletter got a first look in last week’s edition.

This week: what Mark Zuckerberg told Meta employees today about layoffs, the long-term implications of Silicon Valley Bank’s collapse for startups, and I have TikTok’s talking points for employees when they get asked about, well, you know what...

There was a sense of déjà vu inside Meta yesterday as employees watched roughly 2,000 of their colleagues in recruiting disappear from the internal directory. Then came the realization that they could no longer peruse the company org chart like before, with access suddenly restricted to their immediate team.

Yesterday’s cuts were the first of a three-part layoff that will see about 10,000 employees gone by the end of May. 5,000 open roles are also being closed. Remote work may be getting reigned in a bit. Wall Street loved the news when CEO Mark Zuckerberg announced it all on Tuesday. Employees were more mixed.

“How do we expect employees to stay efficient with all the uncertainty going around?” read one employee question that was submitted for a companywide Q&A Zuckerberg held this morning. Another question with fewer upvotes put it more bluntly: “You paralyzed the company for months with bad communication, how is that efficiency?”

In the Q&A itself, Zuckerberg called the decision to pre-announce layoffs this week the “best of the difficult options here,” according to a copy of his remarks that was shared with me. “I mean, look, it’s not traditional,” he said. “I feel like there is no perfect way to do this.”

With recruiting hit first this week, the next wave of layoffs is slated for the week of April 17th. It will impact tech teams (engineers, product managers, etc.), including the roughly 20,000 people in Reality Labs — though managers have already made clear internally that the hardware roadmap I recently reported will remain intact. The third wave of cuts will hit Meta’s business teams in May, including areas like marketing and sales.

As Zuckerberg explained it today, the logic is as follows: since Meta’s business groups “often plan their structure and their priorities around the product priorities,” it makes sense to cut the product and tech teams first. He acknowledged that leaks played a big role in pre-announcing too:

“We either could have communicated now that all of this was coming in May, in which case we would create this multi-month limbo state for a lot more of the company, or we could not communicate about it, which is what a lot of companies would do. And just let the leaks stand, which I think would not be the transparent thing, and is not really in line with our values. And I think [that] would rightfully decrease trust that people have that you’re getting it straight from us.”

In terms of how the coming cuts are being decided, Zuckerberg was clear that this layoff process will be more surgical than November’s cuts, with a focus on reorganizing the company around the highest priorities and reducing unnecessary managerial layers.

“For what we’re doing here, it’s really primarily focused on projects and work and how we want to organize ourselves going forward,” he said. “The layoff that we did in November, I think it was much more in the sense that the financial results weren’t what we needed them to do. We needed to make a cut at that point. There was a large performance part of what we did in November.”

I got the sense that Zuckerberg was much more upbeat today than when he announced the November layoffs, and that he genuinely thinks Meta will operate more efficiently after this process is done. But the uncertainty of the coming weeks still has the company on edge. An internal post I saw from chief information security officer Guy Rosen this week asked employees to stay “vigilant” as “our first line of defense for protecting our data and systems.” He reminded them that Meta’s code of conduct prohibits inappropriate access to code and that “we’ve seen evidence of bad actors preying on our employees during times like this.”

What happens over the next couple of months will likely result in the most dramatic cultural change Meta has seen in years. Meanwhile, Zuckerberg is planning to go on paternity leave next week for the birth of his third child, though I’m told he will still be closely involved in the restructuring process as it plays out.

The sudden collapse of Silicon Valley Bank remains an ongoing story. The question now is who will take over management of the bank’s assets.

As the CEO of AngelList, Avlok Kohli has a real insider’s perspective here. AngelList is a critical artery for Silicon Valley, with nearly $15 billion in startup and venture money managed by its platform as of the end of 2022.

Kohli rarely talks to the press. But he agreed to answer three of my questions about the end of SVB and what it means for startups:

Is it true that AngelList started to move its funds out of SVB before the collapse, and if so, did you see this coming?

AngelList had already identified relying on a single bank as a possible issue and had integrated with multiple banking partners, though this wasn’t tied to any particular insight of what recently happened with SVB. So yes, we were able to quickly provide support for those requests from SVB customers as they came in, without any interruption to their services.

With the worst outcome having been avoided, what are the long-term implications of SVB’s collapse for Silicon Valley?

Silicon Valley has unique needs, in that we’re already taking on high risk/high reward activities to build innovative, world-leading companies. In that context, everybody wants to focus 100% on building, not optimizing treasury. They just want to be certain the money is there when they need it. That was a major role that SVB served in the community, and funds and companies will now have to find other ways to get that service. We’re doing our part with Networked Banking.

What will this mean for the venture debt market?

Silicon Valley Bank wasn’t actually the largest or fastest venture debt provider. There are other areas where it provided credit and payment services that were critical to the ecosystem, but their role in venture debt had already been taken on by others (WTI, etc.). Venture debt is actually not the key worry compared to other areas such as banking for innovative models like crypto, Stripe, extending credit based on privately held equity, or relationships with key backers.

That said, venture debt may change as a funding mechanism for startups. Why? Debt needs historical data to underwrite. The last 14 years of data was from a bull-cycle with low interest rates. It’s unclear whether this type of debt can be underwritten in the current environment.

The reporting this week that the White House wants ByteDance to divest its ownership of TikTok or be banned sounds mostly like saber rattling ahead of TikTok CEO Shou Chew’s DC testimony next week. If the government had actually made a decision it would have announced it, not laundered it anonymously through the press.

Inside TikTok, leaders are doing everything they can to assure employees that a ban won’t happen. I’ve learned that Chew, Vanessa Pappas, and other top leaders gathered employees earlier this week to mostly reiterate what they’ve told the press about their proposal to partition off US data with Oracle through Project Texas. After The Wall Street Journal broke the news yesterday that the White House is demanding a full divestiture from ByteDance, TikTok sent US employees a note that included the following.

“Our strategy remains the same. We continue to believe that the best way to address concerns about national security is with transparent, U.S.-based protection of U.S. user data and systems with robust third-party monitoring, vetting, and verification. We have been heavily investing in this work for the past two years and are already implementing it. We feel strongly that this conversation should include the industry at large and not be based on where a company was founded. We will continue to focus on education and amplifying the voices of our 100 million American users.”

I’ve also obtained a separate list of talking points for employees to use if they get pressed on any of this stuff in conversations with advertisers, creators, or other partners. Are they assuring? You be the judge:

It was another huge week for AI news, namely due to OpenAI releasing ChatGPT-4. I agree that this demo by president Greg Brockman is one of the coolest ever.

I’m not sure why Google thinks that front-running OpenAI with its own AI announcements is doing it any favors because, like its Bard announcement, the public can’t yet use the AI features it said were coming to Gmail and other apps this week. After a certain point, the “coming soon” announcements begin to look desperate relative to what OpenAI is actually putting out into the world.

Needless to say, the pressure is on for Google I/O in May..

That’s all for this week! Please don’t hesitate to forward this to a friend.

I’ll be back next Thursday. In the meantime, if you have any feedback or juicy tips, let me know. Thanks for subscribing.