Last Friday, Lot18 made a company-wide announcement.
If employees weren’t happy at the young flash-sale wine site, they could resign by May 18 and receive one month’s pay.
“If you’re really not happy, we want to help you find something else to do,” says a company spokesperson, who says the offer was modelled after Zappos’ strategy of offering new hires a payment to walk away if they feel the company isn’t a fit.
But in the past week, seven of about 90 employees have taken Lot18 up on the offer.
This time last year, people were scrambling to work for Lot18. In October it raised $30 million from big-time VC firm Accel and it grossed $25 million last year.
What’s going on at Lot18?
After speaking with a number of sources and the company, it sounds like growing pains and discord between employees and upper management.
In the past year, Lot18 shot up from 6 employees to nearly 100. With such quick growth, it’s a difficult transition that many people aren’t cut out for. But often, growth can be harder for startups to manage than failure.
In Lot18’s case, the company’s culture seems to be suffering as it grows into its awkward adolescent phase. But it’s something the startup needs to figure out how to curb.
Current and former employees have described the environment as “deceitful,” “inefficient,” and even “toxic.” They also take issue with upper management and they way news is “spun” to employees.
One source who was employed by Lot18 says the first few months on the job were fun.
“It was full of promise and excitement, but it quickly became a bureaucracy. Now it’s run like a mini corporation inside a small business,” we were told.
“I worked at Lot18 for over a year and I can truly say that the company culture is toxic,” says another. “Not to say there aren’t good people there but the ‘executive team’ (as they call themselves) continually make poor decisions and try to spin them to look great. There’s a lack of honesty and integrity.”
The source couldn’t pin point an exact moment when the vibe at Lot18 began to change, although he/she noted the hiring of a C-level executive, who has since been let go, as part of the problem.
As more executives were hired, a source says the company became more inefficient; he/she began to feel a lack of respect. “I felt like decisions made in a room and then the executives would walk back out and try to spin them to be positive,” we were told.
A spokesperson for Lot18 responded, “No executive is always right. The executives are making the best decisions they can at the time.”
Other complaints were that Lot18 is “bleeding money” and stock options felt like “bait and switch.” “No one who isn’t VP level or higher is going to make more than $10,000 if Lot18 is successful,” the source says.
Those things are true in many growing startups. Executives rake in cash during an exit while other employees are just lucky to get cut a bonus-size check.
Burn rates, especially at startups with as much funding behind them as Lot18 — about $50 million — are high in exchange for expansion and fast growth.
But so much frustration among current and former employees isn’t normal. It also isn’t normal for seven people to quit in one week. The discord between its executives and employees needs to be cleaned up quickly.
Sources say Lot18’s growth has slowed. The company says revenue is ahead of where it was this time last year.
“We’re growing and making changes quickly, which sometimes mean fine tuning and turning a complete 180,” says the spokesperson. “That’s not only startup life, that’s startup life in dealing with the wine business.”
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