Computers and the Internet

Latest story

125 Shares99 Views

From Boom to Gloom: Tech Recruiters Struggle to Find Work

by

Seemingly overnight, the tech industry flipped from aggressive growth, hiring sprees, lavish perks and boundless opportunity to layoffs, hiring freezes and doing more with less.Nora Hamada, a 35-year-old who works with recruiters who hire employees for tech companies, is trying to be optimistic. But the change upended her online business, Recruit Rise, which teaches people how to become recruiters and helps them find jobs.In June, after layoffs trickled through tech companies, Ms. Hamada stopped taking new customers and shifted her focus away from high-growth start-ups. “I had to do a 180,” she said. “It was an emotional roller coaster for sure.”Throughout the tech industry, professional hirers — the frontline soldiers in a decade-long war for tech talent — are reeling from a drastic change of fortune.For years during an extraordinary tech boom, recruiters were flush with work. As stock prices, valuations, salaries and growth soared, companies moved quickly to keep up with demand and beat competitors to the best talent. Amy Schultz, a recruiting lead at the design software start-up Canva, marveled on LinkedIn last year that there were more job postings for recruiters in tech — 364,970 — than for software engineers — 342,586.But this year, amid economic uncertainty, tech companies dialed back. Oracle, Tesla and Netflix laid off staff, as did Peloton, Shopify and Redfin. Meta, Google, Microsoft and Intel made plans to slow hiring or freeze it. Coinbase and Twitter rescinded job offers. And more than 580 start-ups laid off nearly 77,000 workers, according to Layoffs.fyi, a crowdsourced site that tracks layoffs.The pain was acute for recruiters. Robinhood, the stock trading app that was hiring so quickly last year that it acquired Binc, an 80-person recruiting firm, underwent two rounds of layoffs this year, cutting more than 1,000 employees.Now some recruiters are adapting from blindly filling open jobs, known as a “butts in seats” strategy, to having “more formative” conversations with companies about their values. Others are cutting their rates as much as 30 percent or taking consulting jobs, internships or part-time roles. At some companies, recruiters are being asked to make sales calls to fill their time.“Companies are being looked at pretty dramatically differently in the investor market or public market, and now they have to pretty quickly adapt,” said Nate Smith, chief executive of Lever, a provider of recruiting software.It is a confusing time for the job market. The unemployment rate remains low, and employees who outlasted the “Great Resignation” of the millions who quit their jobs during the pandemic became accustomed to demanding more flexibility around their schedules and remote working.Nora Hamada’s program for training recruiters, Recruit Rise, grew quickly after she started it last summer.Leah Nash for The New York TimesBut companies are using layoffs and the specter of a recession to assert more control. Mark Zuckerberg, chief executive of Meta, said he was fine with employees’ “self-selection” out of the company as he set a new, relentless pace of work. Some companies have asked employees to move to a headquarters city or leave, which observers say is an indirect way to trim head count without doing layoffs.Plenty of tech companies are still hiring. Many of them expect growth to bounce back, as it did for the tech industry a few months after the initial shock of the pandemic in 2020. But companies are also under pressure to turn a profit, and some are struggling to raise money. So even the best-performing firms are being more careful and taking longer to make offers. For now, recruiting is no longer a top priority.Recruiters know the industry is cyclical, said Bryce Rattner Keithley, founder of Great Team Partners, a talent advisory firm in the San Francisco Bay Area. There’s an expression about gumdrops — or “nice to have” hires — versus painkillers, who are employees that solve an acute problem, she said.“A lot of the gumdrops — that’s where you’re going to see impact,” she said. “You can’t buy as many toys or shiny things.”Ms. Hamada started Recruit Rise in July last year, when recruiting firms were so overbooked that companies had to call in favors for the privilege of their business. Her company aimed to help meet that demand by offering people — typically midcareer professionals — a nine-week training course in recruiting for technical roles.The program grew quickly, forging relationships with prominent venture capital firms and Y Combinator’s Continuity Fund, which helped funnel students from Ms. Hamada’s program into recruiting jobs at high-growth tech start-ups.In May, emails from companies wanting to hire her students started tapering off. The venture firms she worked with began publishing doom-and-gloom blog posts about cutbacks. Then the layoffs started.Ms. Hamada stopped offering new classes to focus on helping existing students find jobs. She scrambled to contact companies outside the tech industry that were hiring tech roles — like banks or retailers — as well as software development agencies and consulting groups.“It was a scary period,” she said.For Jordana Stein, the shift happened on May 19. Her start-up, Enrich, hosts recurring discussion groups for professionals. In recent years, the most popular one was focused on “winning the talent wars” by hiring quickly. Enrich’s virtual events typically filled up with a wait list. But that day, three people showed up, and they didn’t talk about hiring — they talked about layoffs.“All of a sudden, the needs changed,” Ms. Stein, 39, said. Enrich, based in San Francisco, created a new discussion group focused on employee morale during a downturn.Pitch, a software start-up based in Berlin, froze hiring for new roles in the spring. The company’s four recruiters suddenly had little to do, so Pitch directed them to take rotations on other teams, including sales and research.By keeping the recruiters on staff, Pitch will be ready to start growing quickly again if the market rebounds, said Nicholas Mills, the start-up’s president.“Recruiters have a lot of transferable skills,” he said.Lucille Lam, 38, has been a recruiter her entire career. But after her employer, the crypto security start-up Immunefi, slowed its recruiting efforts in the spring, she switched to work in human resources. Instead of managing job listings and sourcing recruits, she began setting up performance review systems and “accountability frameworks” for Immunefi’s employees.“My job morphed heavily,” she said.Ms. Lam said she appreciated the chance to learn new skills. “Now I understand how to do terminations,” she said. “In a market where nobody’s hiring, I’ll still have a valuable skill set.”Matt Turnbull, a co-founder of Turnbull Agency, said at least 15 recruiters had asked him for work in recent months because their networks had dried up. Some offered to charge 10 percent to 30 percent below their normal rates — something he had never seen since starting his agency, which operates from Los Angeles and France, seven years ago.“Many recruiters are desperate now,” he said.Those who are still working have it harder than before. Job candidates often get stuck in holding patterns with companies that have frozen budgets. Others see their offers suddenly rescinded, leading to difficult conversations.“I have to try to be as honest as possible without discouraging them,” Mr. Turnbull said. “That doesn’t make not being not wanted any easier.”At Recruit Rise, Ms. Hamada restarted classes to train recruiters in late August. Steering her students away from start-ups funded by venture capital has shown promise, even if some of them have started with internships or part-time work instead of a full-time gig.Ms. Hamada is hopeful about the new direction, but less so about the tech companies propped by venture capital funding. “They’re not looking that stable right now,” she said. More

More stories

  • 113 Shares99 Views

    in Economy

    The Summer of NIMBY in Silicon Valley’s Poshest Town

    by

    Moguls and investors from the tech industry, which endorses housing relief, banded together to object to a plan for multifamily homes near their estates in Atherton, Calif.SAN FRANCISCO — Tech industry titans have navigated a lot to get where they are today — the dot-com bust, the 2008 recession, a backlash against tech power, the pandemic. They have overcome boardroom showdowns, investor power struggles and regulatory land mines.But this summer, some of them encountered their most threatening opponent yet: multifamily townhouses.Their battle took place in one of Silicon Valley’s most exclusive and wealthiest towns: Atherton, Calif., a 4.9-square-mile enclave just north of Stanford University with a population of 7,500. There, tech chief executives and venture capitalists banded together over the specter that more than one home could exist on a single acre of land in the general vicinity of their estates.Their weapon? Strongly worded letters.Faced with the possibility of new construction, Rachel Whetstone, Netflix’s chief communications officer and an Atherton resident, wrote to the City Council and mayor that she was “very concerned” about traffic, tree removal, light and noise pollution, and school resources.Another local, Anthony Noto, chief executive of the financial technology company SoFi, and his wife, Kristin, wrote that robberies and larceny had already become so bad that many families, including his, had employed private security.Their neighbors Bruce Dunlevie, a founding partner at the investment firm Benchmark, and his wife, Elizabeth, said the developments were in conflict with Atherton’s Heritage Tree Ordinance, which regulates tree removal, and would create “a town that is no longer suburban in nature but urban, which is not why its residents moved there.”Other residents also objected: Andrew Wilson, chief executive of the video game maker Electronic Arts; Nikesh Arora, chief executive of Palo Alto Networks, a cybersecurity company; Ron Johnson, a former top executive at Apple; Omid Kordestani, a former top executive at Google; and Marc Andreessen, a prominent investor.All of them were fighting a plan to help Atherton comply with state requirements for housing. Every eight years, California cities must show state regulators that they have planned for new housing to meet the growth of their community. Atherton is on the hook to add 348 units.Many California towns, particularly ones with rich people, have fought higher-density housing plans in recent years, a trend that has become known as NIMBYism for “not in my backyard.” But Atherton’s situation stands out because of the extreme wealth of its denizens — the average home sale in 2020 was $7.9 million — and because tech leaders who live there have championed housing causes.The companies that made Atherton’s residents rich have donated huge sums to nonprofits to offset their impact on the local economy, including driving housing costs up. Some of the letter writers have even sat on the boards of charities aimed at addressing the region’s poverty and housing problems.Atherton residents have raised objections to the developments even though the town’s housing density is extremely low, housing advocates said.“Atherton talks about multifamily housing as if it was a Martian invasion or something,” said Jeremy Levine, a policy manager at the Housing Leadership Council of San Mateo County, a nonprofit that expressed support for the multifamily townhouse proposal.Read More About AppleSustained Growth: The tech giant reported a rise in sales of 2 percent for the three months that ended in June, though the company’s profits fell 10.6 percent.The End of a Partnership: Three years after Apple promised to continue working with Jony Ive, its former design leader, the two parties appear to be through. Here is what the change could mean for Apple.Union Effort: Apple employees at a Baltimore-area store voted to unionize, making it the first of the company’s 270-plus stores in the United States to do so.Upgrading: At its annual developer conference in June, Apple unveiled a range of new software features that expand the iPhone’s utility and add more opportunities for personalization.Atherton, which is a part of San Mateo County, has long been known for shying away from development. The town previously sued the state to stop a high-speed rail line from running through it and voted to shutter a train station.Its zoning rules do not allow for multifamily homes. But in June, the City Council proposed an “overlay” designating areas where nine townhouse developments could be built. The majority of the sites would have five or six units, with the largest having 40 units on five acres.That was when the outcry began. Some objectors offered creative ways to comply with the state’s requirements without building new housing. One technology executive suggested in his letter that Atherton try counting all the pool houses.Others spoke directly about their home values. Mr. Andreessen, the venture capitalist, and his wife, Laura Arrillaga-Andreessen, a scion of the real estate developer John Arrillaga, warned in a letter in June that more than one residence on a single acre of land “will MASSIVELY decrease our home values, the quality of life of ourselves and our neighbors and IMMENSELY increase the noise pollution and traffic.” The couple signed the letter with their address and an apparent reference to four properties they own on Atherton’s Tuscaloosa Avenue.The Atlantic reported earlier on the Andreessens’ letter.Mr. Andreessen has been a vocal proponent of building all kinds of things, including housing in the Bay Area. In a 2020 essay, he bemoaned the lack of housing built in the United States, calling out San Francisco’s “crazily skyrocketing housing prices.”“We should have gleaming skyscrapers and spectacular living environments in all our best cities,” he wrote. “Where are they?”Other venture capital investors who live in Atherton and oppose the townhouses include Aydin Senkut, an investor with Felicis Ventures; Gary Swart, an investor at Polaris Partners; Norm Fogelsong, an investor at IVP; Greg Stanger, an investor at Iconiq; and Tim Draper, an investor at Draper Associates.The mayor of Atherton said the townhouse plan wouldn’t have met California’s definition of affordable housing.Jim Wilson/The New York TimesMany of the largest tech companies have donated money toward addressing the Bay Area’s housing crisis in recent years. Meta, the company formerly known as Facebook, where Mr. Andreessen is a member of the board of directors, has committed $1 billion toward the problem. Google pledged $1 billion. Apple topped them both with a $2.5 billion pledge. Netflix made grants to Enterprise Community Partners, a housing nonprofit. Mr. Arora of Palo Alto Networks was on the board of Tipping Point, a nonprofit focused on fighting poverty in the Bay Area.Mr. Senkut said he was upset because he felt that Atherton’s townhouses proposal had been done in a sneaky way without input from the community. He said the potential for increased traffic had made him concerned about the safety of his children.“If you’re going to have to do something, ask the neighborhood what they want,” he said.Mr. Draper, Mr. Johnson and representatives for Mr. Andreessen, Mr. Arora and Mr. Wilson of Electronic Arts declined to comment. The other letter writers did not respond to requests for comment.The volume of responses led Atherton’s City Council to remove the townhouse portion from its plan in July. On Aug. 2, it instead proposed a program to encourage residents to rent out accessory dwelling units on their properties, to allow people to subdivide properties and to potentially build housing for teachers on school property.“Atherton is indeed different,” the proposal declared. Despite the town’s “perceived affluent nature,” the plan said, it is a “cash-poor” town with few people who are considered at risk for housing.Rick DeGolia, Atherton’s mayor, said the issue with the townhouses was that they would not have fit the state’s definition of affordable housing, since land in Atherton costs $8 million an acre. One developer told him that the units could go for at least $4 million each.“Everybody who buys into Atherton spent a huge amount of money to get in,” he said. “They’re very concerned about their privacy — that’s for sure. But there’s a different focus to get affordable housing, and that’s what I’m focused on.”Atherton’s new plan needs approval by California’s Department of Housing and Community Development. Cities that don’t comply with the state’s requirements for new housing to meet community growth face fines, or California could usurp local land-use authority.Ralph Robinson, an assistant planner at Good City, the consulting firm that Atherton hired to create the housing proposal, said the state had rejected the vast majority of initial proposals in recent times.“We’re very aware of that,” he said. “We’re aware we’ll get this feedback, and we may have to revisit some things in the fall.”Mr. Robinson has seen similar situations play out across Northern California. The key difference with Atherton, though, is its wealth, which attracts attention and interest, not all of it positive.“People are less sympathetic,” he said. More

  • 125 Shares199 Views

    in Economy

    F.T.C. Chair Lina Khan Upends Antitrust Standards by Suing Meta

    by

    Lina Khan may set off a shift in how Washington regulates competition by filing cases in tech areas before they mature. She faces an uphill climb.WASHINGTON — Early in her tenure as chair of the Federal Trade Commission, Lina Khan declared that she would rein in the power of the largest technology companies in a dramatically new way.“We’re trying to be forward looking, anticipating problems and taking fast action,’’ Ms. Khan said in an interview last month. She promised to focus on “next-generation technologies,” and not just on areas where tech behemoths were already well established.This week, Ms. Khan took her first step toward stopping the tech monopolies of the future when she sued to block a small acquisition by Meta, the company formerly known as Facebook, of the virtual-reality fitness start-up Within. The deal was significant for Meta’s development of the so-called metaverse, which is a nascent technology and far from mainstream.In doing so, Ms. Khan upended decades of antitrust standards, potentially setting off a wholesale shift in the way Washington enforces competition across corporate America. At the heart of the F.T.C.’s lawsuit is the idea that regulators can apply antitrust law without waiting for a market to mature to the point where it is clear which companies hold the most power. The F.T.C. said such early action was justified because Meta’s deal would probably eliminate competition in the young virtual-reality market.Since the late 1970s, most federal challenges to mergers have been in large, well-established markets and aim to prevent already clear monopolies. Regulators have mostly rubber-stamped the purchases of start-ups by tech giants, such as Google’s 2006 deal to buy YouTube and Facebook’s 2012 acquisition of Instagram, because those markets were still emerging.As a result, Ms. Khan faces an uphill climb. Regulators have been reluctant to try to stop corporate mergers by relying on the theory that competition and consumers will be harmed in the future. The federal government lost at least two cases that used this strategy in the past decade, including an attempt to block a $1.9 billion merger in 2015 among X-ray sterilization providers that the F.T.C. had predicted would harm future competition in regional markets.The F.T.C.’s lawsuit against Meta in the budding virtual-reality market is a “deliberately experimental case that seeks to extend the boundaries of merger enforcement,” said William Kovacic, a former chair of the agency. “Such cases are certainly harder to win.”The F.T.C.’s action immediately caused a ruckus within antitrust circles and across the tech industry. Silicon Valley tech executives said that moving to block a deal in an embryonic area of technology might stifle innovation and spook technologists from taking bold leaps in new areas.“Regulators predicting future markets is a very, very dangerous precedent and position,” said Aaron Levie, the chief executive of the cloud storage company Box. He warned that venture capitalists and entrepreneurs would become wary of going into new markets if regulators cut off the ability of companies like Meta to buy start-ups.Adam Kovacevich, the president of the trade group Chamber of Progress, which represents Meta, Amazon and Alphabet, also said the lawsuit would have a chilling effect on innovation.Read More on Facebook and MetaA New Name: In 2021, Mark Zuckerberg announced that Facebook would change its name to Meta, as part of a wider strategy shift toward the so-called metaverse that aims at introducing people to shared virtual worlds.Morphing Into Meta: Mr. Zuckerberg is setting a relentless pace as he leads the company into the next phase. But the pivot  is causing internal disruption and uncertainty.Zuckerberg’s No. 2: In June, Sheryl Sandberg, the company’s chief financing officer announced she would step down from Meta, depriving Mr. Zuckerberg of his top deputy.Tough Times Ahead: After years of financial strength, the company is now grappling with upheaval in the global economy, a blow to its advertising business and a Federal Trade Commission lawsuit.“This is such an extreme and unfounded reaction to a small deal that many tech industry leaders are already worrying about what an F.T.C. win would mean for start-ups,” he said.For Ms. Khan, winning the lawsuit may be less of a priority than showing it’s possible to file against a tech deal while it is still early. She has said regulators were too cautious in the past about intervening in mergers for fear of harming innovation, allowing a wave of deals between tech giants and start-ups that eventually cemented their dominance.“What we can see is that inaction after inaction after inaction can have severe costs,” she said in an interview with The New York Times and CNBC in January. “And that’s what we’re really trying to reverse.”Ms. Khan declined requests for an interview for this article, and the F.T.C. declined to comment on Thursday.Mark Zuckerberg, Meta’s chief executive, testifying on Capitol Hill in 2019. He has bet the company on the metaverse, a technology frontier.Pete Marovich for The New York TimesMeta said the F.T.C. was applying antitrust law incorrectly. The lawsuit focuses on how the merger with Within would remove competition, but Meta said the agency was ignoring the large number of companies that also had health and fitness apps.“The F.T.C. has no answer to the most basic question — how could Meta’s acquisition of a single fitness app in a dynamic space with many existing and future players possibly harm competition?” Nikhil Shanbhag, Meta’s vice president and associate general counsel, wrote in a blog post.The company added that it hadn’t decided on whether to challenge the lawsuit, which was filed on Wednesday in U.S. District Court for the Northern District of California.The F.T.C. accused Meta of building a virtual reality “empire,” beginning in 2014 with its purchase of Oculus, the maker of the Quest virtual-reality headset. Since then, Meta has acquired around 10 virtual-reality app makers, such as the maker of a Viking combat game, Asgard’s Wrath, and several first-person shooter and sports games.By buying Within and its Supernatural virtual-reality fitness app, the F.T.C. said, Meta wouldn’t create its own app to compete and would scare potential rivals from trying to create alternative apps. That would hobble competition and consumers, the agency said.“This acquisition poses a reasonable probability of eliminating both present and future competition,” according to the lawsuit. “And Meta would be one step closer to its ultimate goal of owning the entire ‘Metaverse.’”Rebecca Haw Allensworth, a professor of antitrust law at Vanderbilt University, said the F.T.C.’s arguments would face tough scrutiny because Meta and Within did not compete with each other and because the virtual-reality market was fledgling.“The way that merger analysis has stood for at least 40 years is about what kind of head-to-head competition does this merger take out of the picture,” she said.The onus will now be on the agency to convince a judge that its predictions about the metaverse and Meta’s purchase would harm competition.“The burden is on the F.T.C. to show, among other things, reasonable probability that Meta would have entered the V.R.-dedicated fitness apps market, absent its acquisition of Within,” said Diana Moss, president of the American Antitrust Institute.If the court dismisses the case, Ms. Khan may have created a precedent that would make it harder to pursue nascent competition cases, antitrust experts cautioned. That could then embolden tech giants to acquire their way into new lines of businesses.“This is a precedential system which goes both ways — if you win or lose — and sends a signal to the market,” Ms. Allensworth said.The F.T.C. is reviewing other tech deals, including Microsoft’s $70 billion acquisition of the gaming company Activision and Amazon’s $3.9 billion merger with One Medical, a national chain of primary care clinics. In addition, the agency has been investigating Amazon on claims of monopoly abuses in its marketplace of third-party sellers.Ms. Khan appears to be prepared for long legal battles with the tech giants even if the cases do not end up going the F.T.C.’s way.In her earlier interview with The Times and CNBC, she said, “Even if it’s not a slam-dunk case, even if there is a risk you might lose, there can be enormous benefits from taking that risk.” More

  • 125 Shares119 Views

    in Economy

    Kraken, a U.S. Crypto Exchange, Is Suspected of Violating Sanctions

    by

    The Treasury Department is investigating whether the crypto exchange allowed users in Iran to buy and sell digital tokens, said people with knowledge of the matter.Kraken, one of the world’s largest cryptocurrency exchanges, is under federal investigation, suspected of violating U.S. sanctions by allowing users in Iran and elsewhere to buy and sell digital tokens, according to five people affiliated with the company or with knowledge of the inquiry.The Treasury Department’s Office of Foreign Assets Control has been investigating Kraken since 2019 and is expected to impose a fine, said the people, who declined to be identified for fear of retribution from the company. Kraken would be the largest U.S. crypto firm to face an enforcement action from O.F.A.C. Sanctions against Iran, which the United States imposed in 1979, prohibit the export of goods or services to people or entities in the country.The federal government has increasingly cracked down on crypto companies, which are lightly regulated, as the market for digital currencies has grown. Tether, a stablecoin company, was fined by the Commodity Futures Trading Commission for misstatements about its reserves last year, while the Justice Department brought insider-trading charges this month against an ex-employee of Coinbase, the largest U.S. crypto exchange.Scrutiny of the industry has risen in recent months as the crypto market went into meltdown and several companies, such as Voyager Digital and Celsius Network, collapsed.Kraken, a private company valued at $11 billion that allows users to buy, sell or hold various cryptocurrencies, has previously faced regulatory actions. Last year, the C.F.T.C. levied a $1.25 million penalty against the company for a prohibited trading service.In an internal conversation about employee benefits in 2019, Jesse Powell, Kraken’s chief executive, suggested he would consider breaking the law in a wide range of situations if the advantages to the company outweighed potential penalties, according to messages seen by The New York Times. The company has also been dealing with internal conflict over issues including race and gender, which were stoked by Mr. Powell.Marco Santori, Kraken’s chief legal officer, said the company “does not comment on specific discussions with regulators.” He added, “Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues.”A Treasury spokeswoman said the agency “does not confirm or comment on potential or ongoing investigations” and was committed to enforcing “sanctions that protect U.S. national security.”Sanctions are some of the most powerful tools the United States has to influence the behavior of nations it does not consider allies. But cryptocurrencies pose a threat to sanctions because the digital coins don’t flow through the traditional banking system, making the funds harder for the government to control.In October, the Treasury Department warned that cryptocurrencies “potentially reduce the efficacy of American sanctions.” It released a 30-page compliance manual that recommended cryptocurrency companies use geolocation tools to weed out customers in restricted regions.“The fact that crypto can move without a bank or intermediary means that exchanges are responsible for certain types of financial regulatory compliance,” said Hailey Lennon, a lawyer at Anderson Kill who handles regulatory issues in crypto. Kraken and the issue of sanctions surfaced in a November 2019 lawsuit by a former employee from the finance department, Nathan Peter Runyon, who accused the start-up of generating revenue from accounts in countries that were under sanctions. He said he had taken the matter to Kraken’s chief financial officer and top compliance official in early 2019, according to legal filings. (The suit was settled last year.)That same year, O.F.A.C. began investigating Kraken, focusing on the company’s accounts in Iran, the people familiar with the investigation said. Kraken’s customers have also opened accounts in Syria and Cuba, two other countries under U.S. sanctions, the people said. In 2020, O.F.A.C. fined BitGo, a digital wallet service with an office in Palo Alto, Calif., more than $98,000 in 2020 for 183 apparent sanctions violations. Last year, it fined BitPay, an Atlanta-based crypto payment processor, more than $500,000 for 2,102 apparent violations. Coinbase also disclosed in a 2021 financial filing that it had sent notices to O.F.A.C. flagging transactions that may have violated sanctions, though the agency hasn’t taken any enforcement action.Mr. Powell co-founded Kraken in 2011 and was an early proponent of Bitcoin, a digital currency that was marketed as being free of any government’s influence or regulation.In 2018, the New York attorney general’s office asked Kraken and 12 other exchanges to answer a questionnaire about their operations. Kraken refused to respond, with Mr. Powell calling New York “hostile to business” on Twitter.Kraken allows users to buy, sell or hold various cryptocurrencies.KrakenIn 2019, Mr. Powell got into an argument on Slack about parental leave at Kraken, according to messages viewed by The Times. Mr. Powell said parental leave was a burden for the company because a child “might as well be a second job, a distracting hobby or a harmful addiction” and “is something outside of work that has a negative impact on work.”The conversation soon shifted to a discussion of legal requirements. Mr. Powell said that in his “formula for everything,” it was important to consider whether it’s “worth the risk to not follow the legal requirement.” He added, “Not following the law would by default be ‘ill-advised,’ but it always has to be considered as an option.”Mr. Powell did not respond to an email requesting comment.This year, Mr. Powell was one of the loudest voices in the crypto industry resisting calls to shut down accounts in Russia after it invaded Ukraine. The United States has imposed sanctions on some individuals and businesses in Russia, but it hasn’t required crypto companies to cut off access to the country entirely.As of last month, Kraken appeared to still be servicing accounts in countries under sanctions, such as Iran, according to a spreadsheet that Mr. Powell posted to a companywide Slack channel to show where the company’s customers were. He said the data came from residence information listed on “verified accounts.”The spreadsheet said Kraken had 1,522 users with residences in Iran, 149 in Syria and 83 in Cuba, according to figures seen by The Times. The company also had more than 2.5 million users with residences in the United States and more than 500,000 in Britain. The spreadsheet was soon made unavailable to most employees. More

  • 88 Shares169 Views

    in Economy

    Loans Could Burn Start-Up Workers in Downturn

    by

    SAN FRANCISCO — Last year, Bolt Financial, a payments start-up, began a new program for its employees. They owned stock options in the company, some worth millions of dollars on paper, but couldn’t touch that money until Bolt sold or went public. So Bolt began providing them with loans — some reaching hundreds of thousands of dollars — against the value of their stock.In May, Bolt laid off 200 workers. That set off a 90-day period for those who had taken out the loans to pay the money back. The company tried to help them figure out options for repayment, said a person with knowledge of the situation who spoke anonymously because the person was not authorized to speak publicly.Bolt’s program was the most extreme example of a burgeoning ecosystem of loans for workers at privately held tech start-ups. In recent years, companies such as Quid and Secfi have sprung up to offer loans or other forms of financing to start-up employees, using the value of their private company shares as a sort of collateral. These providers estimate that start-up employees around the world hold at least $1 trillion in equity to lend against.But as the start-up economy now deflates, buffeted by economic uncertainty, soaring inflation and rising interest rates, Bolt’s situation serves as a warning about the precariousness of these loans. While most of them are structured to be forgiven if a start-up fails, employees could still face a tax bill because the loan forgiveness is treated as taxable income. And in situations like Bolt’s, the loans may be difficult to repay on short notice.“No one’s been thinking about what happens when things go down,” said Rick Heitzmann, an investor at FirstMark Capital. “Everyone’s only thinking about the upside.”The proliferation of these loans has ignited a debate in Silicon Valley. Proponents said the loans were necessary for employees to participate in tech’s wealth-creation engine. But critics said the loans created needless risk in an already-risky industry and were reminiscent of the dot-com era in the early 2000s, when many tech workers were badly burned by loans related to their stock options.Ted Wang, a former start-up lawyer and an investor at Cowboy Ventures, was so alarmed by the loans that he published a blog post in 2014, “Playing With Fire,” advising against them for most people. Mr. Wang said he got a fresh round of calls about the loans anytime the market overheated and always felt obligated to explain the risks.“I’ve seen this go wrong, bad wrong,” he wrote in his blog post.Start-up loans stem from the way workers are typically paid. As part of their compensation, most employees at privately held tech companies receive stock options. The options must eventually be exercised, or bought at a set price, to own the stock. Once someone owns the shares, he or she cannot usually cash them out until the start-up goes public or sells.That’s where loans and other financing options come in. Start-up stock is used as a form of collateral for these cash advances. The loans vary in structure, but most providers charge interest and take a percentage of the worker’s stock when the company sells or goes public. Some are structured as contracts or investments. Unlike the loans offered by Bolt, most are known as “nonrecourse” loans, meaning employees are not on the hook to repay them if their stock loses its value.This lending industry has boomed in recent years. Many of the providers were created in the mid-2010s as hot start-ups like Uber and Airbnb put off initial public offerings of stock as long as they could, hitting private market valuations in the tens of billions of dollars.That meant many of their workers were bound by “golden handcuffs,” unable to leave their jobs because their stock options had become so valuable that they could not afford to pay the taxes, based on the current market value, on exercising them. Others became tired of sitting on the options while they waited for their companies to go public.The loans have given start-up employees cash to use in the meantime, including money to cover the costs of buying their stock options. Even so, many tech workers do not always understand the intricacies of equity compensation.“We work with supersmart Stanford computer science A.I. graduates, but no one explains it to them,” said Oren Barzilai, chief executive of Equitybee, a site that helps start-up workers find investors for their stock. Secfi, a provider of financing and other services, has now issued $700 million of cash financing to start-up workers since it opened in 2017. Quid has issued hundreds of millions’ worth of loans and other financing to hundreds of people since 2016. Its latest $320 million fund is backed by institutions, including Oaktree Capital Management, and it charges those who take out loans the origination fees and interest.So far, less than 2 percent of Quid’s loans have been underwater, meaning the market value of the stock has fallen below that of the loan, said Josh Berman, a founder of the company. Secfi said that 35 percent of its loans and financing had been fully paid back, and that its loss rate was 2 to 3 percent.But Frederik Mijnhardt, Secfi’s chief executive, predicted that the next six to 12 months could be difficult for tech workers if their stock options decline in value in a downturn but they had taken out loans at a higher value.“Employees could be facing a reckoning,” he said.Such loans have become more popular in recent years, said J.T. Forbus, an accountant at Bogdan & Frasco who works with start-up employees. A big reason is that traditional banks won’t lend against start-up equity. “There’s too much risk,” he said.Start-up employees pay $60 billion a year to exercise their stock options, Equitybee estimated. For various reasons, including an inability to afford them, more than half the options issued are never exercised, meaning the workers abandon part of their compensation. Mr. Forbus said he’d had to carefully explain the terms of such deals to his clients. “The contracts are very difficult to understand, and they don’t really play out the math,” he said. Some start-up workers regret taking the loans. Grant Lee, 39, spent five years working at Optimizely, a software start-up, accumulating stock options worth millions. When he left the company in 2018, he had a choice to buy his options or forfeit them. He decided to exercise them, taking out a $400,000 loan to help with the cost and taxes.In 2020, Optimizely was acquired by Episerver, a Swedish software company, for a price that was lower than its last private valuation of $1.1 billion. That meant the stock options held by employees at the higher valuation were worth less. For Mr. Lee, the value of his Optimizely stock fell below that of the loan he had taken out. While his loan was forgiven, he still owed around $15,000 in taxes since loan forgiveness counts as taxable income.“I got nothing, and on top of that, I had to pay taxes for getting nothing,” he said.The office of Envoy, a start-up that makes workplace software, in San Francisco. The company began a loan program in May.Lauren Segal for The New York TimesOther companies use the loans to give their workers more flexibility. In May, Envoy, a San Francisco start-up that makes workplace software, used Quid to offer nonrecourse loans to dozens of its employees so they could get cash then. Envoy, which was recently valued at $1.4 billion, did not encourage or discourage people from taking the loans, said Larry Gadea, the chief executive.“If people believe in the company and want to double down on it and see how much better they can do, this is a great option,” he said.In a downturn, loan terms may become more onerous. The I.P.O. market is frozen, pushing potential payoffs further into the future, and the depressed stock market means private start-up shares are probably worth less than they were during boom times, especially in the last two years.Quid is adding more underwriters to help find the proper value for the start-up stock it lends against. “We’re being more conservative than we have in the past,” Mr. Berman said.Bolt appears to be a rarity in that it offered high-risk personal recourse loans to all its employees. Ryan Breslow, Bolt’s founder, announced the program with a congratulatory flourish on Twitter in February, writing that it showed “we simply CARE more about our employees than most.”The company’s program was meant to help employees afford exercising their shares and cut down on taxes, he said.Bolt declined to comment on how many laid-off employees had been affected by the loan paybacks. It offered employees the choice of giving their start-up shares back to the company to repay their loans. Business Insider reported earlier on the offer.Mr. Breslow, who stepped down as Bolt’s chief executive in February, did not respond to a request for comment on the layoffs and loans.In recent months, he has helped found Prysm, a provider of nonrecourse loans for start-up equity. In pitch materials sent to investors that were viewed by The New York Times, Prysm, which did not respond to a request for comment, advertised Mr. Breslow as its first customer. Borrowing against the value of his stock in Bolt, the presentation said, Mr. Breslow took a loan for $100 million. More

  • 113 Shares159 Views

    in Economy

    Start-Up Funding Falls the Most It Has Since 2019

    by

    SAN FRANCISCO — For the first time in three years, start-up funding is dropping.The numbers are stark. Investments in U.S. tech start-ups plunged 23 percent over the last three months, to $62.3 billion, the steepest fall since 2019, according to figures released on Thursday by PitchBook, which tracks young companies. Even worse, in the first six months of the year, start-up sales and initial public offerings — the primary ways these companies return cash to investors — plummeted 88 percent, to $49 billion, from a year ago.The declines are a rarity in the start-up ecosystem, which enjoyed more than a decade of outsize growth fueled by a booming economy, low interest rates and people using more and more technology, from smartphones to apps to artificial intelligence. That surge produced now-household names such as Airbnb and Instacart. Over the past decade, quarterly funding to high growth start-ups fell just seven times.But as rising interest rates, inflation and uncertainty stemming from the war in Ukraine have cast a pall over the global economy this year, young tech companies have gotten hit. And that foreshadows a difficult period for the tech industry, which relies on start-ups in Silicon Valley and beyond to provide the next big innovation and growth engine.“We’ve been in a long bull market,” said Kirsten Green, an investor with Forerunner Ventures, adding that the pullback was partly a reaction to that frenzied period of dealmaking, as well as to macroeconomic uncertainty. “What we’re doing right now is calming things down and cutting out some of the noise.”The start-up industry still has plenty of money behind it, and no collapse is imminent. Investors continue to do deals, funding 4,457 transactions in the last three months, up 4 percent from a year ago, according to PitchBook. Venture capital firms, including Andreessen Horowitz and Sequoia Capital, are also still raising large new funds that can be deployed into young companies, collecting $122 billion in commitments so far this year, PitchBook said.The State of the Stock MarketThe stock market’s decline this year has been painful. And it remains difficult to predict what is in store for the future.Grim Outlook: The stock market is on track for its worst first six months of the year since at least 1970. And that’s only part of the horror story for investors and companies this year.Advice for Investors: Bear markets and recessions are far more common than many people realize. Being prepared can minimize hardship and even offer investing opportunities, our columnist says.Recession Risks: As investors focus on the threat that inflation and higher interest rates pose to the economy, they are betting that volatility is here to stay.Crypto Meltdown: Amid a dire period for digital currencies, crypto companies are laying off staff and freezing withdrawals, raising questions about the health of the ecosystem.Start-ups are also accustomed to the boy who cried wolf. Over the last decade, various blips in the market have led to predictions that tech was in a bubble that would soon burst. Each time, tech bounced back even stronger, and more money poured in.Even so, the warning signs that all is not well have recently become more prominent.Venture capitalists, such as those at Sequoia Capital and Lightspeed Venture Partners, have cautioned young firms to cut costs, conserve cash and prepare for hard times. In response, many start-ups have laid off workers and instituted hiring freezes. Some companies — including the payments start-up Fast, the home design company Modsy and the travel start-up WanderJaunt — have shut down.Shares of Bird Global, the scooter start-up, have tumbled from a high last year.Tara Pixley for The New York TimesThe pain has also reached young companies that went public in the last two years. Shares of onetime start-up darlings like the stocks app Robinhood, the scooter start-up Bird Global and the cryptocurrency exchange Coinbase have tumbled between 86 percent and 95 percent below their highs from the last year. Enjoy Technology, a retail start-up that went public in October, filed for bankruptcy last week. Electric Last Mile Solutions, an electric vehicle start-up that went public in June 2021, said last month that it would liquidate its assets.Kyle Stanford, an analyst with PitchBook, said the difference this year was that the huge checks and soaring valuations of 2021 were not happening. “Those were unsustainable,” he said.The start-up market has now reached a kind of stalemate — particularly for the largest and most mature companies — which has led to a lack of action in new funding, said Mark Goldberg, an investor at Index Ventures. Many start-up founders don’t want to raise money these days at a price that values their company lower than it was once worth, while investors don’t want to pay the elevated prices of last year, he said. The result is stasis.“It’s pretty much frozen,” Mr. Goldberg said.Additionally, so many start-ups collected huge piles of cash during the recent boom times that few have needed to raise money this year, he said. That could change next year, when some of the companies start running low on cash. “The logjam will break at some point,” he said.David Spreng, an investor at Runway Growth Capital, a venture debt investment firm, said he had seen a disconnect between investors and start-up executives over the state of the market.“Pretty much every V.C. is sounding alarm bells,” he said. But, he added, “the management teams we’re talking to, they all seem to think: We’ll be fine, no worries.”The one thing he has seen every company do, he said, is freeze its hiring. “When we start seeing companies miss their revenue goals, then it’s time to get a little worried,” he said.Still, the huge piles of capital that venture capital firms have accumulated to back new start-ups has given many in the industry confidence that it will avoid a major collapse.“When the spigot turns back on, V.C. will be set up to get back to putting a lot of capital back to work,” Mr. Stanford said. “If the broader economic climate doesn’t get worse.” More

  • 88 Shares129 Views

    in Economy

    How Wall Street Escaped the Crypto Meltdown

    by

    Last November, in the midst of an exuberant cryptocurrency market, analysts at BNP Paribas, a French bank with a Wall Street presence, pulled together a list of 50 stocks they thought were overpriced — including many with strong links to digital assets.They nicknamed this collection the “cappuccino basket,” a nod to the frothiness of the stocks. The bank then spun those stocks into a product that essentially gave its biggest clients — pension funds, hedge funds, the managers of multibillion-dollar family fortunes and other sophisticated investors — an opportunity to bet that the assets would eventually crash.In the past month, as the froth around Bitcoin and other digital currencies dissipated, taking down some cryptocurrency companies that had sprung up to aid in their trading, the value of the cappuccino basket shrank by half.Wall Street clients of BNP who bet that would happen are sitting pretty. Those on the other side of the trade — the small investors who loaded up on overpriced crypto assets and stocks during a retail trading boom — are reeling.“The moves in crypto were coincident with retail money flooding into U.S. equities and equity options,” said Greg Boutle, who heads BNP’s U.S. equities and derivatives strategy group, which put together the trade. “There’s a big bifurcation between retail positioning and institutional positioning.” He declined to name the specific stocks that BNP clients got to bet against.In the great cryptocurrency blood bath of 2022, Wall Street is winning.“The moves in crypto were coincident with retail money flooding into U.S. equities and equity options,” said Greg Boutle of BNP Paribas.Benoit Tessier/ReutersIt’s not that financial giants didn’t want to be part of the fun. But Wall Street banks have been forced to sit it out — or, like BNP, approach crypto with ingenuity — partly because of regulatory guardrails put in place after the 2008 financial crisis. At the same time, big money managers applied sophisticated strategies to limit their direct exposure to cryptocurrencies because they recognized the risks. So when the market crashed, they contained their losses.“You hear of the stories of institutional investors dipping their toes, but it’s a very small part of their portfolios,” said Reena Aggarwal, a finance professor at Georgetown University and the director of its Psaros Center for Financial Markets and Policy.Unlike their fates in the financial crisis, when the souring of subprime mortgages backed by complex securities took down both banks and regular people, leading to a recession, the fortunes of Wall Street and Main Street have diverged more fully this time. (Bailouts eventually saved the banks last time.) Collapsing digital asset prices and struggling crypto start-ups didn’t contribute much to the recent convulsions in financial markets, and the risk of contagion is low.But if the crypto meltdown has been a footnote on Wall Street, it is a bruising event for many individual investors who poured their cash into the cryptocurrency market.“I really do worry about the retail investors who had very little funds to invest,” Ms. Aggarwal said. “They are getting clobbered.”Lured by the promise of quick returns, astronomical wealth and an industry that isn’t controlled by the financial establishment, many retail investors bought newly created digital currencies or stakes in funds that held these assets. Many were first-time traders who, stuck at home during the pandemic, also dived into meme stocks like GameStop and AMC Entertainment.They were bombarded by ads from cryptocurrency start-ups, like apps that promised investors outsize returns on their crypto holdings or funds that gave them exposure to Bitcoin. Sometimes, these investors made investment decisions that weren’t tied to value, egging on one another using online discussion platforms like Reddit.Spurred partly by the frenzy, the cryptocurrency industry blossomed quickly. At its height, the market for digital assets reached $3 trillion — a large number, although no bigger than JPMorgan Chase’s balance sheet. It sat outside the traditional financial system, an alternative space with little regulation and an anything-goes mentality.The meltdown began in May when TerraUSD, a cryptocurrency that was supposed to be pegged to the dollar, began to sink, dragged down by the collapse of another currency, Luna, to which it was algorithmically linked. The death spiral of the two coins tanked the broader digital asset market.Bitcoin, worth over $47,000 in March, fell to $19,000 on June 18. Five days earlier, a cryptocurrency lender called Celsius Networks that offered high-yield crypto savings accounts, halted withdrawals.Martin Robert has two Bitcoins stuck on Celsius Networks and is afraid he will never see them again. He had planned to cash the coins in to pay down debt.Bridget Bennett for The New York TimesThe fortunes of many small investors also began tanking.On the day that Celsius froze withdrawals, Martin Robert, a day trader in Henderson, Nev., was preparing to celebrate his 31st birthday. He had promised his wife that he would take some time off from watching the markets. Then he saw the news.“I couldn’t take my coins out fast enough,” Mr. Robert said. “We’re being held hostage.”Mr. Robert has two Bitcoins stuck on the Celsius network and is afraid he’ll never see them again. Before their price plunged, he intended to cash the Bitcoins out to pay down around $30,000 in credit card debt. He still believes that digital assets are the future, but he said some regulation was necessary to protect investors.“Pandora’s box is opened — you can’t close it,” Mr. Robert said.Beth Wheatcraft, a 35-year-old mother of three in Saginaw, Mich., who uses astrology to guide her investing decisions, said trading in crypto required a “stomach of steel.” Her digital assets are mostly in Bitcoin, Ether and Litecoin — as well as some Dogecoins that she can’t recover because they are stored on a computer with a corrupted hard drive.Ms. Wheatcraft stayed away from Celsius and other firms offering similar interest-bearing accounts, saying she saw red flags.Beth Wheatcraft, a mother of three, said trading in crypto required a “stomach of steel.”Sarah Rice for The New York TimesThe Bitcoin Trust, a fund popular with small investors, is also experiencing turmoil. Grayscale, the cryptocurrency investment firm behind the fund, pitched it as a way to invest in crypto without the risks because it alleviated the need for investors to buy Bitcoin themselves.But the fund’s structure doesn’t allow for new shares to be created or eliminated quickly enough to keep up with changes in investor demand. This became a problem when the price of Bitcoin began to sink rapidly. Investors struggling to get out drove the fund’s share price well below the price of Bitcoin.In October, Grayscale asked regulators for permission to transform the fund into an exchange-traded fund, which would make trading easier and thus align its shares more closely with the price of Bitcoin. Last Wednesday, the Securities and Exchange Commission denied the request. Grayscale quickly filed a petition challenging the decision.When the crypto market was rollicking, Wall Street banks sought ways to participate, but regulators wouldn’t allow it. Last year, the Basel Committee on Banking Supervision, which helps set capital requirements for big banks around the world, proposed giving digital tokens like Bitcoin and Ether the highest possible risk weighting. So if banks wanted to put those coins on their balance sheets, they would have to hold at least the equivalent value in cash to offset the risk.U.S. bank regulators have also warned banks to stay away from activities that would land cryptocurrencies on their balance sheets. That meant no loans collateralized by Bitcoin or other digital tokens; no market making services where banks took on the risk of ensuring that a particular market remained liquid enough for trading; and no prime brokerage services, where banks help the trading of hedge funds and other large investors, which also involves taking on risk for every trade.Banks thus ended up offering clients limited products related to crypto, allowing them an entree into this emerging world without running afoul of regulators.Goldman Sachs put Bitcoin prices on its client portals so clients could see the prices move even though they couldn’t use the bank’s services to trade them. Both Goldman and Morgan Stanley began offering some of their wealthiest individual clients the chance to buy shares of funds linked to digital assets rather than giving them ways to buy tokens directly.The headquarters of Goldman Sachs. Only a small subset of the company’s clients qualified to buy investments linked to crypto through the bank.An Rong Xu for The New York TimesOnly a small subset of Goldman’s clients qualified to buy investments linked to crypto through the bank, said Mary Athridge, a Goldman Sachs spokeswoman. Clients had to go through a “live training” session and attest to having received warnings from Goldman about the riskiness of the assets. Only then were they allowed to put money into “third party funds” that the bank had examined first.Morgan Stanley clients couldn’t put more than 2.5 percent of their total net worth into such investments, and investors could invest in only two crypto funds — including the Galaxy Bitcoin Fund — run by outside managers with traditional banking backgrounds.Still, those managers may not have escaped the crypto crash. Mike Novogratz, the chief executive of Galaxy Digital and a former Goldman banker and investor, told New York magazine last month that he had taken on too much risk. Galaxy Digital Asset Management’s total assets under management, which peaked at nearly $3.5 billion in November, fell to around $1.4 billion by the end of May, according to a recent disclosure by the firm. Had Galaxy not sold a major chunk of Luna three months before it collapsed, Mr. Novogratz would have been in worse shape.But while Mr. Novogratz, a billionaire, and the wealthy bank clients can easily survive their losses or were saved by strict regulations, retail investors had no such safeguards.Jacob Willette, a 40-year-old man in Mesa, Ariz. who works as a DoorDash delivery driver, stored his entire life savings in an account with Celsius that promised high returns. At its peak, the stored value was $120,000, Mr. Willette said.He planned to use the money to buy a house. When crypto prices started to slide, Mr. Willette looked for reassurance from Celsius executives that his money was safe. But all he found online were evasive answers from company executives as the platform struggled, eventually freezing more than $8 billion in deposits.Celsius representatives did not respond to requests for comment.“I trusted these people,” Mr. Willette said. “I just don’t see how what they did is not illegal.” More

  • 113 Shares189 Views

    in Economy

    Mark Zuckerberg Prepares Meta Employees for a Tougher 2022

    by

    In an internal meeting this week, Mr. Zuckerberg said the tech giant was facing one of the “worst downturns that we’ve seen in recent history.”SAN FRANCISCO — Mark Zuckerberg has a message for Meta employees: Buckle up for tough times ahead.At an internal meeting on Thursday, Mr. Zuckerberg, the chief executive of Meta, said the Silicon Valley company was facing one of the “worst downturns that we’ve seen in recent history,” according to copies of his comments that were shared with The New York Times. He told Meta’s 77,800 workers that they should prepare to do more work with fewer resources and that their performances would be graded more intensely than previously.Mr. Zuckerberg added that the company — which owns Facebook, Instagram and other apps — was lowering its hiring targets. Meta now plans to bring on 6,000 to 7,000 new engineers this year, down from a previous goal of around 10,000, he said. In some areas, hiring will pause entirely, especially of junior engineers, though the head count will increase in other parts of the business, he said.“I think some of you might decide that this place isn’t for you, and that self-selection is OK with me,” Mr. Zuckerberg said on the call. “Realistically, there are probably a bunch of people at the company who shouldn’t be here.”The C.E.O.’s comments, which were some of the most sharply worded ones he has made to employees, reflect the degree of difficulty that Meta is facing with its business. The company, which for years went from strength to strength financially, has been in an unfamiliar position this year as it has struggled. While it enjoyed strong growth in the early parts of the pandemic, it has more recently grappled with upheaval in the global economy as inflation and interest rates rise.That economic uncertainty is hitting as Meta navigates tumult in its core social networking and advertising business. Mr. Zuckerberg declared last year that his company, which was renamed Meta from Facebook, was making a long-term bet to build the immersive world of the so-called metaverse. He has been spending billions of dollars on the effort, which has dragged down Meta’s profits.The company is also dealing with a blow to its advertising business after Apple made privacy changes to its mobile operating system that limit the amount of data that Facebook and Instagram can collect on its users.As a result, Meta has posted back-to-back profit declines this year, the first time that has happened in over a decade. In February, after a dismal financial report, Meta’s stock plummeted 26 percent and its market value plunged more than $230 billion in what was the company’s biggest one-day wipeout. In March, the company told employees that it was cutting back or eliminating free services like laundry and dry cleaning.In a memo to employees on Thursday, Chris Cox, Meta’s chief product officer, echoed Mr. Zuckerberg’s sentiments and said the company was in “serious times” and that economic “headwinds are fierce,” according to a copy of the memo that was read to The Times.“We need to execute flawlessly in an environment of slower growth, where teams should not expect vast influxes of new engineers and budgets,” Mr. Cox’s memo said. “We must prioritize more ruthlessly, be thoughtful about measuring and understanding what drives impact, invest in developer efficiency and velocity inside the company, and operate leaner, meaner, better executing teams.”Mr. Zuckerberg’s and Mr. Cox’s comments to employees were reported earlier by Reuters. A Meta spokesman said that Mr. Cox’s memo echoed what the company has said publicly in earnings calls and that it was being frank about its “challenges” and “opportunities.”In the internal meeting on Thursday, which was held via videoconference, Mr. Zuckerberg’s comments appeared to come out of a sense of frustration, according to one employee who watched the call. After someone asked whether the company would continue having “Meta Days” in 2022, an internal name for paid-time-off holidays, Mr. Zuckerberg paused and mulled aloud about how to answer the question appropriately, said the employee, who spoke anonymously because they were not authorized to speak.The C.E.O. then said the company needed to crack down and work harder than it had before, “turning up the heat” on internal goals and metrics used to rate employees’ performance. He said he expected some degree of turnover from employees who were not meeting those goals and that some might leave as a result of the intensified pace.But Mr. Zuckerberg noted that he was not averse to spending heavily on projects that matter for the long term and was not focused solely on profits. He cited the efforts on building the metaverse with virtual and augmented reality products over the next 10-plus years.Mr. Cox in his memo also said that Meta was continuing to focus on investing in Reels — the TikTok-like video product featured heavily in Instagram — as well as improving artificial intelligence to help drive the discovery of popular posts across Facebook and Instagram. Meta is also working on making money from its messaging apps and looking to more opportunities in e-commerce sales across the platform, he said.Internal recruiters at Meta said that after a surge of new hires during the pandemic, the company’s recruiting slowed this year. The company was mostly hiring for vital positions, and many roles were being filled internally, said two recruiters who spoke on condition of anonymity because they were not authorized to speak to reporters.There are no current plans to lay people off, two people with knowledge of the company’s plans said, who spoke anonymously because they were not authorized to speak. In chat room channels that accompanied the live broadcast of the employee meeting, some workers said they were celebrating cutting the “dead weight” after feeling that the “bar was lowered” for hiring over the course of the pandemic, according to comments that were described to The Times by one of the employees. More

  • 100 Shares129 Views

    in Economy

    Inside Kraken’s Culture War Stoked by Its C.E.O.

    by

    Jesse Powell, who leads the crypto exchange Kraken, has challenged the use of preferred pronouns, debated who can use racial slurs and called American women “brainwashed.”Jesse Powell, a founder and the chief executive of Kraken, one of the world’s largest cryptocurrency exchanges, recently asked his employees, “If you can identify as a sex, can you identify as a race or ethnicity?”He also questioned their use of preferred pronouns and led a discussion about “who can refer to another person as the N word.”And he told workers that questions about women’s intelligence and risk appetite compared with men’s were “not as settled as one might have initially thought.”In the process, Mr. Powell, a 41-year-old Bitcoin pioneer, ignited a culture war among his more than 3,000 workers, according to interviews with five Kraken employees, as well as internal documents, videos and chat logs reviewed by The New York Times. Some workers have openly challenged the chief executive for what they see as his “hurtful” comments. Others have accused him of fostering a hateful workplace and damaging their mental health. Dozens are considering quitting, said the employees, who did not want to speak publicly for fear of retaliation.Corporate culture wars have abounded during the coronavirus pandemic as remote work, inequity and diversity have become central issues at workplaces. At Meta, which owns Facebook, restive employees have agitated over racial justice. At Netflix, employees protested the company’s support for the comedian Dave Chappelle after he aired a special that was criticized as transphobic.But rarely has such angst been actively stoked by the top boss. And even in the male-dominated cryptocurrency industry, which is known for a libertarian philosophy that promotes freewheeling speech, Mr. Powell has taken that ethos to an extreme.His boundary pushing comes amid a deepening crypto downturn. On Tuesday, Coinbase, one of Kraken’s main competitors, said it was laying off 18 percent of its employees, following job cuts at Gemini and Crypto.com, two other crypto exchanges. Kraken — which is valued at $11 billion, according to PitchBook — is also grappling with the turbulence in the crypto market, as the price of Bitcoin has plunged to its lowest point since 2020.Mr. Powell’s culture crusade, which has largely played out on Kraken’s Slack channels, may be part of a wider effort to push out workers who don’t believe in the same values as the crypto industry is retrenching, the employees said.This month, Mr. Powell unveiled a 31-page culture document outlining Kraken’s “libertarian philosophical values” and commitment to “diversity of thought,” and told employees in a meeting that he did not believe they should choose their own pronouns. The document and a recording of the meeting were obtained by The Times.Those who disagreed could quit, Mr. Powell said, and opt into a program that would provide four months of pay if they affirmed that they would never work at Kraken again. Employees have until Monday to decide if they want to take part.On Monday, Christina Yee, a Kraken executive, gave those on the fence a nudge, writing in a Slack post that the “C.E.O., company, and culture are not going to change in a meaningful way.”“If someone strongly dislikes or hates working here or thinks those here are hateful or have poor character,” she said, “work somewhere that doesn’t disgust you.”After The Times contacted Kraken about its internal conversations, the company publicly posted an edited version of its culture document on Tuesday. In a statement, Alex Rapoport, a spokeswoman, said Kraken does not tolerate “inappropriate discussions.” She added that as the company more than doubled its work force in recent years, “we felt the time was right to reinforce our mission and our values.”Mr. Powell and Ms. Yee did not respond to requests for comment. In a Twitter thread on Wednesday in anticipation of this article, Mr. Powell said that “about 20 people” were not on board with Kraken’s culture and that even though teams should have more input, he was “way more studied on policy topics.”“People get triggered by everything and can’t conform to basic rules of honest debate,” he wrote. “Back to dictatorship.”The conflict at Kraken shows the difficulty of translating crypto’s political ideologies to a modern workplace, said Finn Brunton, a technology studies professor at the University of California, Davis, who wrote a book in 2019 about the history of digital currencies. Many early Bitcoin proponents championed freedom of ideas and disdained government intrusion; more recently, some have rejected identity politics and calls for political correctness.“A lot of the big whales and big representatives now — they’re trying to bury that history,” Mr. Brunton said. “The people who are left who really hold to that are feeling more embattled.”Mr. Powell, who attended California State University, Sacramento, started an online store in 2001 called Lewt, which sold virtual amulets and potions to gamers. A decade later, he embraced Bitcoin as an alternative to government-backed money.In 2011, Mr. Powell worked on Mt. Gox, one of the first crypto exchanges, helping the company navigate a security issue. (Mt. Gox collapsed in 2014.)Mr. Powell founded Kraken later in 2011 with Thanh Luu, who sits on the company’s board. The start-up operates a crypto exchange where investors can trade digital assets. Kraken had its headquarters in San Francisco but is now a largely remote operation. It has raised funds from investors like Hummingbird Ventures and Tribe Capital.As cryptocurrency prices skyrocketed in recent years, Kraken became the second-largest crypto exchange in the United States behind Coinbase, according to CoinMarketCap, an industry data tracker. Mr. Powell said last year that he was planning to take the company public.He also insisted that some workers subscribe to Bitcoin’s philosophical underpinnings. “We have this ideological purity test,” Mr. Powell said about the company’s hiring process on a 2018 crypto podcast. “A test of whether you’re kind of aligned with the vision of Bitcoin and crypto.”In 2019, former Kraken employees posted scathing comments about the company on Glassdoor, a website where workers write anonymous reviews of their employers.“Kraken is the perfect allegory for any utopian government ideal,” one reviewer wrote. “Great ideas in theory but in practice they end up very controlling, negative and mistrustful.”In response, Kraken’s parent company sued the anonymous reviewers and tried to force Glassdoor to reveal their identities. A court ordered Glassdoor to turn over some names.On Glassdoor, Mr. Powell has a 96 percent approval rating. The site adds, “This employer has taken legal action against reviewers.”Kraken is one of the world’s largest cryptocurrency exchanges.KrakenAt Kraken, Mr. Powell is part of a Slack group called trolling-999plus, according to messages viewed by The Times. The group is labeled “… and you thought 4chan was full of trolls,” referring to the anonymous online message board known for hate speech and radicalizing some of the gunmen behind mass shootings.In April, a Kraken employee posted a video internally on a different Slack group that set off the latest fracas. The video featured two women who said they preferred $100 in cash over a Bitcoin, which at the time cost more than $40,000. “But this is how female brain works,” the employee commented.Mr. Powell chimed in. He said the debate over women’s mental abilities was unsettled. “Most American ladies have been brainwashed in modern times,” he added on Slack, in an exchange viewed by The Times.His comments fueled a furor.“For the person we look to for leadership and advocacy to joke about us being brainwashed in this context or make light of this situation is hurtful,” wrote one female employee.“It isn’t heartening to see your gender’s minds, capabilities, and preferences discussed like this,” another wrote. “It’s incredibly othering and harmful to women.”“Being offended is not being harmed,” Mr. Powell responded. “A discussion about science, biology, attempting to determine facts of the world cannot be harmful.”At a companywide meeting on June 1, Mr. Powell was discussing Kraken’s global footprint, with workers in 70 countries, when he veered to the topic of preferred pronouns. It was time for Kraken to “control the language,” he said on the video call.“It’s just not practical to allow 3,000 people to customize their pronouns,” he said.That same day, he invited employees to join him in a Slack channel called “debate-pronouns” where he suggested that people use pronouns based not on their gender identity but their sex at birth, according to conversations seen by The Times. He shut down replies to the thread after it became contentious.Mr. Powell reopened discussion on Slack the next day to ask why people couldn’t choose their race or ethnicity. He later said the conversation was about who could use the N-word, which he noted wasn’t a slur when used affectionately.Mr. Powell also circulated the culture document, titled “Kraken Culture Explained.”“We Don’t Forbid Offensiveness,” read one section. Another said employees should show “tolerance for diverse thinking”; refrain from labeling comments as “toxic, hateful, racist, x-phobic, unhelpful, etc.”; and “avoid censoring others.”It also explained that the company had eschewed vaccine requirements in the name of “Krakenite bodily autonomy.” In a section titled “self-defense,” it said that “law-abiding citizens should be able to arm themselves.”“You may need to regularly consider these crypto and libertarian values when making work decisions,” it said.In the edited version of the document that Kraken publicly posted, mentions of Covid-19 vaccinations and the company’s belief in letting people arm themselves were omitted.Those who disagreed with the document were encouraged to depart. At the June 1 meeting, Mr. Powell unveiled the “Jet Ski Program,” which the company has labeled a “recommitment” to its core values. Anyone who felt uncomfortable had two weeks to leave, with four months’ pay.“If you want to leave Kraken,” read a memo about the program, “we want it to feel like you are hopping on a jet ski and heading happily to your next adventure!”Kitty Bennett More