In the tech world, “lean” has taken on a new urgency since 2022. What began as “right-sizing” in Big Tech has cascaded through the industry, reshaping how companies of all sizes approach growth and efficiency. From industry giants to nimble startups, doing more with less has become a necessity.
This shift has forced many companies to reimagine their trajectories and operational structures. As venture capital became scarcer and market conditions tightened, companies found themselves needing to get fit and optimize their resources like never before.
In this post, we'll dig deeper into this phenomenon, explore some real-world examples and examine how the philosophy of getting fit and reducing headcount is changing the way tech companies approach growth and efficiency.
Let’s start by looking at some of the reasons these changes are happening.
Why companies are tightening their belts
There are many forces driving startups to get fit:
- Venture capital funding has dried up, especially in the growth-stage rounds (Series B+).
- AI is increasing productivity, so teams can stretch resources further.
- The biggest tech companies are being rewarded in the public markets for reducing headcount. This has a trickle-down effect on startups.
- Leaner organizations can potentially execute their highest priorities faster.
Now let’s examine one startup that seemed to anticipate this trend before it became a widespread necessity.
Linear's blueprint: Efficiency over expansion
Karri Saarinen (CEO and co-founder of Linear) recently revealed the number of employees the company had at each stage of its funding journey.
Linear has built a beloved product and is backed by some of the best VCs including Sequoia and Accel. Through the go-go years of ZIRP, Linear stayed lean and kept its headcount growth reasonable.
When Linear raised its Series A in 2020, it had 8 employees. By my estimate, in 2020, the norm was for Series A companies to have around 40+ employees.
For perspective, in 2021, David Sacks published a blog post about the SaaS Org Chart listing the optimal 50-person organization for a company that raised its Series A.
Linear's approach to growth now seems prescient in light of the broader right-sizing trend sweeping the tech industry. While many companies are scrambling to trim their workforce and optimize operations, Linear's lean strategy has positioned them well for the current climate.
Their disciplined approach to hiring and growth aligns closely with the industry's newfound focus on efficiency and sustainable scaling. Clearly, sometimes being ahead of the curve means moving more slowly and deliberately.
From giants to startups, everyone’s getting fit
Founders and investors are now prioritizing efficiency and sustainable growth over rapid expansion. This shift has led to more careful hiring practices, increased focus on core products and a greater emphasis on achieving profitability earlier in a company's lifecycle.
The impact of this trend is evident in the actions of both tech giants and smaller startups:
- Meta laid off 11,000 employees in November 2022, followed by another 10,000 in March 2023.
- Amazon announced plans to cut more than 18,000 jobs in January 2023, marking the largest layoffs in the company's history.
- Stripe and Klarna cut around 10-15% of their workforce in 2022, citing the need to operate more efficiently in a challenging economic environment.
Even traditionally stable companies like Microsoft and Google parent Alphabet announced layoffs of 10,000 and 12,000 employees respectively in early 2023.
These actions reflect a broader trend: According to layoffs.fyi, over 1,000 tech companies laid off more than 150,000 employees in 2022, with the trend continuing into 2023.
Mark Zuckerberg articulated the rationale behind these moves in an open letter to Meta employees, where he emphasized the benefits of a leaner organization:
Get fit, or get left behind?
The right-sizing trend is likely to have lasting effects on the tech industry and startup world. While it may lead to short-term pain for some, it could ultimately result in a more sustainable and resilient tech sector.
Companies that can balance innovation with operational efficiency will be positioned to thrive as they scale. This shift may also create a more diverse startup ecosystem where a wider variety of business models and growth strategies can succeed.
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