Drop the name Hootsuite Inc. at any Vancouver technology firm’s office and the same questions inevitably bubble to the surface: Will the social media management company go public? Will it be acquired? Or will it continue to forge its own path as a privately held venture?
April 30 layoffs totalling as much as 10 per cent of its 1,000-person global workforce, according to some media reports, may stick a pin in that conversation for the time being.
But in its place come questions about Hootsuite’s future and whether one of Vancouver’s few potential tech anchor firms can regain its darling status.
“Once again, people get breathless about a layoff at a major tech company in Vancouver. In this case, and many others, it is likely a belt-tightening exercise before going public,” venture capitalist Brent Holliday, CEO of Garibaldi Capital Advisors, told Business in Vancouver in an email.
While Hootsuite had been at the centre of speculation for a possible initial public offering (IPO) for years, Reuters reported last fall the company had engaged Goldman Sachs Group Inc. to inquire about a potential sale.
But the process was abandoned just before Christmas when Hootsuite determined offers were less than the US$750 million it was aiming for, according to a January report from the Globe and Mail.
Hootsuite did not acknowledge an interview request from BIV but instead sent a statement confirming an undisclosed number of layoffs were taking place.
“It looked bad last fall when the alleged M&A process did not work and top talent appeared to be leaving,” Holliday said, referring to the departures of a number of Hootsuite executives overseeing sales, product and technology.
“But I believe the company is on solid ground, continues to grow and is simply becoming more profitable.”
Hootsuite still finds itself in an unenviable position after competitors were scooped up over the years by American tech giants.
Most notably Adobe Systems Inc. acquired Marketo Inc. last year for $4.75 billion, Microsoft Corp. acquired Yammer Inc. for US$1.2 billion in 2012 and Salesforce.com Inc. acquired Radian6 a year earlier in a deal worth US$326 million.
“So the pool of companies that could acquire [Hootsuite] have gotten a lot smaller,” said New Avenue Capital founder Manny Padda, a friend of Hootsuite CEO Ryan Holmes (the pair merged their respective charities in 2017). “Either you’re consolidating, you’re a consolidator or you’re left in the dark.”
He added there are few companies that haven’t experienced challenges along the way to building a large enterprise and Holmes’ name still holds considerable weight in the local tech ecosystem.
“In terms of cachet in Vancouver, if there’s anybody that you want to talk to about social media, I still can’t think of anyone else but Ryan Holmes I’d want to have that conversation with,” Padda said.
Ray Walia, CEO of Vancouver-based incubator Launch Academy, said the layoffs aren’t automatically indicative of any failures on the part of Hootsuite, but likely represent a “natural evolution” for the company amid changes to technology.
He said small-to-mid-size tech firms in the talent-starved city will benefit from the layoffs as they land former Hootsuite employees now hunting for work.
“These are not people who were let go because they’re doing bad jobs,” he said. “Sometimes skill sets don’t match those new directions.”
BuildDirect founder Jeff Booth said his experience in Vancouver’s tech sector showed him investors north of the border are a different breed from those south of the border, which can prove challenging for companies like Hootsuite.
He pointed to the multibillion-dollar valuations of Uber Technologies Inc. and WeWork — two giants that are still bleeding money ahead of planned IPOs — as epitomizing the difference.
“To create companies that are competing with world giants, if we don’t fund them the right way or have the right people around them, we starve them in a competitive world,” Booth said.
“When you starve companies with similar thinking and ambitions for capital, they have no choice but to try to create a different company halfway through the growth period.”
BuildDirect, one of Vancouver’s few other potential technology anchor firms, has also faced turmoil in recent years.
Often described as the Amazon.com Inc. of home-building supplies, the company filed for creditor protection in fall 2017 before exiting from creditor protection the following spring.
Booth departed BuildDirect in 2017 but remains involved with about 10 other tech companies.
“At the highest levels the ecosystem is still thriving, and it’s thriving because of the talent that’s been through the wars before,” Booth said. “There’s another wave behind BuildDirect and Hootsuite.”