Personal blog of Yzmir Ramirez

As IBM makes a broad shift in strategy, Bloomberg reported this morning that the company would be cutting around 10,000 jobs in Europe. This comes on the heels of last month’s announcement that the organization will be spinning out its infrastructure services business next year. While IBM wouldn’t confirm the layoffs, a spokesperson suggested there were broad structural changes ahead for the company as it concentrates fully on a hybrid cloud approach.

IBM had this to say in response to a request for comment on the Bloomberg report: “Our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities. We also continue to make significant investments in training and skills development for IBMers to best meet the needs of our customers.”

Unfortunately, that means basically if you don’t have the currently required skill set, chances are you might not fit with the new version of IBM. IBM CEO Arvind Krishna alluded to the changing environment in an interview with Jon Fortt at the CNBC Evolve Summit earlier this month when he said:

The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence.

The story has always been the same around IBM layoffs, that as they make the transition to a new model, it requires eliminating positions that don’t fit into the new vision, and today’s report is apparently no different, says Holger Mueller, an analyst at Constellation Research.

“IBM is in the biggest transformation of the company’s history as it moves from services to software and specialized hardware with Quantum. That requires a different mix of skills in its employee base and the repercussions of that manifest itself in the layoffs that IBM has been doing, mostly quietly, for the last 5+ years,” he said.

None of this is easy for the people involved. It’s never a good time to lose your job, but the timing of this one feels worse. In the middle of a recession brought on by COVID, and as a second wave of the virus sweeps over Europe, it’s particularly difficult.

We have reported on a number of IBM layoffs over the last five years. In May, it confirmed layoffs, but wouldn’t confirm numbers. In 2015, we reported on a 12,000 employee layoff.

In a case of bizarre timing, Salesforce announced it was laying off 1,000 employees at the end of last month just a day after announcing a monster quarter with over $5 billion in revenue, putting the company on a $20 billion revenue run rate for the first time. The juxtaposition was hard to miss.

Earlier today, Salesforce CEO and co-founder Marc Benioff announced in a tweet that the company would be hiring 4,000 new employees in the next six months, and 12,000 in the next year. While it seems like a mixed message, it’s probably more about reallocating resources to areas where they are needed more.

While Salesforce wouldn’t comment further on the hirings, the company has obviously been doing well in spite of the pandemic, which has had an impact on customers. In the prior quarter, the company forecasted that it would have slower revenue growth due to giving some customers facing hard times with economic downturn time to pay their bills.

That’s why it was surprising when the CRM giant announced its earnings in August and that it had done so well in spite of all that. While the company was laying off those 1,000 people, it did indicate it would give those employees 60 days to find other positions in the company. With these new jobs, assuming they are positions the laid-off employees are qualified for, they could have a variety of positions from which to choose.

The company had 54,000 employees when it announced the layoffs, which accounted for 1.9% of the workforce. If it ends up adding the 12,000 news jobs in the next year, that would put the company at approximately 65,000 employees by this time next year.

In what felt like strange timing, Salesforce has confirmed a report in yesterday’s Wall Street Journal that it was laying off around 1,000 people, or approximately 1.9% of the company’s 54,000 strong workforce. This news came in spite of the company reporting a monster quarter on Tuesday, in which it passed $5 billion in quarterly revenue for the first time.

In fact, Wall Street was so thrilled with Salesforce’s results, the company’s stock closed up an astonishing 26% yesterday, adding great wealth to the company’s coffers. It seemed hard to reconcile such amazing financial success with this news.

Yet it was actually something that president and chief financial officer Mark Hawkins telegraphed in Tuesday’s earnings call with industry analysts, although he didn’t come right and use the L (layoff) word. Instead he couched that impending change as a reallocation of resources.

And he talked about strategically shifting investments over the next 12-24 months. “This means we’ll be redirecting some of our resources to fuel growth in areas that are no longer as aligned with the business priority will be now deemphasized,” Hawkins said in the call.

This is precisely how a Salesforce spokesperson put it when asked by TechCrunch to confirm the story. “We’re reallocating resources to position the company for continued growth. This includes continuing to hire and redirecting some employees to fuel our strategic areas, and eliminating some positions that no longer map to our business priorities. For affected employees, we are helping them find the next step in their careers, whether within our company or a new opportunity,” the spokesperson said.

It’s worth noting that earlier this year, Salesforce CEO Marc Benioff pledged there would be no significant layoffs for 90 days.

The 90-day period has long since passed and the company has decided the time is right to make some adjustments to the workforce.

It’s worth contrasting this with the pledge that ServiceNow CEO Bill McDermott made a few weeks after the Benioff tweet, promising not to lay off a single employee for the rest of this year, while also pledging to hire 1,000 people worldwide the remainder of this year, while bringing in 360 summer interns.

IBM confirmed reports from overnight that it is conducting layoffs, but wouldn’t provide details related to location, departments or number of employees involved. The company framed it in terms of replacing people with more needed skills as it tries to regroup under new CEO Arvind Krishna.

“IBM’s work in a highly competitive marketplace requires flexibility to constantly remix to high-value skills, and our workforce decisions are made in the long-term interests of our business,” an IBM spokesperson told TechCrunch.

Patrick Moorhead, principal analyst at Moor Insights & Strategy, says he’s hearing the layoffs are hitting across the business. “I’m hearing it’s a balancing act between business units. IBM is moving as many resources as it can to the cloud. Essentially, you lay off some of the people without the skills you need and who can’t be re-educated and you bring in people with certain skill sets. So not a net reduction in headcount,” Moorhead said.

It’s worth noting that IBM used a similar argument back in 2015 when it reportedly had layoffs. While there is no official number, Bloomberg is reporting that today’s number is in the thousands.

Holger Mueller, an analyst at Constellation Research, says that IBM is in a tough spot. “The bets of the past have not paid off. IBM Cloud as IaaS is gone, Watson did not deliver and Blockchain is too slow to keep thousands of consultants occupied,” he said.

Mueller adds that the company could also be feeling the impact of having workers at home instead of in the field. “Enterprises do not know and have not learnt how to do large software projects remotely. […] And for now enterprises are slowing down on projects as they are busy with reopening plans,” he said.

The news comes against the backdrop of companies large and small laying off large numbers of employees as the pandemic takes its toll on the workforce. IBM was probably due for a workforce reduction, regardless of the current macro situation, as Krishna tries to right the financial ship.

The company has struggled in recent years, and with the acquisition of Red Hat for $34 billion in 2018, it is hoping to find its way as a more open hybrid cloud option. It apparently wants to focus on skills that can help them get there.

The company indicated that it would continue to subsidize medical expenses for laid off employees through June 2021, so there is that.

Another startup has turned to downsizing and fund raising to help weather the uncertainty around the economy amid the global coronavirus health pandemic. People.ai, a predictive sales startup backed by Andreessen Horowitz, Iconic, Lightspeed and other investors and last year valued at around $500 million, has laid off around 30 people, working out to about 18% of staff, TechCrunch has learned and confirmed.

Alongside that, the company has quietly raised a debt round in the “tens of millions of dollars” to make strategic investments in new products and potentially other moves.

Oleg Rogynskyy, the founder and CEO, said the layoffs were made not because business has slowed down, but to help the company shore up for whatever may lie ahead.

“We still have several years of runway with what we’ve raised,” he noted (it has raised just under $100 million in equity to date). “But no one knows the length of the downturn, so we wanted to make sure we could sustain the business through it.”

Specifically, the company is reducing its international footprint — big European customers that it already has on its books will now be handled from its U.S. offices rather than local outposts — and it is narrowing its scope to focus more on the core verticals that make up the majority of its current customer base.

He gave as an example the financial sector. “We create huge value for financial services industry but have moved the functionality for them out to next year so that we can focus on our currently served industries,” he said.

People.ai’s software tracks the full scope of communication touch points between sales teams and customers, supposedly negating the tedious manual process of activity logging for SDRs. The company’s machine learning tech is also meant to generate the average best way to close a deal — educating customer success teams about where salespeople may be deviating from a proven strategy.

People.ai is one of a number of well-funded tech startups that is making hard choices on business strategy, costs and staffing in the current climate.

Layoffs.fyi, which has been tallying those losing their jobs in the tech industry in the wake of the coronavirus (it’s based primarily on public reports with a view to providing lists of people for hire), says that as of today, there have been nearly 25,000 people laid off from 258 tech startups and other companies. With companies like Opendoor laying off some 600 people earlier this week, the numbers are ratcheting up quickly: just seven days ago, the number was just over 16,000.

In that context, People.ai cutting 30 may be a smaller increment in the bigger picture (even if for the individuals impacted, it’s just as harsh of an outcome). But it also underscores one of the key business themes of the moment.

Some businesses are getting directly hit by the pandemic — for example, house sales and transportation have all but halted, leaving companies in those categories scrambling to figure out how to get through the coming weeks and months and prepare for a potentially long haul of life and consumer and business behavior not looking like it did before January.

But other businesses, like People.ai, which provides predictive sales tools to help salespeople do their jobs better, is (for now at least) falling into that category of IT still in demand, perhaps even more than ever in a shrinking economy. In People.ai’s case, software to help salespeople have better sales conversations and ultimately conversions at a time when many customers might not be as quick to buy things is an idea that sells right now (so to speak).

Rogynskyy noted that more than 90% of customers that are up for renewal this quarter have either renewed or expanded their contracts, and it has been adding new large customers in recent weeks and months.

The company has also just closed a round of debt funding in the “tens of millions” of dollars to use for strategic investments.

It’s not disclosing the lender right now, but it opted for debt in part because it still has most of its most recent round — $60 million raised in May 2019 led by Iconic — in the bank. Although investors would have been willing to invest in another equity round, given that the company is in a healthy position right now, Rogynskyy said he preferred the debt option to have the money without the dilution that equity rounds bring.

The money will be used for strategic purposes and considering how to develop the product in the current climate. For example, with most people now working from home, and that looking to be a new kind of “normal” in office life (if not all the time, at least more of the time), that presents a new opportunity to develop products tailored for these remote workers.

There have been some M&A moves in tech in the last couple of weeks, and from what we understand People.ai has been approached as well as a possible buyer, target and partner. All of that for now is not something the company is considering, Rogynskyy said. “We’re focused on our own future growth and health and making sure we are here for a long time.”

The coronavirus demand crunch has taken another bite: Palo Alto-based corporate travel-focused unicorn TripActions has confirmed laying off hundreds of staff.

Per this post on Blind — written by someone with a verified TripActions email address — the company laid off 350 people. Business Insider reported the same figure yesterday, and the Wall Street Journal said the layoffs amount to between one-quarter to one-fifth of the startup’s total staff, citing a person familiar with the situation.

Update: A spokesman for TripActions told us the number of impacted employees impacted is “less than 300” — although he qualified the remark by saying the figure includes 25 people who were offered other roles within the company.

In an earlier email to Crunchbase News TripActions confirmed axing jobs in response to the COVID-19 global health crisis — saying it had “cut back on all non-essential spend.” It did not confirm exactly how many employees it had fired at that point.

“[We] made the very difficult decision to reduce our global workforce in line with the current climate,” TripActions wrote in the statement. “We look forward to when the strength of the global economy and business travel inevitably return and we can hire back our colleagues to rejoin us in our mission to make business travel effortless for our customers and users.”

“This global health crisis is unlike anything we’ve ever seen in our lifetimes, and our hearts go out to everyone impacted around the world, including our own customers, partners, suppliers and employees,” it added. “The coronavirus has had [a] wide-reaching effect on the global economy. Every business has been impacted including TripActions. While we were fortunate to have recently raised funding and secured debt financing, we are taking appropriate steps in our business to ensure we are here for our customers and their travelers long into the future.”

Per the post on Blind, TripActions is providing one week of severance to sacked staff and medical cover until end of month. “With [the coronavirus pandemic] going on you think they would do better,” the OP wrote. The layoffs were made by Zoom call, they also said.

However TripActions’ spokesman disputed the details about severance and medical cover, saying it is offering severance packages for U.S. employees that include two months of company-paid COBRA health insurance coverage, extending health benefits through the end of June, along with a minimum of 3 weeks salary.

He added that U.S. employees who were given notice yesterday were told their last day would be April 1, 2020 — meaning their health benefits continue through the end of April.

Travel startups are facing an unprecedented nuclear winter as demand has fallen off a cliff globally — with little prospect of a substantial change to the freeze on most business travel in the coming months as rates of COVID-19 infections continue to grow exponentially outside China.

However, TripActions is one of the highest valued and best financed of such startups, securing a $500 million credit facility for a new corporate product only last month. At the time, Crunchbase recorded $480 million in tracked equity funding for the company, including a $250M Series D TripActions raised in June from investors including a16z, Group 11, Lightspeed and Zeev Ventures.

Before the layoffs, the company had already paused all hiring, per one former technical sourcer for the company writing on LinkedIn.

This post was updated with additional comment from TripActions

Justin Kan’s hybrid legal software and law firm startup Atrium is shutting down today after failing to figure out how to deliver better efficiency than a traditional law firm, the CEO tells TechCrunch exclusively. The startup has now laid off all its employees, which totaled just over 100. It will return some of its $75.5 million in funding to investors, including Series B lead Andreessen Horowitz. The separate Atrium law firm will continue to operate.

“I’m really grateful to the customers and the team members who came along with me and our investors. It’s unfortunate that this wasn’t the outcome that we wanted but we’re thankful to everyone that came with us on the journey,” said Kan. He’d previously founded Justin.tv, which pivoted to become Twitch and later sold to Amazon for $970 million. “We decided to call it and wind down the startup operations. There will be some capital returned to investors post wind-down,” Kan told me.

Atrium had attempted a pivot back in January, laying off its in-house lawyers to become a more pure software startup with better margins. Some of its lawyers formed a separate standalone legal firm and took on former Atrium clients. But Kan tells me that it was tough to regain momentum coming out of that change, which some Atrium customers tell me felt chaotic and left them unsure of their legal representation.

More layoffs quietly ensued as divisions connected to those lawyers were eliminated. But trying to build software for third-party lawyers, many of whom have entrenched processes and older leadership, proved difficult. The streamlined workflows may not have seemed worth the thrash of adopting new technology.

“If you look at our original business model with the verticalized law firm, a lot of these companies that have this kind of full stack model are not going to survive,” Kan explained. “A lot of these companies, Atrium included, did not figure out how to make a dent in operational efficiency.”

Disrupting law firms proves difficult

Founded in 2017, Atrium built software for startups to navigate fundraising, hiring, acquisition deals and collaboration with their legal team. Atrium also offered in-house lawyers that could provide counsel and best practices in these matters. The idea was that the collaboration software would make its lawyers more efficient than a traditional law firm so they could get work done faster, translating to savings for clients and Atrium.

Atrium’s software included Records, a Dropbox-esque system for keeping track of legal documents, and Hiring, which instantly generated employment offer letters based on details punched into a form while keeping track of signatures. The startup hoped it could prevent clients and lawyers from wasting time digging through email chains or missing a sign-off that could put them in legal jeopardy.

The company tried to generate client leads by hosting fundraising workshops for startups, starring Kan and his stories from growing Twitch. A charismatic leader with a near-billion-dollar exit under his belt, investors and founders alike were quick to buy into Kan’s vision and advice. Startups saw Atrium as an ally with industry expertise that could help them avoid dirty term sheets or botched hires.

But keeping a large squad of lawyers on staff proved costly. Atrium priced packages of its software and legal assistance under subscriptions, with momentous deals like acquisitions incurring add-on fees. The model relied less on milking clients with steep hourly rates measured down to six-minute increments like most law firms.

Yet eliminating the busywork for lawyers through its software didn’t materialize into bountiful profits. The pivot sought to create a professional services network where Atrium could route clients to attorneys. The layoffs had shaken faith in the startup as clients demanded stability, lest they be caught without counsel at a tough time.

Rather than trudge on, Kan decided to fold the company. The standalone Atrium law firm will continue to operate under partners Michel Narganes and Matthew Melville, but the startup developing legal software is done.

Atrium’s implosion could send ripples through the legal tech scene, and push other entrepreneurs to start with a more focused software-only approach.

Fearing weak fundraising options in the wake of the WeWork implosion, late-stage startups are tightening their belts. The latest is another Softbank-funded company, joining Zume Pizza (80 percent of staff laid off), Wag (80 percent),  Fair (40%), Getaround (25 percent), Rappi (6 percent), and Oyo (5 percent) that have all cut staff to slow their burn rate and reduce their funding needs. Now freight forwarding startup Flexport is laying off 3 percent of its global staff.

“We’re restructuring some parts of our organization to move faster and with greater clarity and purpose. With that came the difficult decision to part ways with around 50 employees” a Flexport spokesperson tells TechCrunch after we asked today if it had seen layoffs like its peers.

Flexport CEO Ryan Petersen

Flexport had raised a $1 billion Series D led by SoftBank at a $3.2 billion valuation a year ago, bringing it to $1.3 billion in funding. The company helps move shipping containers full of goods between manufacturers and retailers using digital tools unlike its old-school competitors.

“We underinvested in areas that help us serve clients efficiently, and we over-invested in scaling our existing process when we actually needed to be agile and adaptable to best serve our clients, especially in a year of unprecedented volatility in global trade,” the spokesperson explained.

Flexport still had a record year, working with 10,000 clients to finance and transport goods. The shipping industry is so huge that it’s still only the seventh largest freight forwarder on its top Trans-Pacific Eastbound leg. The massive headroom for growth plus its use of software to coordinate supply chains and optimize routing is what attracted SoftBank.

The Flexboard Platform dashboard offers maps, notifications, task lists, and chat for Flexport clients and their factory suppliers.

But many late-stage startups are worried about where they’ll get their next round after taking huge sums of cash from SoftBank at tall valuations. As of November, SoftBank had only managed to raise about $2 billion for its Vision Fund 2 despite plans for a total of $108 billion, Bloomberg reported. LPs were partially spooked by SoftBank’s reckless investment in WeWork. Further layoffs at its portfolio companies could further stoke concerns about entrusting it with more cash.

Unless growth-stage startups can cobble together enough institutional investors to build big rounds, or other huge capital sources like sovereign wealth funds materialize for them, these startups might not be able to raise enough to keep rapidly burning. Those that can’t reach profitability or find an exit may face down-rounds that can come with onerous terms, trigger talent exodus death spirals, or just not provide enough money.

Flexport has managed to escape with just 3 percent layoffs for now. Being proactive about cuts to reach sustainability may be smarter than gambling that one’s business or the funding climate with suddenly improve. But while other SoftBank startups had to spend tons to edge out direct competitors or make up for weak on-demand service margins, Flexport at least has a tried and true business where incumbents have been asleep at the wheel.

After appointing a new CEO and CFO last summer, cloud infrastructure provider DigitalOcean is embarking on a wider reorganisation: the startup has announced a round of layoffs, with potentially between 30 and 50 people affected.

DigitalOcean has confirmed the news with the following statement:

“DigitalOcean recently announced a restructuring to better align its teams to its go-forward growth strategy. As part of this restructuring, some roles were, unfortunately, eliminated. DigitalOcean continues to be a high-growth business with $275M in [annual recurring revenues] and more than 500,000 customers globally. Under this new organizational structure, we are positioned to accelerate profitable growth by continuing to serve developers and entrepreneurs around the world.”

Before the confirmation was sent to us this morning, a number of footprints began to emerge last night, when the layoffs first hit, with people on Twitter talking about it, some announcing that they are looking for new opportunities and some offering help to those impacted. Inbound tips that we received estimate the cuts at between 30 and 50 people. With around 500 employees (an estimate on PitchBook), that would work out to up to 10% of staff affected.

It’s not clear what is going on here — we’ll update as and when we hear more — but when Yancey Spruill and Bill Sorenson were respectively appointed CEO and CFO in July 2019 (Spruill replacing someone who was only in the role for a year), the incoming CEO put out a short statement that, in hindsight, hinted at a refocus of the business in the near future:

“My aspiration is for us to continue to provide everything you love about DO now, but to also enhance our offerings in a way that is meaningful, strategic and most helpful for you over time.”

The company provides a range of cloud infrastructure services to developers, including scalable compute services (“Droplets” in DigitalOcean terminology), managed Kubernetes clusters, object storage, managed database services, Cloud Firewalls, Load Balancers and more, with 12 data centers globally. It says it works with more than 1 million developers across 195 countries. It has also been expanding the services that it offers to developers, including more enhancements in its managed database services, and a free hosting option for continuous code testing in partnership with GitLab.

All the same, as my colleague Frederic pointed out when DigitalOcean appointed its latest CEO, while developers have generally been happy with the company, it isn’t as hyped as it once was, and is a smallish player nowadays.

And in an area of business where economies of scale are essential for making good margins on a business, it competes against some of the biggest leviathans in tech: Google (and its Google Cloud Platform), Amazon (which as AWS) and Microsoft (with Azure). That could mean that DigitalOcean is either trimming down as it talks to investors for a new round; or to better conserve cash as it sizes up how best to compete against these bigger, deep-pocketed players; or perhaps to start thinking about another kind of exit.

In that context, it’s notable that the company not only appointed a new CFO last summer, but also a CEO with prior CFO experience. It’s been a while since DigitalOcean has raised capital. According to PitchBook data, DigitalOcean last raised money in 2017, an undisclosed amount from Mighty Capital, Glean Capital, Viaduct Ventures, Black River Ventures, Hanaco Venture Capital, Torch Capital and EG Capital Advisors. Before that, it took out $130 million in debt, in 2016. Altogether it has raised $198 million, and its last valuation was from a round in 2015, $683 million.

It’s been an active week for layoffs among tech startups. Mozilla laid off 70 employees this week; and the weed delivery platform Eaze is also gearing up for more cuts amid an emergency push for funding.

We’ll update this post as we learn more. Best wishes to those affected by the news.

Seventy-five-million-dollar-funded legal services startup Atrium doesn’t want to be the next company to implode as the tech industry tightens its belt and businesses chase margins instead of growth via unsustainable economics. That’s why Atrium is laying off most of its in-house lawyers.

Now, Atrium will focus on its software for startups navigating fundraising, hiring and collaborating with lawyers. Atrium plans to ramp up its startup advising services. And it’s also doubling down on its year-old network of professional service providers that help clients navigate day-to-day legal work. Atrium’s laid-off attorneys will be offered spots as preferred providers in that network if they start their own firm or join another.

“It’s a natural evolution for us to create a sustainable model,” Atrium co-founder and CEO Justin Kan tells TechCrunch. “We’ve made the tough decision to restructure the company to accommodate growth into new business services through our existing professional services network,” Kan wrote on Atrium’s blog. He wouldn’t give exact figures, but confirmed that more than 10 but less than 50 staffers are impacted by the change, with Atrium having a headcount of 150 as of June.

The change could make Atrium more efficient by keeping fewer expensive lawyers on staff. However, it could weaken its $500 per month Atrium membership that included some services from its in-house lawyers that might be more complicated for clients to get through its professional network. Atrium will also now have to prove the its client-lawyer collaboration software can survive in the market with firms paying for it rather than it being bundled with its in-house lawyers’ services.

“We’re making these changes to move Atrium to a sustainable model that provides high-quality services to our clients. We’re doing it proactively because we see the writing on the wall that it’s important to have a sustainable business,” Kan says. “That’s what we’re doing now. We don’t anticipate any disruption of services to clients. We’re still here.”

Justin Kan (Atrium) at TechCrunch Disrupt SF 2017

Founded in 2017, Atrium promised to merge software with human lawyers to provide quicker and cheaper legal services. Its technology can help automatically generate fundraising contracts, hiring offers and cap tables for startups while using machine learning to recommend procedures and clauses based on anonymized data from its clients. It also serves like a Dropbox for legal, organizing all of a startup’s documents to ensure everything’s properly signed and teams are working off the latest versions without digging through email.

The $500 per month Atrium membership offered this technology plus limited access to an in-house startup lawyer for consultation, plus access to guide books and events. Clients could pay extra if they needed special help such as with finalizing an acquisition deal, or access to its Fundraising Concierge service for aid with developing a pitch and lining up investor meetings.

Kan tells me Atrium still has some in-house lawyers on staff, which will help it honor all its existing membership contracts and power its new emphasis on advising services. He wouldn’t say if Atrium is paid any equity for advising, or just cash. The membership plan may change for future clients, so lawyer services are provided through its professional network instead.

“What we noticed was that Atrium has done a really good job of building a brand with startups. Often what they wanted from attorneys was…advice on ‘how to set my company up,’ ‘how to set my sales and marketing team up,’ ‘how to get great terms in my fundraising process,’ ” so Atrium is pursuing advising, Kan tells me. “As we sat down to look at what’s working and what’s not working, our focus has been to help founders with their super-hero story, connect them with the right providers and advisors, and then helping quarterback everything you need with our in-house specialists.”

LawSites first reported Saturday that Atrium was laying off in-house lawyers. A source tells TechCrunch that Atrium’s lawyers only found out a week ago about the changes, and they’ve been trying to pitch Atrium clients on working with them when they leave. One Atrium client said they weren’t surprised by the changes because they got so much legal advice for just $500 per month, which they suspected meant Atrium was losing money on the lawyers’ time as it was so much less expensive than competitors. They also said these cheap legal services rather than the software platform were the main draw of Atrium, and they’re unsure if the tech on its own is valuable enough.

One concern is Atrium might not learn as quickly about which services to translate into software if it doesn’t have as many lawyers in-house. But Kan believes third-party lawyers might be more clear and direct about what they need from legal technology. “I feel like having a true market for the software you’re building is better than having an internal market,” he says. “We get feedback from the outside firms we work with. I think in some ways that’s the most valuable feedback. I think there’s a lot of false signals that can happen when you’re the both the employer and the supplier.”

It was critical for Atrium to correct course before getting any bigger, given the fundraising problems hitting late-stage startups with poor economics in the wake of the WeWork debacle and SoftBank’s troubles. Atrium had raised a $10.5 million Series A in 2017 led by General Catalyst alongside Kleiner, Founders Fund, Initialized and Kindred Ventures. Then in September 2018, it scored a huge $65 million Series B led by Andreessen Horowitz.

Raising even bigger rounds might have been impossible if Atrium was offering consultations with lawyers at far below market rate. Now it might be in a better position to attract funding. But the question is whether clients will stick with Atrium if they get less access to a lawyer for the same price, and whether the collaboration platform is useful enough for outside law firms to pay for.

Kan had gone through tough pivots in the past. He had strapped a camera to his head to create content for his live-streaming startup Justin.tv, but wisely recentered on the 3% of users letting people watch them play video games. Justin.tv became Twitch and eventually sold to Amazon for $970 million. His on-demand personal assistant startup Exec had to switch to just cleaning in 2013 before shutting down due to rotten economics.

Rather than deny the inevitable and wait until the last minute, with Atrium Kan tried to make the hard decision early.