Pretty much everyone is getting socked by the COVID-19 shutdown. Among the latest to say so in a public way is Away, the trendy, five-year-old, New York-based travel brand that has raised roughly $180 million from investors over the years, including a $100 million round last year that pegged the company's valuation at $1.4 billion -- nearly three times where it was valued a year earlier.
With travel down nearly 100% as the coronavirus makes its way across the U.S. and world, the company has seen sales of its product fall off a cliff, say company founders Steph Korey and Jen Rubio in a new Medium post. Specifically, they disclosed today, sales of their luggage, bags and interior organizers have fallen by more than 90% over the past few weeks.
The company, which began as a direct-to-consumer brand, first took steps to reduce its burn rate by shuttering its now 10 retail stores, while paying its retail teams "during what we hoped would be short-term closures."
Unsurprisingly, given that human capital is typically a company's biggest cost center, that strategy didn't go far enough, so the company is having to furlough "about half" of its team and it's laying off another 10%, it says.
"This was a devastating decision and one we considered only as a last resort," say Korey and Rubio in their post. "The pride we once had in the creation of so many opportunities for people is now fear, frustration, and concern for a large number of people who didn’t deserve this outcome. Many of these are people we personally hired, and many more are friends."
The founders are also suspending their own salaries, they add, and they say senior leadership at the company has agreed to reduced salaries.
Away is doing this exactly the right way, by the way. Rubio and Korey say those laid off will receive a minimum of eight weeks of severance and will see their healthcare coverage through the end of June.
The company says it has also waived the vesting cliff on equity and extended the exercise period of stock options so affected employees don’t have to make decisions surrounding their equity while they're frantically figuring out next steps for themselves.
They also note that owing to government assistance, its furloughed employees -- many of whom work in customer support -- should continue to receive 100% of their wages and benefits until they can resume work full time.
Away was described by some former employees as having a toxic culture in The Verge late last year, owing in part to CEO Korey's management style. Soon after, Korey apologized and stepped aside. But weeks later she announced through The New York Times that, on second thought, she wasn't going to give up her role at the company, a position she currently shares with Stuart Haselden, who agreed to join the company from Lululemon Athletica when Korey first stepped away.
Whether the two continue to share this role is another question and one that presumably depends on how long the current downturn lasts.
In the meantime, Away is smart to do everything in its power for employees whom it can no longer pay -- and to get ahead of employee leaks about the layoffs by posting the news itself to Medium.
It's not the first company to do so, of course. Last week, as one example, the CEO of the personalized stationery startup Minted, Mariam Naficy, also posted on Medium her letter to employees about layoffs at the company and precisely what former staffers could expect in the way of severance. It's easy to imagine many others adopting the same playbook as the current state of affairs wears on.
They should. In both cases, the founders came across as savvy and compassionate on the whole. Their handling of a bad situation also stands in stark contrast to how some other startups have handled layoffs -- and how they will be remembered for it when all is said and done.