What Glossier got wrong – TechCrunch

These last weeksGlossier laid off about 80 employees (a third of its workforce), most of whom were part of its technical team.

Although the company focused on technology when it was really a beauty company, it’s not hard to see these layoffs in light of the tech meltdown in the public market.

Many venture-backed companies think they are technology companies – in fact, they were born that way – when in fact they are not. The leaders of these companies must learn the activities in which they really operate, what makes these companies good and direct their technical efforts towards these ends.

The Fundamental Disconnect: Software-based businesses don’t necessarily monetize in the same way as software-based businesses.

Tech companies fetch the richest valuations and have the highest multiples of any industry. Chasing those higher multiples means going to great lengths to show, both operationally and financially, that you “look like” a tech company.

For a company like Glossier, looking like a technology company is the difference between having a price-to-sales ratio of 5.44, like Estée Lauder, or 31.6, like MongoDB. Glossier founder and CEO Emily Weiss knows it, and so do her investors.

Tech companies are highly valued for a reason: when they work, they have high growth rates and very high margins. Companies therefore often make product decisions to achieve a technology company profile, such as investing in engineering or avoiding margin trading.

Hunter Walk, for example, pointed out that chasing software markups may be one of the reasons social media companies avoid the human moderation cost center.

The difficulty with these types of decisions is that you will be directing your technical talent towards the wrong problems.

But the narrative changes once you go public. Markets work by taking companies, categorizing them, and then evaluating them on well-known metrics. You don’t decide what kind of business you are.

You can present yourself as a tech company, and you can use technology just fine, but if the public markets decide you’re a beauty company, well, you’re a beauty company (at least for marketing purposes). evaluation) until you prove otherwise. .

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