There is a disturbing trend of layoffs in startups

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We don’t need to tell you about the layoffs that are defining the tech landscape right now, especially at late-stage companies that are struggling to increase renewal rounds and grow to existing valuations. However, we think it’s important to focus on the disappointing trend that emerges between all of these headlines: some companies are announcing layoffs after layoffs in quick succession, a double cut that seems surprising.

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For a long time, I’ve noticed that the same startups that made layoffs in March 2020 should have contracted again in the wake of 2022. The first wave was in preparation and fear, this wave feels like a pullback after a surge. What confuses me now is that startups are laying off staff now, referencing it vaguely because of the macroeconomic situation, and then doing the same thing a few weeks later with the same reasoning.

Some nuance

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In most cases, the subsequent layoffs looked larger than the previous ones, which tells us that the company did not go far enough in its first reorganization.

It’s also worthless that the rate of net new layoffs is declining, albeit only marginally. According to the layoffs.fyi tracker, there were 150 new layoffs in July, down nearly 18% from a month earlier.

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According to Nolan Church, CEO and co-founder of part-time job platform Continuum, there are several reasons why a founder might need two rounds of layoffs in a row: deteriorating business, poor forecasting, or both. He also added that one factor could be that “management lacked the courage to consciously cut deep” when it comes to people and projects in the first round.

Continuum recently raised $12 million in a Series A round. scale a set of partial work tools, including a service to help startups behave more humanely. The company connects a client in need of support in handling layoffs with an experienced manager for anything from a day of support in news sharing to a high-level consultation. He hasn’t seen a single double round of layoffs among clients, which he attributes to the fact that his executives encourage founders to “cut once and cut deep.”

“Layoffs two weeks apart are unforgivable. Management, probably the CEO, miscalculated badly,” Church said. “I am not surprised by layoffs two years apart. Typically, CEOs of early-stage companies optimize for two to three runway years. The first layoff came when they initially changed direction. As part of this event, they likely changed course and made a new bet. The second dismissal is due to the fact that this bet did not pay off.

With all that said, according to layoffs.fyi, as well as TechCrunch’s own reports, here are some of the companies that have gone through at least two rounds of layoffs within months, sometimes weeks of each other:

On deck

On Deck, the tech company that connects founders to each other, capital and boards, has gone through yet another round of layoffs. just three months after laying off a quarter of the staff. Sources say more than 100 people have been affected by the workforce cuts, accounting for half of the entire workforce, while the company, which confirmed the layoff to TechCrunch via email, said 73 full-time employees have been laid off. The leaders were not hurt.

The startup’s second layoff is tied to a more specific strategic roadmap, while its first layoff was largely due to changes in the capital and accelerator markets. This time around, On Deck went deeper: it closed several communities and spun off the career development department into its own startup.

Perhaps this is due to the more urgent need to expand the runway. Sources calculated that the first round of layoffs came because there were only nine months left on the runway. Now, On Deck co-founders Eric Thorenberg and David Booth say the company has more than three years of runway.

Robin Hood

Earlier this week, Robinhood announced that 23% of the staff were fired in all functions, especially those focused on company operations, marketing and program management functions. The workforce cut comes just three months after Robinhood cut 9% of its full-time workforce, with CEO and co-founder Vlad Tenev saying it was “the right decision to increase efficiency, increase our speed and ensure we’re responsive to change.” . the changing needs of our customers.”

After the official confirmation of the second round of layoffs, Tenev spoke differently. The co-founder took credit for the apparent over-hiring of Robinhood in a frenzy that was in 2021. He said the company staffed many of its operational functions last year on the assumption that the “increased retail engagement” that has taken place will continue into 2022.

“In these new conditions, we are working with more staff than necessary,” he wrote. “As CEO, I have endorsed and taken responsibility for our ambitious talent trajectory – that is my responsibility.” He also said that the first round of layoffs “didn’t go far enough.”

“Since then, we have witnessed an additional deterioration in the macroeconomic environment, with inflation reaching a 40-year high, accompanied by a massive collapse of the cryptocurrency market. This further reduced the trading activity of clients and assets held in custody,” Tenev said. Robinhood’s share price was also volatile last year. As of press time, the company is trading at $8.90 after hours, well down – 89% – from its 52-week high of $85. It also fell 3.6% after business hours.

Twins

Crypto platform Gemini cut roughly 10% of its workforce and then cut another 7% just weeks later. Co-founders and twin brothers Cameron and Tyler Winklevoss spoke of somewhat expected volatility in what they called the “crypto revolution”.

“His path can best be described as a punctuated equilibrium—periods of equilibrium or stagnation that are punctuated by dramatic moments of hypergrowth followed by sharp contractions that come to a new equilibrium that is higher than the previous one,” the co-founders wrote. in a blog post during the first downsizing. They go on to say that the cryptocurrency has entered a temporary downturn, also known as a contraction phase, which is further “exacerbated by the current macroeconomic and geopolitical turmoil.”

However, Gemini did not respond to the comment when it came to the second firing. A source who spoke to TechCrunch on condition of anonymity said the company is laying off employees due to what he called “extreme cost cutting.” An internal operating plan document showed that Gemini was considering a plan that would see the company have about 800 employees, about 15% down from the 950 employees at the time. Jacqueline Melinek reports.

jump in

Hopin virtual event platform, last rated in valuation $7.75 billion, in July, 29% of employees, or 242 people, were fired. The cut comes just four months after Hopin laid off 12% of its workforce. sustainable growth goal against the backdrop of a changing market.

In addition to laying off almost a third of the company, a Hopin spokeswoman confirmed that some contractors and outside team members were laid off, but did not give exact numbers. The difference between the first round and the second round, except for the latter being more than double that, is that Hoping parted ways with a number of executives. TechCrunch has learned that the COO, CFO and chief commercial officer have left the company, though it’s not clear if the trio left voluntarily or were fired.

A spokesperson for Hopin confirmed via email that the trio was “going out of business,” adding that “after much discussion, we all agreed that this is the best way forward for business.”

Latch

Latch, the Proptech and SaaS platform that went public through SPAC in June 2021, was the first company I saw layoffs for two weeks in a row.

According to an email obtained by TechCrunch, the company laid off 30 people in May, or 6% of its total workforce. Then, as confirmed at the end of Friday’s press releaseLatch announced that it has laid off a total of 130 people, or 28% of its full-time employees.

As in the case of Khopin, successive layoffs are accompanied by an exodus of executives. Sources say the cuts will include Chief Revenue Officer Chris Lee and VP of Sales Adam Sold. In April, Latch’s CFO left the company less than a year after he took office and after the company went public in a reverse merger. At the time, TechCrunch outlined wider collapse of SPAC and explained that Latch was not immune.

Latch expects to achieve savings of approximately $40 million a year in research and development, sales and marketing, and general and administrative expenses after the layoff. says in a press release.

Clerko

Clerko, a Toronto-based provider of fintech capital for online companies, told TechCrunch that it has laid off 125 people, or 25% of its entire staff. Those affected will receive a severance pay, a two-year window to implement equity, and management support for job transitions, Clearco said. The company did not say which teams and roles were affected, or if any members of senior management were fired.

Clearco expanded to Germany in June but simultaneously cut 10% of its workforce in Ireland, just three months after it entered the market and announced plans to hire more than 100 employees, it is reported. Independent.i.e. It’s not clear if the upcoming layoffs will be geo-referenced or what exactly “strategic” options exist, but we do know that Clearco does have a lot of international competition. The startup previously went through another round of layoffs in March 2020. layoffs affecting 8% of staff then talked about the “long-term economic consequences of COVID-19.”

It has been about a year since Clearco announced that he received funding from SoftBank, The $215 million tranche closed just weeks after the company received a $100 million round. this increased his valuation fivefold to $2 billion.

Takeaway

After nearly four months of the constant drumming of layoffs, it’s clear that double cuts offer mixed messages for many reasons. It’s likely that a combination of factors has driven the layoffs, from misguided forecasts to missed renewal rounds to realizing just how bad things really are. While workers have ultimately had to deal with the effects of a changing macroeconomic climate, employers are giving us example after example of how difficult it is to understand how to manage staff during an economic downturn. Or at least fire them.


Credit: techcrunch.com /

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