Several large startups announced mass layoffs, this Thursday, November 3, a true black day for tech gamers. Lyft, Stripe, OpenDoor and even Twitter… The bleeding continues in startups and scale-ups.
Regardless of their size, companies specializing in Technology go through difficult months. All GAFAMs saw their shares drop significantly since the beginning of the calendar year. The increase is even greater for Meta, which continues to invest in an unfrequented metaverse, much to the dismay of investors and shareholders. Since January, the group’s share price has lost 74% of its value.
Read too: Mass layoffs in the world of technology: what consequences?
Why do all startups fire at all costs?
Waves of layoffs in startups are a combination of several factors. The first is inflation. In fact, it drives customers of certain companies to make choices. Thus, the cloud from Google and Microsoft attracts fewer companies that need to reduce their expenses. Likewise, consumers avoid plant-based meats that are considered too expensive in a context where families are looking to save money. This decision directly impacts the revenue of startups such as Beyond Meat.
The other factor to take into account is the cost savings of the companies themselves. In addition to consumers, organizations also need to review their spending. Unfortunately for employees, payroll is any company’s first expense item, along with real estate. Thus, carrying out layoffs saves staff and office space.
The third cause is related to the companies’ need for profitability. Many funds and investors have lost money investing in companies that burn a lot of money. This year, SoftBank has been heavily sanctioned with its risky investments such as the acquisition of WeWork. Now, investors want to have an interesting ROI. Investments in technology have therefore dropped significantly and companies that relied on these fundraisers must find a way to save money.
Finally, the last factor is directly linked to the previous one. In fact, to get up to speed quickly, many companies have eagerly recruited for roles that are not necessarily useful for the smooth running of the organization. Others were less attentive to recruiting talent and didn’t necessarily hire the right people in the right position. Many tech giants such as Google have also frozen recruiting to take stock of their payroll.
Read too: Layoffs: Shopify is undertaking a massive reduction in its workforce
Layoffs: A Black Thursday for Tech Startups
This Thursday, November 3, many startups announced layoffs. This wave of forced exits is actually a continuation of a very complex month of October for initial employment. In early November, Lyft therefore laid off 13% of its staff, or about 650 people. Stripe made 1,120 layoffs (14% of its employees). Twitter also unleashed a tsunami of layoffs. Elon Musk wants to dispose of 50% to 75% of his workforce, or up to 5,600 people!
This Black Thursday was preceded by a wave of forced departures from OpenDoor, which laid off 18% of its staff (550 employees). Zillow, which had already reduced its workforce, again laid off 5% of its payroll, or 300 employees. At Beyond Meat, 19% of employees were laid off in mid-October. 611 HelloFresh employees lost their jobs during the same period. Even Microsoft has announced that it is shedding less than 1% of its 180,000 employees.
Read too: Employment: the 25 startups that laid off the most employees
Employer branding: The devastating consequences of startup layoffs
Faced with this wave of layoffs, several problems arise. The first is, of course, the fact that thousands of people have lost their jobs. Since the beginning of the year, there have been almost 25,000, but it is also devastating for those who remain. Trust in your company is very low among the employees of these startups who fire at all costs.
Another problem: these companies also continue to recruit at the same time. In fact, startups or large groups that separate from employees strengthen certain teams to accelerate their growth, their profitability or generate more turnover. But who really wants to run for an organization that has just announced that it has laid off 1,200 people?
In addition to the bad image on the employer brand side, these operations scare off talent who prefer the safety of large groups and are less likely to go to start-ups, which nevertheless hold promise. This affects even businesses that are considered profitable. Especially since, in most cases, employees are only notified by email of their dismissal.
A study by Blind showed that concern is growing among candidates and employees at these organizations. On Airbnb, 60% fear for their jobs. They are 91% on Twitter, rightly so, and 83% on Coinbase. This phenomenon affects even large groups because 43% of Deloitte employees do not trust their job security.
Read too: Wall Street: Mass layoffs looming