For a company that has a ball pit in its headquarters, Google can teach tech startups a lot about growing up. Google won't officially turn 18 until this September, meaning that in less time than it takes someone to reach legal voting age, Sergey Brin and Larry Page's baby has grown from two PhD students' side project into the world's No. 2 company by market cap.
But corporate birthdays aside, Silicon Valley is hardly in a festive mood these days. Fear of the b-word (that's bubble, not ball pit) has created a significantly more difficult fundraising environment, and with it, a newfound emphasis on cost-control.
Google is hardly struggling, with more than $75 billion in cash, according to its most recent financial release. Other tech companies, however, could find themselves facing an operational squeeze. Even would-be Googles, high-flying unicorn startups with private valuations over $1 billion, have been forced to raise "down rounds," as investors begin to rethink exuberant growth projections. CB Insights' Downround Tracker lists 71 "wounded companies," including some big names like Zenefits, Box, Gilt Groupe, and Square.
Business Insider notes that in recent months, "a number of unicorn startups, worth over $1 billion, including Evernote, Jawbone, and Tango, have all gone through some form of cost cuts, whether layoffs, office closures, or reduced employee perks."
My company, Rocketrip, helps businesses motivate their employees to spend less on travel. Increasingly, we're seeing that companies both young and old, big and small, are reevaluating laissez faire attitudes to costs. It's not just travel either: The entire culture of spending is being questioned--as it should be.
Pandas and Perks
Dropbox provides one of the most high-profile examples of Silicon Valley belt-tightening. In April, the company, last valued at $10 billion, opened a new headquarters in San Francisco. But the celebration was dampened somewhat by a note displayed prominently in the lobby next to the $100,000 chrome sculpture of Dropbox's panda mascot.
"Pandas have meant many things to Dropboxers over the years, and the idea here was to commemorate the original," the note said, before going on to say that the situation had changed and that extravagant office decor (no matter how adorable, presumably) was no longer "the right call."
Panda-gate came only a month after Dropbox announced larger cost-cutting measures in a companywide email: free shuttle service in San Francisco was being canceled, dinner time was being pushed back by an hour, and employees would no longer be able to bring an unlimited number of guests to the office for meals and open-bar Fridays.
Better Late Than Never
Such measures qualify as austerity by the lavish standards of the recent tech boom. And really, Dropbox isn't in dire straits. As a startup matures, it's natural that it shifts focus--from growth at all costs to the bottom line. This newfound spirit of restraint is worthy of praise, not derision.
If you look past the gathering storm in Silicon Valley--with dark clouds taking the shape of Theranos, Zenefits, a dismal IPO market, etc.--Dropbox's decision can be seen for what it is: reasonable, productive, and overdue.
In the words of that panda-adjacent note, "when it comes to building a healthy and sustainable business, every dollar counts. And while it's OK for us to have nice things, it's important to remember to ask ourselves, 'would I spend my own money this way?'"
Keeping Up With the Joneses
That question--"would I spend my own money this way?"--hasn't been asked nearly enough during the boom years. Startups flush with venture capital spent lavishly, not in spite of the expense, but because of it.
Flashy perks became a form of conspicuous consumption, a way to advertise the latest sky-high valuation and subtly reinforce the impression that conventional measures of business performance shouldn't apply. Some startups have no clear path to generating revenue, let alone profits: Extravagant spending on perks makes huge operating losses seem like an intentional strategy, not a permanent, structural problem.
Google's Grown-Up Approach to Employee Benefits
Google, in so many ways the paradigmatic tech company, is well-known for lavish employee perks. Search Google for "insane employee perks + Google" and you'll get 3,050,500 results. Incidentally, conducting the same search on Bing returns 44,900 results.
In the knowledge economy, a company's chief asset is its employees, so it has to spend a great deal of effort attracting the right people, then keeping them motivated, creative, and engaged. But startups looking to become the "next Google" have learned the wrong lesson if they think they can buy a healthy company culture one perk at a time.
It's true that Google does shower its employees with perks (including on-site showers). However, the company actually takes a more nuanced approach to employee satisfaction.
In his book Work Rules!, Lazlo Bock, Google's SVP of People Ops, discusses the analysis Google applies to employee benefits. Each perk is viewed in terms of monetary cost and benefit, to the employee as well as to some overarching organizational objective. Obvious as this may seem, it's a far cry from the spending for spending's sake attitude so pervasive in the startup world.
Google takes it a step further, too, with programs like Trips, which encourages responsible spending on business travel by letting employees keep part of what they save. Is this cost-control or employee perk? It's both, as well as a perfect example of creative thinking about spending from one of the world's most innovative companies.
If Silicon Valley's startups want to age gracefully, they should look no further than Mountain View for a role model.