If You Were Laid Off from Toast, You Were Just Handed Some Great Lessons for Your Next Job

Nobody likes to see unemployment rise, especially when it comes at the hand of uncontrollable events like a global pandemic. But some things are within your control, and our hope is that in reading this you learn from your experiences to avoid suffering similar outcomes in the future.

Plain and simple, Toast played chicken with the market. Their business model was entirely predicated on free/easy money, and they were “right” for seven years. But on the macro, it’s financially foolish to bet on a bull market lasting as long as it did. In fact, the average bull market only lasts 55 months, or just shy of five years.

Toast was already betting on this trend a full 30 months beyond the average length of a bull market, and yet it still didn’t course-correct. Instead, Toast doubled down on, in our opinion, a financially unsustainable model. So while Toast will likely point to COVID-19 as the cause for their troubles, and they are certainly right to some extent, the scale of their layoffs are a reflection of a piggish business model Toast continued to pursue despite macro realities.

If you were let go – or you still find yourself at Toast – here are some things you should really consider.

Toast was all but guaranteed to execute layoffs of similar magnitude eventually.

All financial information we ever saw from Toast pointed to cash burn upon growing cash burn to chase market share. This included Toast’s plan to reach a net negative burn of $200M at the end of 2020 on revenues of close to $500M. That means Toast was going to spend an astounding $700M this year. That’s a negative EBITDA of 40%, implying that Toast would need to continue growing at 80% a year, which seems really hard to do forever.

We’d guess that when Toast started testing public markets at the end of 2020 they’d find that the investors would have pushed back, much as they had on Uber and Lyft for losing so much money. And depending how that feedback went, Toast would start the process of thinning its ranks. If investors needed Toast to demonstrate a path to EBITDA, Toast might have whacked a quarter to a half of their workforce, or about the same number they laid off in April 2020.

What line of business is your company really in?

It’s important that you understand what company you’re working for. Is it a technology company? Is it a sales machine? Is it something else entirely? This matters because how a company perceives itself at the top will determine both the culture and the business decisions the company makes. For example, despite restaurants claiming to be technology companies, they’re never going to attract high caliber engineers. Why? Because until engineering is prioritized, good engineers don’t want to join an organization where their findings, opinions, and strategies are subordinated to some guy who’s been cooking french fries for 40 years.

In our view Toast was and continues to be a payments company. If their software were so superior they would not have had to give it away under a “free POS” model, nor would they have such a thin list of enterprise merchants. This means Toast prioritized the payments business above all else. Sure, with enough easy money they’d hire engineers to build additional software, but when 70% of your revenues come from payments you’re a payments company. If Toast were a software company why not just partner with a payments company? We all know the answer.

How transparent is the culture?

There’s been a huge move to transparency, especially at technology companies vying for the top engineers. How much money has the company raised? How is it spending it? How much does it have on the balance sheet? What are the revenues? What are the KPIs the organization prioritizes and how is the company executing against those metrics?

Without fail, many at Toast couldn’t answer this question, even at fairly senior positions. Why? If you asked such a question were you ignored, ridiculed, or handed another glass of kool-aid? Is it because Toast didn’t want employees questioning the messaging? Do you trust Toast more or less because of this?

As you move forward in your career you have every right to ask these questions and get an answer.

The long and short of it is this: you should question everything. Don’t be a lemming and follow blindly. Ask tough questions. Understand what’s really going on. Or don’t, but you can’t complain if you’re let go again and you don’t know why.

Bulls make money, bears make money, hogs get slaughtered.