Airtime Navigates Turbulent Waters with Significant Layoffs and Strategic Pivot

In the dynamic and often unpredictable world of technology startups, periods of rapid growth can quickly give way to challenging contractions. The latest company to face such a reality is Airtime, the video communication startup founded by Phil Libin, the entrepreneur best known for co-founding the once-dominant note-taking application, Evernote. Airtime has confirmed a substantial reduction in its workforce, laying off dozens of employees as it seeks a new path forward.

According to reports, Airtime has let go of 25 individuals from its relatively small team of 58. This represents a significant cut, impacting over 40% of the company's staff. Airtime has characterized these departures as part of its ongoing operational adjustments, specifically linking them to a “bigger than usual” change in the company's strategic focus. However, the timing and nature of the layoffs have reportedly caused surprise and frustration among some employees.

The Genesis of Airtime: From mmhmm to a Post-Pandemic World

Airtime's journey began under a different name: mmhmm. Launched in 2020, the startup emerged during a pivotal moment in global history – the sudden and widespread shift to remote work and virtual communication necessitated by the COVID-19 pandemic. With millions suddenly reliant on video calls for everything from daily stand-ups to major presentations, mmhmm aimed to enhance the virtual meeting experience beyond standard video conferencing platforms.

Phil Libin, already a recognizable figure in the tech landscape due to his tenure at Evernote, positioned mmhmm as a tool to make online presentations and interactions more engaging and dynamic. The initial product allowed users to appear alongside their presentations, offering features like virtual backgrounds, effects, and interactive elements. This was a direct response to the perceived flatness and fatigue associated with endless grid views of talking heads.

Libin's previous venture, Evernote, had achieved considerable success, reaching a valuation of nearly $1 billion at its peak. However, it later faced challenges from newer, more agile competitors like Notion and ultimately sold to Bending Spoons in 2022 for a figure significantly lower than its peak valuation. This history provides a backdrop to Libin's subsequent endeavors, including Airtime, highlighting the pressures and complexities of maintaining relevance and growth in the fast-evolving tech market.

Today, Airtime offers two primary tools: Airtime Creator and Airtime Camera. Airtime Creator is designed for presenters, allowing them to integrate themselves seamlessly with their slides or screen share, creating a more television-like broadcast feel. Airtime Camera provides tools for users to customize their appearance and environment in video calls, aiming to help individuals stand out and express themselves more effectively in virtual settings.

The 'Seasonal' Employment Model: An Attempt at Predictability

In late 2022, Airtime introduced a unique “seasonal” employment structure. This followed an earlier layoff round that reduced the company's headcount to around 100 as it actively sought to find a stronger product-market fit. The stated intention behind the seasonal model was to provide employees with greater predictability and transparency regarding their future with the company.

Under this model, the company would operate in roughly five-and-a-half-month “seasons,” with a short break in between. Near the conclusion of each season, Airtime's leadership would decide which employees would be invited back for the subsequent season based on the company's evolving plans and needs. The premise was that employees who were not invited back would receive ample advance notice, giving them time to seek alternative employment before their current “season” ended.

Conversely, employees who accepted an invitation to return for the next season were expected to commit for the full duration, and the company committed not to terminate them mid-season, except in cases of serious misconduct. This structure aimed to create a mutual understanding and commitment, contrasting with the often abrupt nature of traditional layoffs.

While unconventional and potentially controversial, the company and its staff had reportedly adhered to this seasonal agreement since its implementation. The recent layoffs, however, appear to have deviated from the expected cadence for some employees, leading to dissatisfaction.

Discrepancies and Discontent: The Impact on Employees

Sources within Airtime indicated that staff were surprised by the recent layoff announcement. Many were under the impression that the company was planning to raise additional funding in the near future and had previously been assured that no significant cuts were planned. This perceived misalignment between internal communications and the actual decision contributed to the sense of surprise.

Furthermore, the timing of the departures reportedly caused friction concerning the seasonal model. Employees were told their current season would typically conclude at the end of June. However, impacted staff were given an earlier end date of Friday, June 6th. While Airtime stated that severance packages would cover at least some of the period employees might have expected to be employed under the seasonal arrangement, the deviation from the anticipated timeline added to the frustration for some.

Phil Libin offered a different perspective, stating that departure dates varied, with some employees staying longer to finalize tasks while others left sooner. He emphasized that all departing employees would receive six weeks of severance pay from their last day, suggesting that any issues might stem from employee confusion or miscommunication regarding the specific end dates and severance details.

The decision-making process itself also became a point of discussion among staff. Sources claimed that the layoffs were determined during two extensive eight-hour sessions held by leadership at a restaurant in Palo Alto. Managers were reportedly informed of the decision the night before the broader staff announcement on Tuesday, June 3rd. In addition to the full-time employees, an unspecified number of independent contractors were also reportedly let go.

Behind the Cuts: Product Challenges and Shifting Priorities

While Airtime attributed the larger-than-usual cuts to a significant change in focus, internal perspectives shared with TechCrunch painted a picture of underlying challenges that may have necessitated the pivot and subsequent layoffs. According to company insiders, Airtime's product suite never achieved the widespread adoption or sustained engagement needed to truly “take off.” The company reportedly experienced significant user churn, indicating difficulty in retaining users after initial sign-up.

User acquisition efforts also proved costly, with employees reporting monthly ad spend in the high tens of thousands of dollars – a substantial figure for a startup of Airtime's size, especially if not yielding proportional returns in terms of retained users or revenue. High customer acquisition costs coupled with low retention can quickly become unsustainable for a venture-backed company.

Adding to the internal concerns, some employees reportedly felt that Phil Libin, while the visionary founder, was often absent from the day-to-day operational decisions of Airtime. Reports suggest that Libin had been dedicating significant attention to his restaurant venture in Arkansas, potentially diverting focus from the core challenges facing the video startup.

In his official statement, Libin reiterated the company's commitment to the seasonal structure and explained the layoffs as a necessary adjustment driven by a change in strategic direction. “We’re currently in our sixth seasonal transition, and we’ve made changes to the team every time. This change is bigger than usual because our focus changed more than usual,” the statement read. He confirmed that out of 58 employees, 33 were invited back for the next season to work on “new products and partnerships.” This indicates a clear pivot away from previous initiatives and towards unexplored avenues for growth.

Funding, Acquisitions, and the Search for Product-Market Fit

Despite the recent challenges, Airtime has attracted significant investment since its inception. The company has raised nearly $135 million in venture funding across multiple early-stage rounds. This substantial capital infusion reflects investor belief in Phil Libin's vision and the potential of the video communication market, particularly in the wake of the pandemic-driven shift to remote interactions.

Some of this funding was strategically deployed for acquisitions aimed at enhancing Airtime's product capabilities and bringing in experienced talent. In 2020, while still operating as mmhmm, the company acquired Memix, a startup specializing in video filters, to integrate enhanced visual effects into its presentation toolkit. This move aimed to make virtual presentations more dynamic and visually appealing.

A year later, in 2021, mmhmm (by then transitioning towards Airtime) acquired Macro, a company focused on building tools for online meetings, including filters and reactions. The Macro acquisition was particularly noted for bringing in its founders, Ankith Harathi and John Keck, who were seen as having strong product development expertise. However, according to their LinkedIn profiles, both Harathi and Keck have since departed Airtime, suggesting that integrating acquired talent and product lines may not have yielded the desired long-term results.

Airtime's parent company, All Turtles, also brought in Alexander Pashintsev, who had previously worked on AI initiatives at Evernote. While this move signaled potential interest in leveraging artificial intelligence, Airtime itself has not yet made a significant public push into AI-powered features for its core video tools. This could be an area the company explores as part of its newly announced strategic pivot.

The Broader Context: Tech Layoffs and Market Realities

Airtime's layoffs occur within a broader landscape of significant workforce reductions across the technology sector. Following a period of rapid hiring and expansion fueled by pandemic-era demand and readily available venture capital, many tech companies, from large corporations to early-stage startups, have been forced to cut costs and streamline operations. Factors contributing to this trend include rising interest rates, tighter investment climates, changing consumer behavior post-pandemic, and a general recalibration of growth expectations.

Startups, in particular, are under increased pressure to demonstrate a clear path to profitability and sustainable growth, rather than solely focusing on user acquisition at all costs. Investors are scrutinizing business models more closely, demanding efficiency and a strong product-market fit before committing further capital. Companies that thrived during the peak of remote work and online collaboration are now facing challenges as hybrid work models evolve and video fatigue sets in.

In this environment, a startup like Airtime, which raised substantial funding but struggled with product adoption and churn, becomes vulnerable. The decision to lay off staff and pivot strategy is often a necessary, albeit painful, step to extend runway, reduce burn rate, and attempt to find a more viable business model or market niche.

The internal accounts of product challenges, high ad spend, and perceived leadership focus issues, if accurate, align with common reasons for startup struggles. Even with a seasoned founder like Phil Libin and significant funding, building a successful product that resonates with a large, paying user base in a competitive market is inherently difficult.

The Future of Airtime: A Pivot Towards New Products and Partnerships

Airtime's official statement points towards a future focused on “new products and partnerships.” This suggests a potential shift away from its current core offerings or a significant evolution of them. The video communication space remains competitive, dominated by giants like Zoom, Microsoft Teams, and Google Meet, while also seeing innovation from smaller players focusing on specific niches or enhanced features.

What these “new products” might entail is currently unclear. Given the parent company's connection to AI expertise, a move into AI-enhanced video tools or related collaboration technologies could be a possibility. Partnerships could involve integrating Airtime's technology into existing platforms or collaborating with other companies to offer bundled services.

The success of this pivot will depend heavily on Airtime's ability to quickly identify and execute on a new strategy that addresses the market challenges and finds a stronger product-market fit than its previous efforts. The reduced team size means fewer resources to pursue these new directions, placing increased pressure on the remaining 33 employees to deliver results.

The experience also highlights the complexities of alternative employment models like the “seasonal” structure. While intended to provide clarity, its implementation during a period of significant change appears to have created confusion and disappointment for some staff, underscoring the difficulty of managing workforce transitions, regardless of the framework.

As Airtime embarks on this new phase, the tech community will be watching to see if Phil Libin and his team can successfully navigate this challenging period, leverage their remaining resources effectively, and find a sustainable path forward in the ever-evolving landscape of digital communication tools.

The story of Airtime serves as a reminder that even startups with experienced founders and substantial funding are not immune to the pressures of the market and the constant need to adapt and evolve in the pursuit of lasting success.