- Associated Press - Friday, September 9, 2016

PORTLAND, Ore. (AP) - These are heady times in the Silicon Forest.

Tech jobs are proliferating, wages are rising even faster, and venture dollars are flowing in at their fastest rate in a decade.

And yet Oregon tech has endured a spate of layoffs that began this spring and continued throughout the summer as companies pared back in search of profitability or to recalibrate their business.

The cuts came at companies big and small and reflect the constant state of churn on technology’s cutting edge and growing pressure from investors for small companies to stand on their own.

Portland online education company Treehouse laid off nearly one-fifth of its 104 employees last month, including 10 in Oregon.

“Part of the decision was driven by investor sentiment. We saw a real shift in investor mentality in Jan ‘16 where valuations were becoming more reasonable and investors wanted to see profitability,” Ryan Carson, Treehouse’s chief executive, wrote in an email.

Entrepreneurs and venture capitalists say investors have grown more cautious this year, particularly with companies beyond their earliest stages. Rather than plowing more money into companies, they say, investors want young tech businesses to demonstrate they can make money.

“A lot of venture funded companies are going to go out of business or be acquired in the next 12 months because they have little or no revenue and were hoping to ‘figure it out at scale,’” Carson wrote in his email. He said Treehouse’s revenue is growing strongly, and the prospect of profitability means the company will be able to chart its own course.

“I’m extremely glad we can control our future during these uncertain times,” Carson wrote.

It might seem obvious that businesses would want to be make money, but with startups that’s often not the case - not right away, anyway. Venture investors look for businesses with tremendous growth prospects and are willing to finance losses for months or years in hopes of generating a big payday down the road.

So when companies run out of those investment opportunities it can be a sign investors see their growth curve leveling off.

Portland mobile marketing startup Urban Airship, which has raised nearly $70 million, disclosed last month that it cut 8.5 percent of its work force. It will now target “strategic growth” as it shoots for profitability in 2017.

“Choices like this are never easy as they involve colleagues we care deeply about, and admire and appreciate for their contributions to our success,” chief executive Brett Caine wrote in a blog post announcing the cutbacks. “However, these adjustments are necessary to maintain our stated course, which will open up even more opportunities for our customers, employees and shareholders.”

It’s not just venture-backed companies chasing profitability.

Jive Software, founded in 2001, had never turned a profit when it laid off 100 workers in May. Its stock was trading as low as $3, one-quarter of what shares went for in its 2011 IPO, and Jive said it needed to cut back to reach profitability.

Last quarter Jive broke into the black on one key gauge of its financial performance for the first time.

“There definitely has been a trend over the last six months to tighten things up a little bit and be a little more fiscally responsible,” said Scott Roth, the new chief executive at Portland product development technology company Jama Software.

Jama laid off 10 of its roughly 160 employees last spring. The company, which has raised $33 million altogether, remains well capitalized, according to Roth. But he said the business is maturing, and Jama is shifting from marketing to business units within large companies to targeting the entire organization with its product planning technology.

That marketing shift represents a big opportunity, Roth said, but requires a different skill set. And so as Jama adds personnel in one area it cuts back in others.

“We’re not just trying to throw money at stuff and see what works,” Roth said. “We’re trying to be really smart about how we’re growing.”

A similar dynamic is at work at Lytics, a Portland marketing data startup. In its earliest stage the company focused on engineering, building its technology and demonstrating what it can do. Now that its service is up and running, though, chief executive James McDermott said Lytics needs to be thinking about how to sell its technology.

So Lytics cut a handful of engineering jobs last spring, hiring marketers in their place. McDermott said that’s a better way to run a business than to raise more funds only to keep the headcount up.

“We want to grow in a way that makes sense for us and our business,” he said, “not just to see how much money we can raise.”

There’s no doubt growth is slowing at some companies, according to Diane Fraiman, partner with the venture firm Voyager Capital. And she said it’s also true that investors are getting less patient, especially with some of the highly funded companies in the Bay Area.

But Fraiman said the technology industry is particularly volatile, continually upended as new concepts overtake the old. Even as the startups recalibrate in downtown Portland, she noted, big companies like Intel are also cutting back to reposition their businesses.

“It’s basically the nature of the beast,” Fraiman said, “and always has been.”

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Information from: The Oregonian/OregonLive, https://www.oregonlive.com

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