Layoffs, hiring freezes ripple through tech ecosystem as investors push for cost discipline

IT was not so long ago that the tech ecosystem was driving up the costs of rentals and manpower. But the sector is now showing signs of slowing, with multiple companies announcing hiring freezes and layoffs.

In the United States, big names like Meta have paused their hiring for certain functions, while crypto players like Coinbase have slashed their headcounts.

Closer to home, Singapore-headquartered Crypto.com has cut 260 jobs, and Sea’s e-commerce arm Shopee is letting go of staff in its ShopeePay and ShopeeFood verticals.

Meanwhile, robo-adviser StashAway has cut 14 per cent of its workforce, and e-commerce aggregator iPrice has retrenched 20 per cent of its staff.

In Indonesia, edtech startup Zenius axed over 200 employees in May. Bookkeeping startup Lummo reportedly laid off more than 100 staff this month.

The layoffs may intensify as investors and funds put pressure on startups to rein in costs.

“I think we’re only getting started, especially for early-stage companies, which are trying to raise or manage cashflow. But I expect quite a few of them to start adjusting to reality gradually and layoffs will be inevitable,” said Shauraya Bhutani, co-founder of Capital Connect Advisors.

Startup accelerator Y Combinator (YC) has emailed its portfolio companies, asking them to “prepare for the worst”. That email, along with a presentation deck from Sequoia Capital titled RIP Good Times, have been circulating in the startup ecosystem.

“When the YC email came out, 2 investors sent it to us on the same day. If our investors – who have no reason to depress our valuation because we’ve already closed the round – are telling us this, we’d better take it seriously,” said Kevin Quah, co-founder of data-focused startup TicTag.

Having a 24-month cash runway has become a mantra pressed on founders by investors, and layoffs are a byproduct of the need to cut cash burn.

“The message we’re giving all our portfolio is: cut some fat now, we’re trying to get to 24 months of capital,” said Rajive Keshup, investment director at venture capital (VC) firm Cathay Innovation.

Jefrey Joe of Indonesia’s Alpha JWC Ventures expects more right-sizing among startups. “With interest rates going up, growth capital is getting more expensive, which will increase the return expectation on investments. This change in environment is quite significant, hence we expect more adjustments in the market,” he said. 

Sam Lee, co-founder of financial services company Paloe, added: “Everyone seems to be anticipating a venture funding winter coming up.”

While this might not actually happen – some South-east Asian VCs have raised record levels of funds and continue to be able to attract more – startups are preparing themselves. Some are trying to raise as much as they can now, Lee said.

Some startups are also taking advantage of the general sentiment to make needed adjustments to their workforce. “If everyone is laying off, there might be a little bit of an opportunity to right-size the departments,” said a founder who requested anonymity as plans have not been communicated to staff.

Other founders told The Business Times they are in the midst of restructuring their company, and are now looking to focus on core markets and axe exploratory projects and expansion plans.

“Countries that are more exploratory would take time, especially if you're going to generate demand locally… Currently, I think we should just focus on the core because we are so far from tapping up our current markets,” the founder said.

Meanwhile, employees sensitive to the shifting terrain are approaching recruiters or indicating on their LinkedIn profiles that they are “open to work”, according to Elena Chow, founder of talent consultancy ConnectOne. Notably, some of those reaching out are from companies that have not announced layoffs.

Chow said this may indicate that layoffs are “done discreetly to manage employee or external stakeholder sentiments”.

In such times, one company’s loss can easily end up as another company’s gain. Those in a better financial position would be able to use the opportunity to snap up experienced talent.

Indeed, several companies continue to advertise roles. Career platform NodeFlair posted 11,854 job listings in the first quarter of 2022, although this was down slightly from the the third quarter 2021 listings total of 12,239. (The fourth-quarter data is not generally useful for comparison as hiring typically slows in December)

ConnectOne’s Chow said both Shopee and Grab are still hiring, albeit at a slower pace. Shopee Singapore had 611 roles open in October 2021, but only 494 roles in May 2022. Roles available at Grab fell from 333 in October 2021 to 269 in May 2022.

“There is still a big demand for jobseekers in certain fields such as engineering, product management and tech sales, so I would not say that there are more jobseekers than openings across the board. However, the delta is definitely narrowing,” she said.

Capital Connect Advisors’ Bhutani, too, said that the demand and supply situation for talent varies by role. “Growth-focused roles such as marketing have more jobseekers than job openings, while engineers remain very much in demand. Engineers are usually not touched even when there are company-wide cuts.”

“These talent shifts could ultimately be opportunities for (the) more secure companies to have a leg up in the market, even more so than before,” said Tan Yinglan, managing partner of Insignia Ventures Partners.

One founder said that even as he contemplates slashing his company’s headcount, he is mindful of the need to retain the necessary talent for growth. “Good times don’t last and bad times don’t last. For us, it’s very important that we do not do things haphazardly, but through conversations and exploring the options we have.”