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A disturbing trend of startup layoffs has emerged – TechCrunch


We don’t need to tell you about the layoffs that are defining the tech landscape right now, concentrated especially in later-stage companies that are struggling to ramp up extension cycles and hit existing valuations. What we think is important, however, is to focus on a frustrating pattern emerging between all these headlines: Some companies have announced layoffs after layoffs in quick succession, a double cut that seems surprising.

For a long time, I have noticed that the same startups that made layoffs in March 2020 were expected to scale back again in the wave of 2022. The first wave was in preparation and fear; this wave feels like a pullback after a push. What confuses me is seeing startups cutting staff now, vaguely quoting it due to the macro environment, and then doing the same thing a few weeks later with the same reasoning.

Some nuances

In most cases, a follow-up layoff seemed larger than previous cuts, which tells us the company didn’t go far enough in its first reorganization.

It should also be noted that the cadence of new net layoff events is decreasing, very slightly. According to layoff tracker layoffs.fyi, 150 new layoff events occurred in July, down nearly 18% from the previous month.

According to Nolan Church, CEO and co-founder of split-work platform Continuum, there are a few reasons why a founder may have to make two rounds of layoffs in quick succession: deteriorating business, bad forecasts, or both. He also added that one factor could be that “the leadership didn’t have the guts to realize the deep cut” when it came to people and projects in the first round.

Continuum recently raised a $12 million Series A funding round to scale a suite of split-work tools, including a service that helps startups make layoffs more humane. The company connects a client needing layoff assistance with a seasoned executive for everything from one-day support to share the news to high-level advice. He hasn’t seen double rounds of layoffs among clients, which he attributes to his executives encouraging founders “to cut once and cut deep.”

“Layoffs two weeks apart are inexcusable. The leadership, probably the CEO, made a drastic miscalculation,” Church said. “Layoffs two years apart don’t surprise me. Typically, startup CEOs are optimized for two to three years of trail. The first layoff occurred when they initially changed direction. As part of this event, they probably changed course and made a new bet. The second layoff is caused by this bet which does not pay off.

With all that in mind, according to data from layoffs.fyi as well as TechCrunch’s own reports, here are some of the companies that have made at least two rounds of layoffs within months, and sometimes weeks, of each other.

On the bridge

On Deck, a tech company that connects founders, capital and advice, has launched another round of layoffs just three months after laying off a quarter of its staff. Sources say more than 100 people have been affected by the downsizing, representing half of all staff, while the company – which confirmed the layoffs to TechCrunch via email – said that 73 full-time employees had been laid off. No leader was impacted.

The startup’s second layoff comes with a more specific strategic plan for what comes next, while its first layoff has been widely attributed to changes in the capital and accelerator markets. This time, On Deck went a step further: it shut down several communities and turned its career advancement arm into a separate startup.

It may be because of a more pressing need to lengthen the runway. Sources estimated that the first round of layoffs happened because On Deck only had nine months left of the lead. Today, On Deck co-founders Erik Torenberg and David Booth say the company has more than three years of track.

Robin Hood

Earlier this week, Robinhood announced that it had laid off 23% of staff across all functions, particularly concentrated in the company’s operations, marketing and program management functions. The downsizing comes just three months after Robinhood cut 9% of full-time staff, with CEO and co-founder Vlad Tenev saying it was “the right decision to improve efficiency, increase our speed and to ensure that 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 apparent over-hiring in the 2021 frenzy. increased in retail” which was taking place would continue in 2022. .

“In this new environment, we are operating with more staff than necessary,” he wrote. “As CEO, I have endorsed and taken responsibility for our ambitious staffing trajectory – it’s on me.” He also said the first round of layoffs “did not go far enough”.

“Since then, we have seen a further deterioration in the macroeconomic environment, with inflation at its highest level in 40 years accompanied by a broad crypto market crash. This further reduced client trading activity and assets under custody,” Tenev said. Robinhood’s stock price has also been volatile over the past year. At press time, the company is trading at $8.90 after hours, considerably lower – by 89% – from its 52-week high of $85. It is also down 3.6% after hours.

Gemini

Crypto platform Gemini cut about 10% of its workforce and then about 7% more staff a few weeks later. Co-founders and twin brothers Cameron and Tyler Winklevoss spoke about the somewhat expected volatility of what they called the “crypto revolution.”

“Its path can be described as punctuated equilibrium – periods of equilibrium or stasis that are punctuated by dramatic moments of hypergrowth, followed by sharp contractions that settle at a new equilibrium higher than the previous one,” wrote the co-founders. in a blog post during the first downsizing. They go on to say that crypto has entered a temporary downturn, otherwise known as the contraction phase, further “aggravated by the current macroeconomic and geopolitical unrest.”

However, Gemini did not respond to comments regarding his second reported layoff. A source, who spoke to TechCrunch on condition of anonymity, said the company was laying off staff due to what it described as “extreme cost-cutting”. An internal operating plan document showed Gemini was considering a plan that would grow the company to around 800 employees, about 15% down from the 950 employees at the time, Jacquelyn Melinek reports.

Get in

Virtual events platform Hopin, last valued at $7.75 billion, laid off 29% of employees, or 242 people, in July. The cut came just four months after Hopin laid off 12% of its workforce, citing at the time a goal of sustainable growth in a changing market.

In addition to cutting nearly a third of the business, a Hopin spokeswoman confirmed that some contractors and third-party team members were laid off, but did not provide exact numbers. The difference between the first round and the second round, other than the latter being more than double, is that Hopin 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 unclear if the trio left voluntarily or were fired.

A Hopin spokesperson via email confirmed that the trio were “leaving the company”, adding that “after much discussion, we have all agreed that this is the best way forward for the company”.

Latch

Latch, a proptech meets SaaS platform that went public via SPAC in June 2021, was the first company I’ve seen make two consecutive weeks of layoffs.

In May, the company cut 30 people, or 6% of its total workforce, according to an email obtained by TechCrunch. Then, as confirmed in a Friday night press release, Latch said it cut a total of 130 people, or 28% of its full-time employee base.

Similar to Hopin, back-to-back layoffs come with management turnover. Sources say the cuts impact chief revenue officer Chris Lee and vice president of sales Adam Sold. In April, Latch’s chief financial officer, Garth Mitchell, left the company less than a year after taking office and taking the company public through a reverse merger. At the time, TechCrunch described the broader SPAC collapse – and explained that Latch was not immune.

Latch expects to realize annual savings of approximately $40 million in research and development costs, sales and marketing, and general and administrative expenses after the layoff, a press release said.

Clearco

Clearco, a Toronto-based fintech capital provider for online businesses, told TechCrunch it has laid off 125 people, or 25% of its entire workforce. Those affected will receive a severance package, a two-year window to exercise equity and employment transition support from the management team, according to Clearco. The company didn’t say which teams and roles were affected, or whether any C-suite members were let go.

Clearco expanded into Germany in June but simultaneously cut its workforce in Ireland by 10%, just three months after entering the market and announcing plans to hire more than 100 staff, reports Independent.ie. It’s unclear if there are more geo-targeted layoffs to come, or what exactly the “strategic” options are – but we do know that Clearco has plenty of international competitors. The startup previously made another round of layoffs in March 2020, a reduction that affected 8% of staff and then reasoned “the long-term economic impact of COVID-19.”

It’s been about 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 seed round that quintupled its valuation to $2 billion. of dollars.

The take-out sale

Almost four months after covering the steady pace of layoffs, it’s clear that the double cuts offer mixed messages in more ways than one. It’s likely that there was a mix of factors that played a part in the layoffs, from misguided projections to dropped expansion streaks to the realization that this is how bad things are getting. . While employees have finally had to deal with the repercussions of the changing macroeconomic climate, employers are giving us example after example of how difficult it is to know how to manage a workforce in a downturn. Or at least manage their layoff.

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