Canopy lays off nearly half its staff
Canopy, a fast-growing practice management and tax software company, laid off over 40 percent of its staff over the weekend.
Before the layoffs, Canopy had been expanding rapidly, and many employees were caught off guard by the sudden layoffs. Canopy has been planning to release a professional tax preparation system, which it began beta testing earlier this year with hopes of launching it in time for next tax season (see Canopy to begin beta testing professional tax prep software). It recently moved into larger headquarters in Lehi, Utah, after receiving a grant from the governor’s economic development office and announced plans to double the size of its workforce over the next four years.
Canopy was founded by Kurt Avarell in 2014. He left a career as a Wall Street tax attorney to launch the company, which used to be called Canopy Tax, from his basement. In recent years, the company has rapidly developed a cloud-based practice management system for tax firms, in addition to software for handling tax transcripts. tax notices, and tax resolution management.
“I have personally invested from Day 1 in building a company in which our customers, partners, employees and investors can be proud,” Avarell said in a statement emailed Monday to Accounting Today. “We’re poised for continued growth as we develop solutions to equip the category to tackle key challenges. Unfortunately, this journey now includes the hard decision to part ways with valued team members as we implement the high level of focus and precision needed in the next phase of Canopy’s growth trajectory. I thank each and every team member for their contribution and dedication to the company. Each of these individuals is among the best in their fields, and brought significant vision and strong execution to Canopy during their time here. In fact, as a testament to their talent and to the supportive tech community here in Utah, a free networking breakfast on [March 13] has been set up featuring more than 30 of the region’s top employers to help affected Canopy employees find their next opportunity. Moving ahead, we commit to building on the great foundation put in place by the Canopy team with the support of our investors and partners.”
Canopy is still moving forward with its product development plans, according to spokesperson Andrew Jones: “There will not be any anticipated delay in releasing and enhancing Canopy's upcoming product offerings.”
Avarell later told Accounting Today that the layoffs amounted to approximately 30 percent of the full-time staff, but mostly did not affect the product or engineering teams. "It was about 30% of our full-time staff and primarily impacted our sales and marketing teams," he said in an email. "The company still has a team of over 170 employees in Utah. The impact to product and engineering was minimal, and we don't anticipate any change in the delivery of tax prep in the coming weeks or other major product releases. Canopy will be releasing a 2019 tax prep product as soon as the tax season is over. While difficult decisions, the future of innovation at Canopy remains unchanged and as bright as ever. We will certainly miss our alum and are helping them find new positions here in Silicon Slopes."
In all, 81 full-time employees were let go, and the 30 percent would include all those who were laid off, according to a spokesperson.
In January, when Canopy moved to its new offices, the company touted the advantages of the much larger space. It took over three of the five floors in a newly built corporate space with nearly 80,000 square feet. The building offered employees basketball and pickleball courts, a gym, a library, stocked kitchens, barbecue grills and a smoker, along with maternity/paternity rooms.
Recent social media posts on LinkedIn and Glassdoor suggested that that spending may have contributed to the retrenchment.
“It was very clear that the allocation of money was way out of proportion,” wrote one former employee on Glassdoor. “So many jobs could have been spared had we made better use of the funding we'd been given. It seems that some decisions were extremely rash. Having to lay off 40 percent of the company is not something that should have been decided in two days, but should have been forecasted for months. I gave Canopy my heart and soul and was left with little explanation and absolutely no apology from my managers.”
A current employee was more optimistic about the company’s growth prospects. “It was either layoffs now and focus on fixing core problems and extending the runway long enough to do it or betting all of our jobs on a short-term goal that, if missed, would have meant everyone losing their jobs,” the employee wrote on Glassdoor. “I appreciate the hard decision you made. To those who got let go, my heart goes out. Those of us who stay will do what we can to help you land on your feet. To those who see a big new building and positive press recently, the building and the press was in place before any of this happened. From my understanding the models for why layoffs happened were only fully realized last week. It’s not a reflection of the leadership or the company, but simply the velocity. We were moving too fast and we needed to pump the [brakes]. The future for Canopy is still incredibly bright.”
Avarell denied that the company overspent on improvements to the building. "It's also important to note that Canopy did not spend $1 on any of the tenant improvements in the building that the reviewer on Glassdoor (who clearly does not what he/she is talking about)," he told Accounting Today. "The buildout, including all amenities, was covered in its entirety by the landlord in exchange for a long-term lease, which suggests the staying-power of Canopy into the future. Additionally, Canopy is currently generating income from leasing some portion of the building to other subtenants, which means to date and throughout the end of this year the building will generate net rental income for Canopy, rather than the lavish spending that the reviewer on Glassdoor suggested."
On LinkedIn, Ted Ferrin, the CEO and co-founder of financial reporting technology company Rivet Software, wrote a post over the weekend encouraging employers to hire the newly laid-off employees. “It's clear there will be a large recruiting market for Canopy's talent who is looking for the next job, but nobody knows who is now looking: Please tag anyone as a reply to this particular comment who is looking and fair game,” he wrote. To the company’s current employees, he also encouraged them to stick with it. “To those staying at Canopy, the party isn't over,” he wrote. “Canopy is in a gigantic market with low/no competition from innovators. Give this 1-2 years of execution and you'll be back on top.”
Canopy received $42 million in funding last May from Tenaya Capital and Nyca Partners, on top of $30 million in earlier funding led by New Enterprise Associates, along with Wells Fargo Strategic Capital, Pelion Ventures, University Growth Fund and EPIC Venture (see Canopy receives $42M in funding).