Sun. Aug 14th, 2022

We don’t need to tell you about the layoffs that are currently shaping the technology landscape, especially concentrated among late-stage companies struggling to increase renewal rounds and grow into existing valuations. What we do care about is the focus on a frustrating trend emerging among all these headlines: Some companies have announced layoffs after layoffs in quick succession, a double reduction that feels surprising.

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

some nuance

In most cases, subsequent layoffs seemed larger than previous cuts, suggesting that the company didn’t go far enough in its initial reorganization.

It’s also worthless that the cadence of net new layoffs drops even just a little bit. According to layoff tracker layoffs.fyi, there were 150 new layoffs in July, down nearly 18% from the previous month.

According to Nolan Church, the CEO and co-founder of fractional work platform Continuum, there are a few reasons why a founder should do two rounds of layoffs in quick succession: worse business, poor forecasting, or both. He also added that a factor could be that “leadership did not have the courage to consciously cut” when it comes to people and projects in the first round.

Continuum recently raised a $12 million Series A round to scale up a range of fractional work tools, including a service that helps startups act more humanely. The company pairs a client in need of layoff support with an experienced executive for everything from day-to-day news-sharing support to high-level advice. He hasn’t seen any double layoffs at clients, which he attributes to his executives encouraging founders to “cut once and cut deep.”

Layoffs two weeks apart are unforgivable. Leadership, probably the CEO, has miscalculated dramatically,” Church said. runway of two to three years. The first layoff was when they initially changed direction. As part of that event, they probably changed course and made another bet. The 2nd layoff is caused by that bet not paying off.”

All that in mind, according to data from layoffs.fyi and BestFitnessBands’s own reporting, here are some of the companies that have had at least two rounds of layoffs within months and sometimes weeks of each other:

on deck

On Deck, a technology 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 were affected by the cut, accounting for half of the total workforce, while the company – which confirmed the layoff via email to BestFitnessBands – said 73 full-time employees were laid off. No executives were affected.

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

It may be because of a more pressing need to extend the runway. Sources estimate that the first round of layoffs occurred because On Deck only had nine months of runway left. Now On Deck co-founders Erik Torenberg and David Booth say the company has runway for more than three years.

Robin Hood

Earlier this week, Robinhood announced it had laid off 23% of its workforce in all positions, especially the company’s operations, marketing and program management functions. The staff cut comes just three months after Robinhood laid off 9% of its full-time workforce, with CEO and co-founder Vlad Tenev saying it was “the right decision to improve efficiency, increase our speed and ensure we respond.” to the changing needs of our customers.”

With the second round of layoffs officially confirmed, Tenev struck a different note. The co-founder took responsibility for Robinhood’s apparent hiring in the 2021 frenzy. He said the company held many of its operational functions last year under the assumption that the “increased retail engagement” that took place would continue into 2022.

“In this new environment, we are working with more staff than necessary,” he wrote. “As CEO, I have approved our ambitious workforce trajectory and taken responsibility – this is up to me.” He also said the first round of layoffs “didn’t go far enough”.

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

Twin

Crypto platform Gemini has cut about 10% of its workforce and about 7% more in a few weeks after that. Co-founders and twin brothers Cameron and Tyler Winklevoss talked about the somewhat anticipated volatility in what they called the “crypto revolution.”

“The path is best described as punctuated equilibrium — periods of equilibrium or standstill punctuated by dramatic moments of hypergrowth, followed by sharp contractions leading to a new equilibrium higher than the previous one,” the co-founders wrote. in a blog post during the first staff reduction. They go on to say that crypto has entered a temporary downturn known as the contraction phase, further “exacerbated by the current macroeconomic and geopolitical turmoil.”

However, Gemini did not respond to comment when it came to his second layoff. A source, who spoke to BestFitnessBands on the condition of anonymity, said the company was laying off staff because of what it described as “extreme cost savings.” An internal business plan document revealed that Gemini was looking for a plan that would bring the company to about 800 employees, which was about 15% less than the 950 employees at the time, reports Jacquelyn Melinek.

Get in

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

In addition to scrapping nearly a third of the company, Hopin’s spokeswoman confirmed that some contractors and members of an outside team had been laid off, but did not provide exact numbers. The difference between round one and round two, other than the latter being more than double, is that Hopin has parted ways with a number of executives. BestFitnessBands learned that COO, CFO and chief business officer have left the company, although it’s unclear whether the trio left voluntarily or were fired.

A Hopin spokesperson confirmed via email that the trio is “leaving the company”, adding that “after many discussions, we all agreed that this was the best way forward for the company.”

Lock

Latch, a proptech meets SaaS platform that went public through SPAC in June 2021, was the first company I saw leading two consecutive weeks of layoffs.

In May, the company laid off 30 people, or 6% of its total workforce, in an email BestFitnessBands received. Then, as confirmed by a press release late Friday, Latch announced it has cut a total of 130 people, or 28% of its full-time workforce.

As with Hopin, successive layoffs come with a side of executive churn. Sources say the cuts will affect Chief Revenue Officer Chris Lee and VP Sales Adam Sold. In April, Latch CFO left the company less than a year after taking the position and after taking the company public through a reverse merger. At the time, BestFitnessBands outlined the broader SPAC meltdown — explaining that Latch wasn’t immune.

Latch expects to realize approximately $40 million in annual cost savings in research and development, sales and marketing, and general and administrative expenses following its layoff, a press release said.

clearco

Clearco, a Toronto-based fintech capital provider for online businesses, tells BestFitnessBands it has laid off 125 people, or 25% of its entire workforce. Those affected will receive severance pay, according to Clearco, a period of two years to exercise fairness and job transition support from the leadership team. The company has not said which teams and roles are involved or if any members of the C-suite have been fired.

Clearco expanded into Germany in June, but at the same time cut 10% of its workforce in Ireland, just three months after breaking into the market and announcing plans to hire more than 100 employees, Independent.ie reports. It’s unclear whether there will be more geographically focused layoffs, or what exactly “strategic” options are – but we do know that Clearco has many international competitors. The startup made another round of layoffs earlier in March 2020, a reduction that hit 8% of its workforce and then reasoned on the “long-term economic effects of COVID-19”.

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

the takeaway

Nearly four months after we’ve picked up the steady pace of layoffs, it’s clear that double rebates deliver mixed messages in more ways than one. It’s likely that there was a mix of factors that played into the layoffs, from misguided projections to fallen overtime rounds to the realization that this is so bad it’s getting real. While employees ultimately have to deal with the effects of the changing macroeconomic environment, employers give us example after example of how difficult it is to know how to manage a workforce during a recession. Or at least manage to fire them.

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