A disturbing startup layoff trend has surfaced – Meczyki.Net

We don’t need to tell you about the layoffs that are defining the tech landscape right now, especially those concentrated in late-stage companies that are struggling to raise expansion rounds and grow at current valuations. What we think is important, though, is focusing on the depressing trend emerging amid all these headlines: Some companies have announced layoff after layoff in quick succession, a double whammy that sounds surprising.

For a long time, I saw the same startups that laid off in March 2020 had to scale again in the wave of 2022. The first wave was in preparation and fear, this wave feels like a pullback after a bounce. What confuses me now is that startups are now cutting staff, citing it vaguely because of the macroeconomic environment, and then doing the same thing a few weeks later with the same logic.

some nuances

In most cases, a follow-up layoff looks bigger than a prior cut, telling us the company didn’t go far enough in its first restructuring.

It’s also not for nothing that the cadence of net new layoffs is falling, ever so slightly. According to layoff tracker layoffs.FYI, there were 150 new layoff incidents in July, down about 18% from a month ago.

According to Nolan Church, CEO and co-founder of fractional work platform Continuum, there are a few reasons a founder might have to do two rounds of layoffs in quick succession: business failure, poor forecasting, or both. He also said that one factor may be that “leaders don’t have the courage to make deep cuts” when it comes to people and projects in the first round.

Continuum recently raised a $12 million Series A round to scale up a suite of fractional work tools, including a service that helps startups behave more humanely. For anything from sharing news to high-level advice, the company connects to a customer in need of support when conducting layoffs to an experienced executive. He hasn’t seen a double round of layoffs among clients, which he attributes to the fact that his execution encourages founders to “cut once and cut deeper.”

“The layoffs are unforgivable except for two weeks. The leadership, possibly the CEO, guessed terribly wrong,” Church said. “The layoff two years apart doesn’t surprise me. Typically, CEOs of early-stage companies are optimized for a runway of two to three years. The first layoffs occurred when they initially changed direction. As part of that event, he probably shifted course and made a new bet. The second layoff is due to a condition that is not paying.”

With all that in mind, according to layoff figures as well as Meczyki.Net’s own reporting, here are some companies that have laid off at least two rounds of layoffs within months, and sometimes weeks of a second:

on the deck

On Deck, a tech company that connects founders to one another, Capital & Advice, has conducted another round of layoffs just three months after laying off a quarter of its employees. Sources say more than 100 people were affected by the workforce reduction, which accounted for half of the entire workforce, while the company – which confirmed the layoffs over an e-mail to Meczyki.Net – said 73 full-time employees would be laid off. was closed. No officer was affected.

The startup’s second layoff comes with a more specific strategic plan for the future, while its first layoff was largely attributed to changes in capital and accelerator markets. This time, On Deck went deeper: it has rattled many communities and is turning its career advancement arm into a separate startup.

This may be due to the need for more pressure to extend the runway. Sources estimate that the first round of layoffs happened because there was only nine months of runway left on deck. Now, On Deck co-founders Eric Torenberg and David Booth say the company has a runway of more than three years.

Robin Hood

Earlier this week, Robinhood announced that it was laying off 23% of employees across all operations, focusing specifically on the company’s operations, marketing and program management functions. CEO and co-founder Vlad Tenev said the workforce reduction comes just three months after Robinhood cut 9% of full-time employees, adding that it is “improving efficiencies, increasing our velocity, and ensuring We are responsive to the changing needs of our customers.”

With the official confirmation of the second round of layoffs, Tenev struck a different tone. The co-founder took responsibility for Robinhood’s apparently hiring in the frenzy of 2021. He said the company carried out many of its operations last year under the assumption that “increased retail engagement” would continue into 2022.

“In this new environment, we are working with more staff than is appropriate,” he wrote. “As CEO, I approved and took responsibility for our ambitious staffing trajectory – it’s on me.” He also said the first round of layoffs “didn’t go far enough.”

“Since that time, we have seen additional declines in the macro environment, with inflation at 40-year highs and a widespread crypto market crash. This has further reduced customer trading activity and custodial assets,” Tenev said. Robinhood’s share price has also been volatile over the past year. At the time of publication, the company is trading after hours at $8.90, a dramatically lower — 89% — from its 52-week high of $85. It is also down 3.6% after hours.

Gemini

Crypto platform Gemini cut its workforce by about 10%, and then just a few weeks later, about 7% more. Co-founders and twin brothers Cameron and Tyler Winklevoss talked about a somewhat expected volatility called the “crypto revolution”.

The co-founders wrote, “Its path can be described as punctuated equilibrium – periods of equilibrium or stagnation that are punctuated by dramatic moments of hypertrophy, followed by sharp contractions that settle to a new equilibrium that more than before.” In a blog post during the first workforce reduction. They further state that crypto has entered a temporary recession, otherwise known as a contraction phase, which is further “complicated by the current macroeconomic and geopolitical turmoil.”

However, Gemini did not respond to comment when it came to its second, reported layoffs. A source who spoke with Meczyki.Net under the condition of anonymity said the company was laying off employees in what it described as “extreme cost-cutting.” An internal operating plan document revealed that Gemini was considering a plan that would bring the company down to about 800 employees, which was about 15% less than the 950 employees at the time, Jacqueline Melinek reports.

pop

Hoppin’ virtual event platform, final price a $7.75 billion valuation, laid off 29% of employees, or 242 people, in July. Just four months after Hoppin cut 12% of its workforce, Hoppin cut 12% of its workforce, citing the goal of sustainable growth amid a changing market.

In addition to cutting off nearly a third of the company, a Hopepin spokeswoman confirmed that some contractors and third-party team members had been laid off, but did not provide exact numbers. The difference between the first round and the second round, apart from the latter more than doubling in size, is that Hoppin has participated with multiple officials. Meczyki.Net learned that the COO, CFO and chief business officer have left the company, although it is not clear whether all three left voluntarily or were laid off.

A Hoppin’ spokeswoman confirmed over e-mail that all three were “leaving the business,” and that “after many discussions, we all agreed it was the best course of action for the business.”

Latch

Latch, a proptech meets SaaS platform that went public via SPAC in June 2021, was the first business I saw laying off two weeks in a row.

In May, the company cut 30 people, or 6% of its total workforce, according to an email obtained by Meczyki.Net. Then, as confirmed According to a press release late FridayLatch announced that it has cut a total of 130 people, or 28% of its full-time employee base.

Similar to hoppin’, frequent layoffs come with a side of executive churn. Sources say the cuts affect chief revenue officer Chris Lee and VP of sales Adam Sold. In April, Latch left the company less than a year after assuming the role as CFO and took the company public through a reverse-merger. At the time, Meczyki.Net outlined the broader SPAC slowdown — and explained that the latch was not immune.

Latch expects to achieve approximately $40 million annual run rate cost savings in research and development, sales and marketing and general and administrative expenses after the layoffs, says a press release.

clearco

clearco, Toronto-based fintech capital provider for online companies, tells Meczyki.Net that it has laid off 125 people, or 25% of its entire workforce. According to Clearco, those affected will receive severance pay, a two-year window to exercise equity and job transition support from the leadership team. The company did not say which teams and roles were impacted, or if any members of the C-suite were let go.

Clearco expanded into Germany in June, but also cut 10% of its workforce in Ireland, three months after entering the market and announced plans to hire more than 100 employees, reports That is, independent. It’s not clear whether there are more geographically-focused layoffs to come, or exactly what “strategic” options are — but we do know that Clearco has plenty of international competitors. The startup first conducted another round of layoffs in March 2020, a reduction that affected 8% of its workforce, then led to the “long-term economic impact of COVID-19”.

It’s been nearly a year since Clearco announced it had secured funding from SoftBank, a $215 million tranche that closed just weeks after the company landed a $100 million round that saw its valuation rise to $2 billion. Extended.

takeaway

Nearly four months into covering the steady intoxication of layoffs, it’s clear that the double cut delivers a mixed message in more ways than one. It’s likely that there was a mix of factors that played a role in the layoffs, from misguided estimates to dropped expansion rounds to the realization of just how bad it really is. While employees eventually have had to deal with the repercussions of the shifting macroeconomic environment, employers are giving us example after example how hard it is to know how to manage employees during a recession. Or at least manage to turn them off.