Capitalists are accused of being obsessed with making money. Startup reporters seem to be the opposite. We’re infatuated with losing money.
It’s possible others find this ongoing loss-tallying tiresome. But we do not. And so, with that, we bring the latest installment of Loss-O-Rama 2018: Who Loses The Most Money Per Capita?
Over the past couple weeks, we’ve been assembling a dataset that tallies employee headcounts at recently public venture-backed companies. (We did not include private companies because generally only public or pre-IPO companies regularly disclose headcounts.)
The intent of today’s data dive is to see what kind of correlation, if any, exists between a company’s headcount and its loss levels. We set out with the presumption that companies deepest in the red would likely be those with the largest staffing cost. But does the data support that?
Below, let’s take a look.
Big Staff, Plus Losses
Indeed, the data sometimes supports the notion that heavily staffed companies lose the most money.
Here are some of the companies with staffs of several hundred or more that manage to lose a lot per-capita:
- Estimated employee count. 800
- Estimated loss per employee per year. $225,000
Among the most heavily staffed companies with the highest losses, Domo stood out. The Utah-based developer of business intelligence software has a staff of around 800 and has posted quarterly losses averaging around $45 million for the past five quarters.
Seeing Domo rank poorly on this metric is not surprising. The company tends to size up poorly on most established metrics for its industry. It went public this spring at a public valuation far below its private market levels, and it has seen shares shed about a third their value since.
- Estimated employee count. 1,400
- Estimated loss per employee per year. $150,000
The Silicon Valley-based developer of solid oxide fuel cell technology is no youthful startup. Founded in 2001, it’s been plugging away ever since. And while it’s not profitable, Bloom does have high sales, bringing in nearly $340 million in revenue in the first half of 2018.
- Estimated employee count. 1,500
- Estimated loss per employee per year. $49,000
Tax and compliance software provider Avalara had nearly 1,500 employees per its last disclosure and is running in the red at a rate of approximately $70 million a year. The losses come as the company continues to grow revenue at a healthy clip and earmarks more money for sales and marketing.
- Estimated employee count. 350
- Estimated loss per employee per year. $220,000
Guardant, a provider of blood tests for cancer detection, has performed well since its October IPO, notching a recent valuation over $3 billion amid investor enthusiasm for its growth potential. And while Guardant isn’t hugely staffed, it’s no skeleton crew either. Losses, meanwhile, contracted some in the first half of this year from prior quarters.
Small Staff, Big Losses
Pre-revenue biotechs dominate the list of companies with the highest per capita losses. This makes sense. Companies in this sector tend to spend heavily on R&D and clinical trials while also operating with lean staffs.
It’s not uncommon to see losses in the neighborhood of a million dollars a person. Here are a few examples out of the many we came across:
- Forty Seven, a clinical stage immuno-oncology startup, lost roughly $1 million per capita last year. (It posted a loss of $45 million while employing a staff of 46.)
- Tricida, a drug developer with just over 60 employees, is also in the same ballpark, having lost $70 million in the first three quarters of this year.
- Denali Therapeutics, a developer of therapies for neurodegenerative disease, has posted losses of $114 million in the first three quarters of this year. It employs 130 people.
As an aside, it should be noted that these loss-per-capita figures are offered for interest value rather than investment strategy. There are plenty of valid reasons why a company would be posting large per-capita losses as it scales, or it could be burning too much money. A much deeper analysis would be required to figure out which is the better explanation. And this is just a dataset, not a case-by-case study.
Losses Can Lead To Profits
To conclude on a positive note, the loss-counting did unearth several examples of recently public venture-backed companies that have turned profitable.
For instance, Sonos, the maker of high-end home speaker systems, was in the red last year but posted a $13 million profit in the first half of 2018. It employs around 1,500 people. Drug developer Principia Biopharma, with just over 50 employees, also posted a small profit in 2018.
Still, profits-per-capita compatible with industry heavyweights like Microsoft or Google aren’t likely to be found among unicorns and recently public companies. That typically takes years or even decades to amass.
Loss per capita is based on last four quarters for which financial returns are publicly available. When 2017 returns weren’t broken down by quarter, we divided annual loss evenly by quarter. Employee counts are based on IPO filings.
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