Startup layoffs mount amid market chill

SOUTH-EAST Asia’s tech industry is bracing for more layoffs after several high-profile players retrenched workers in recent weeks, amid an increasingly uncertain environment and funding slowdown.

No longer able to stomach high cash burn, some investors have called on their portfolio startups to build cash runways of as much as 24 months. These companies are trimming staff as the quickest way to reduce costs.

Elena Chow, founder of talent solutions company ConnectOne, said that she has seen a recent rise in tech layoffs.

“It has been increasingly difficult for venture capital-funded tech startups to raise funds. If they are not able to, laying off to ensure survival of the company is the most practical solution,” she said.

Chow recalled a recent conversation with a senior marketing leader of a late-stage startup, who told her: “I felt harassed at the beginning of the year by recruiters with multiple messages a week on LinkedIn; now it is my turn to harass them, as my role has been made redundant, but I have been getting much fewer job opportunities.”

Layoffs generally come from companies that were hiring more aggressively in the past years but now find themselves forced to be more financially prudent with the shift in market sentiment, said Adrian Goh, co-founder of tech hiring platform NodeFlair. He cited Sea and foodpanda as examples.

Last Monday (Sep 19), The Business Times reported that e-commerce player Shopee is axing more employees as its parent company Sea faces pressure to turn profitable. Cuts will be made to teams, including human resources, regional operations, marketing, and product and engineering.

This comes in the wake of earlier reports that Sea had rescinded dozens of job offers after suffering widening losses and slower revenue growth. Shopee is shutting operations in some South American markets, while gaming unit Garena, often regarded as the company’s cash cow, will reportedly cut hundreds of staff in Shanghai.

Elsewhere, foodpanda is laying off staff as its German parent company Delivery Hero faces a “critical need now to reduce costs and move to profitability”.

Layoffs in international companies have also started to have trickle-down effects in South-east Asia, with Singapore staff impacted after e-commerce giant Shopify axed around 1,000 of its global workforce in July.

Volatile industries such as cryptocurrencies have been among the worst-hit. Distressed crypto startup Hodlnaut, for instance, laid off 80 per cent of staff following the TerraUSD implosion.

“In months to come, I wouldn’t be surprised to see layoffs from startups that are burning cash and unprofitable, as well as those in the experimental divisions of the larger companies,” said NodeFlair’s Goh.

Remote hiring takes off

Despite rapid cost-cutting from tech companies, the industry continues to face a talent crunch. Recruitment platform Glints said its data indicates that for most companies, talent needs have remained stable or increased.

But this comes with some shifts. “For instance, smaller companies – startups, SMEs (small and medium-sized enterprises) – are more budget-conscious when it comes to hiring, so they are looking for more cost-effective hiring solutions; in contrast, enterprises, especially in ICT (information and communications technology) and financial services, are more resilient,” said Yeo Puay Lim, managing director at Glints.

In Singapore, tech is expected to continue being a significant contributor to the job market. Tech jobs across the economy grew from 155,000 to 195,000 from 2017 to 2021, said the Infocomm Media Development Authority (IMDA)’s 2022 annual report. That represented a 5.6 per cent annual growth – higher than most of the economy, IMDA said.

Resident tech talent commanded good wages in 2021 as well, about 1.6 times the overall median resident wages.

Meanwhile, remote hiring has taken off as companies look for more cost-effective measures. Startups are searching for technical talent in Indonesia, Vietnam and the Philippines.

Commercial roles such as sales and digital marketing are also being filled through offshore hiring in South-east Asia, noted Glints’ Yeo.

“In the past 2 years, we’ve seen an 11-time increase in cross-border job opportunities. Additionally, remote cross-border job postings grew by 3 times year on year,” he said.

Amid these rapid changes in the tech job market, some government bodies are emphasising their continued support for startups, such as Digital Industry Singapore (DISG) – a joint office between the Economic Development Board, IMDA and Enterprise Singapore (EnterpriseSG).

Chan Ih Ming, executive director and head of DISG, highlights that schemes such as the Venture Capital Fund Incentive and Fund Management Incentive under EnterpriseSG’s Startup SG Investor help to catalyse investment and deal flow in Singapore.

“Around the world, businesses are starting to tighten operational costs, which includes relooking their workforce profile due to an uncertain short-term economic outlook. Startups in Singapore are not immune to these global pressures,” said Chan.

“The government will work closely with players in the ecosystem, including universities, accelerators, incubators and investors, to provide support in areas such as financing, mentorship and talent development.”