Amidst rising inflation and a gloomy economic outlook, tech startups across the globe bit the bullet in June as they laid off a total of 15,781 staff in the month. This figure represents the number of workers sacked by 126 startups that made their figures public, as many others announced layoffs in the month without disclosing the number of staff.
The layoffs followed a similar pattern that was experienced across sectors of the startups in May, thus raising serious concerns for the budding startup ecosystem in Nigeria.
According to a startup layoff tracker platform, layoffs.fyi, top among the startups that announced massive layoffs in the month was crypto exchange Coinbase, which sacked 1,100, representing 18% of its workforce. Video streaming company, Netflix also sacked 300 in the month, representing 3% of its staff. This brought its total layoffs within two months to 450, as the company had sacked 150 in May this year.
Another major crypto startup, Crypto.com also slashed its staff by 260 in the month, representing 5% of its workforce. It was the same for Chinese-based Bytedance, the owners of popular social media platform, TikTok, which sacked 150 in the month.
California-based health tech unicorn, Carbon, also sacked 250 employees in the month. Carbon had raised more than $500 million to date, including a $350 million round in July 2021 at a $3.3 billion valuation.
Citing reasons for the layoff, CEO of Coinbase, Brian Armstrong pointed to a possible recession, and a need to manage Coinbase’s burn rate and increase efficiency. He also said the company grew “too quickly” during a bull market.
“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period,” Armstrong said, adding that past crypto winters have resulted in a significant decline in trading activity.
Earlier this year, Coinbase said it planned to add 2,000 jobs across product, engineering and design. “Our employee costs are too high to effectively manage this uncertain market. While we tried our best to get this just right, in this case, it is now clear to me that we over-hired. While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment,” Armstrong said.
Netflix had also cited the high cost of operation and slow revenue growth as the reasons for laying off some of its staff. The company had said: “Today, we sadly let go of around 300 employees. While we continue to invest significantly in the business, we made these adjustments so that our costs are growing in line with our slower revenue growth.”
Announcing its layoff, Co-founder and CEO of Carbon, Eren Bali said: “For the last few years, we have been more focused on topline revenue growth, patient acquisition, patient retention and service expansion, and we have been less focused on profitability. While that was the right decision in 2020 and 2021, the macro environment with more volatile capital markets means it is vital that we become less focused on growth and more focused on profitability.”
The massive layoffs are confirming several projections that tough times are awaiting the startup community as venture capitals slow down funding. High inflation across the globe and the ongoing Russia-Ukraine war are also projected to shrink the startup ecosystem.