Profitability drive, business pivot cited as reasons for CXA layoffs

Singapore

THE recent layoff of a dozen staff at CXA Group arose from investors wanting to see a "clear path to profitability", while the insurtech startup is seeking to raise US$50 million in Series C funds, chief executive Rosaline Koo told The Business Times in a phone interview.

On Tuesday, online news outlet Tech In Asia reported that CXA has laid off "dozens of employees", with one source specifying that the startup plans to retrench about 40 staff in the engineering, product development and marketing departments.

In response to queries from BT, Ms Koo said that only 12 staff in Singapore, out of a 319-strong regional team, have been laid off, mainly in marketing and other roles that involved "manual processing", which have been automated.

Some staff were let go due to their roles becoming redundant with the startup's greater emphasis on white-labelling its software, while other layoffs had to do with performance issues, Ms Koo added.

Founded in 2013, CXA has raised US$58 million to date, according to Crunchbase, from backers including HSBC, Singtel Innov8, the Singapore Economic Development Board's investment arm EDBI and B Capital Group, the venture firm of Facebook co-founder Eduardo Saverin.

"Post-WeWork, every investor talking to us... conveyed that they needed to see a clear path to profitability, (with) layoffs being part and parcel of a company's journey as it automates functions away, creating redundancy in teams," Ms Koo noted.

She added: "Part of it is really just to make sure we become profitable; we are pretty much on track as we grew revenue by 50 per cent last year... We can't cut that much because we're growing. You don't want to cut to the bone."

Based on regulatory filings of CXA Group Pte Ltd (which may not fully reflect the company's financials), CXA recorded a S$17.5 million loss in 2018, on the back of S$18 million revenue for the year.

Its financial statement for last year is not available.

Ms Koo also denied that the startup plans to cut 40 staff, and said that no further cuts have been planned.

The startup is also building up a tech hub in Vietnam, where it has hired 70 developers in recent months.

CXA investor Openspace Ventures expressed support for the startup's move to streamline operations. Shane Chesson, co-founder and partner of Openspace, is a director on CXA's board.

"In this environment, many startups are looking for a path to profitability. In any company, layoffs are part of the business. CXA has moved towards a software-driven distribution model which has caused redundancies, and being financially responsible, they have chosen to optimise these costs quickly," an Openspace spokesman told BT.

Ms Koo is targeting for CXA to break even in the first half of 2021. Last March, she told BT that the startup may not need further funding, as it was targeting profitability this year.

But that target has since been shifted back, and the company is back on the fundraising market as CXA has pivoted more towards white-labelling its technology in partnership with insurers and banks, including HSBC.

"If I sign a big bank deal or insurance deal - they have hundreds of thousands of commercial clients - and if they use my app for all of them, to me, it's like 'eureka'. I will invest more to scale the platform, to get these types of deals," Ms Koo pointed out.