The highs, lows and path forward for fintech company Knock
CEO Sean Black shares the journey of his company's near-IPO followed by painful layoffs and strategic changes.
- Knock laid off nearly half its employees in March, ahead of the market slowdown.
- Though difficult, “I would rather be more aggressive than not, because you only want to do this once,” said Black.
- Companies struggling with falling profits are better off making cuts sooner, focusing on opportunities ahead.
It's not easy to let go of big aspirations — or employees — when all signs previously pointed to growth.
But in business, as in life, the unexpected happens, and a willingness to change directions is key to successful leadership. That was the reality that CEO and co-founder Sean Black came to accept as his company Knock, at one point a "unicorn," lost investors and saw the market changing, all in the midst of a pandemic.
Knock, a fintech company, offers guaranteed loans that allow buyers to make an all-cash offer on a home, and enables sellers who are also buying to buy before they sell through Knock's "Home Swap" program.
A promising start, and a difficult pivot
Things were going well in early 2021. The company, founded in 2015, was preparing to launch an IPO after receiving a $2 billion valuation. But as investor confidence began to shift, Knock lowered its valuation and its funding goal. The company continued to expand, but decided to scrap its plans for an IPO as changing market dynamics — due in part to surging Covid cases and Zillow's announcement that it was shuttering its iBuying business — forced Knock to rethink its strategy.
Ultimately, the company secured $220 million in capital funding (after setting an original goal of $400 million). With only about half the funding they anticipated, Black and his Knock co-founder, Jamie Glenn, made the difficult decision to "right-size" the company by laying off nearly half its workforce.
Documenting the journey
Black felt that transparency was important, so after talking it over with Glenn, he took the unusual step of writing a detailed blog post explaining what happened and why the cuts were necessary. The company also tried to support employees who were being laid off by connecting them with companies they knew were hiring.
In an era where job cuts are typically announced via a short press release (or not announced at all), Black's post was a refreshing tactic, and he said many people told him they appreciated the candor.
"I feel like we did it the right way, we did it with dignity, we gave as much runway as possible, we were transparent about what we did. There were a lot of examples of how not to do it. I'm glad we did it early, but it was really hard to do," Black said in an interview.
The blog also helped him capture those lessons learned so he could refer to them during future challenging cycles.
"So much was out of our control, but it was important to document exactly what happened because over time you start to forget yourself and the story starts to evolve somehow," Black said.
Still adjusting to the current market
Black said he sensed a shift in the market in the spring of 2022, and while the layoffs were difficult, making cuts early — in March 2022 — was the right decision for the company because it saved much-needed resources.
"I would rather be more aggressive than not, because you only want to do this once," Black said. "That was one of the lessons learned, and then you have to get past it."
Knock's job reductions helped the company as the real estate slowdown set in, but it's still been challenging. The company had planned to enter 15 more markets by the end of 2022. Instead, they added one, shelving their expansion plans for now and focusing on their existing 75 markets.
'You can only control what you can control'
As CEO, Black needs to keep an eye on the market, but he's made an effort to avoid doom-scrolling, particularly on social media.
"You can only control what you can control. You can't control the macroeconomic environment, all you can control is being customer-focused and getting people across the finish line," Black said. "Real estate is all cyclical."
Black has experienced those cycles before. During the financial crisis of 2008, he was a founding team member at Trulia, and it quickly became a "last man standing" situation for the company (which was later acquired by Zillow) — a mentality worth applying to the current slowdown, he said.
But Black is much more optimistic about the health of the real estate market today. "People want to buy, they are just waiting for the opportunity to do it," Black said.
In the meantime, there will still be some challenges for the industry. For companies facing decisions about job reductions, Black said it's best to deal with it sooner rather than later.
"You are not doing anyone a favor by not doing it faster," Black said. "There is a positive in every challenging situation, and in this case a massive opportunity if you can conserve resources."