“It is a change in mindset to be profitable - let go of the bottom 5%”
Tom Livne, Founder and CEO at Verbit, spoke to CTech about how Israeli companies are restructuring themselves to focus on profits
“If you think about what happened in the last two years, the Fed printed money like crazy, and then they're asking why there's inflation,” said Tom Livne, Founder and CEO at Verbit. “So they're increasing the interest rate and if you increase the interest rate, it means automatically lower valuations because this is how they calculate the value with the DCF (discounted cash flow) model.”
Livne joined CTech to discuss some of the trends coming out of Startup Nation that see companies with millions of dollars in the bank firing significant percentages of their workforces to focus on making a profit. Verbit, an AI-based transcription service that recently raised a $250 million funding round, found itself letting go of 10% of its employees earlier this month in a change of mindset that refocusses its efforts on profitability instead of growth.
“In the U.S., every Fortune 500 company each year does a performance review and sends home its bottom 5%,” he explained. “We had never done it, and we acquired six companies. Therefore, we had some duplications and so we wanted to consolidate and reorganize, and let go of the bottom 5%. I think every big tech company should do it moving forward, including ourselves. This is a change in mindset to be profitable - let go of the bottom 5%, and not be shy about it. There is nothing to be shy about.”
You can watch the entire exchange in the video above.