Video game coaching marketplace Metafy cuts 23% of staff despite doubling revenue
Metafy, a marketplace for video game coaching, laid off 23% of its staff last week, primarily impacting product, design and engineering teams, founder Joshua Fabian confirmed in an e-mail to TechCrunch. The layoff impacted 12 full-time employees. A Notion page has been created for those looking for their next jobs.
Metafy has raised over $30 million in known funding from Tiger Global, Seven Seven Six, Forerunner, DCM and others. Layoffs were preceded by leadership team pay cuts, Fabian said.
“I'm not crazy about the ivory tower bullshit. The cuts impacted roles that once made sense to the business but are now hard to justify. Nobody laid off has done anything wrong, and it's not a reflection on their work ethic,” Fabian wrote in an e-mail to TechCrunch. “The needs of the business have simply changed as it's grown and evolved over the last two years.”
Everyone impacted, Fabian says, has been offered three months of severance pay and extended health care regardless of tenure. For people who were at Metafy for less than a year, equity cliffs have been lifted. The startup also provided a subscription to LinkedIn pro.
Metafy’s mobile (iOS and Android) teams were most impacted by the workforce reduction, as the company says it now wants to build on React Native, a single code base that doesn’t require two separate iOS and Android teams.
As for what went wrong, it’s a similar story for many startups adjusting to the "new normal" of a more disciplined environment. Metafy last raised its Series A round in February 2022, “when things were rosy,” per Fabian, who planned to raise a Series B round months later.
“If you were fundraising last year, priorities were GMV and growth, not unit economics or revenue. There's a new normal, if you want to stay alive, there's no choice but to become more disciplined with not just spending but also product vision and direction,” Fabian said. “My regret is waiting as long as we did to do it. That caused unnecessary pain. We've learned a valuable lesson, but we did it the hard way.”
The founder, who opted for a more transparent explanation of the layoffs as compared to some of his fellow entrepreneurs, added that: “this is my fault.” Fabian also published a public investor update, including most recent cash burn, active students and coaches and cash on hand (it’s now $18.4 million).
The latest Letter to my Investors has some exciting updates on the present and future of Metafy, and also addresses the shittiest week of my career so far. https://t.co/Z8MDfa2HeR
— Josh (@JoshFabian) September 13, 2022
There's one excerpt from the investor update that goes more specifically into the company's financials:
Q2 has come to a close and, I'm happy to say, we had hell of a quarter. June was our best month ever across GMV, AOV, game distribution and total active coaches. The market is something of a blood bath, but thanks to a weirdly specific fortune cookie, I never bathe without my floaties. You're in good hands.
In response to the market, we’ve made it a priority to get a lot smarter about our unit economics. More to come on that soon. Thanks to the work of our Expert Success Team, our experts continue to get smarter about running their business. Our Outreach team has also found a repeatable model for linear growth. We’re cooking with gas now.
Speaking of, let's get to the point.
Active Coaches: 570 -> 686 (+20.4%)
Active Students: 1812 -> 3337 (+84.2%)
Sessions Booked: 2549 -> 5733 (+124.9%)
Monthly GMV / Revenue: $185,975 -> $375,971 (+102.2%)
Cash on hand: $18,388,055
Monthly burn: ~$1.3M (does not reflect Q3 layoffs)
Put differently, in the most recent quarter, the company grew its active coaches and active students, leading to an over 100% growth in monthly GMV and revenue. The shift toward layoffs seems to be one step toward operating a leaner business, especially given the time cost associated with tailored video game advice.
The layoffs help Metafy reduce personnel costs by 19%, from $746,000 per month to $607,000. Operational costs have been cut by 70%, from $306,000 to $100,000 per month. With these trims, Fabian estimates that Metafy has a little over two years of runway if it stops making revenue. Or to be more specific, he said Metafy has runway until February 2024.
The founder said that Metafy has most of the team needed to build over those next two years, but will hire in critical roles moving forward.