After a month that saw nearly 16,000 tech workers lose their jobs, June is off to a similar tumultuous start. Startups across all sectors, from healthcare to enterprise SaaS to crypto, are laying off portions of staff and citing, seemingly, from the same notes: it’s a tough market, a time of uncertainty, and a correction toward sustainability is needed.
This week, we’ll continue our round-up of layoffs in tech, but we’re not stopping there; we extracted a few common themes from the workforce reductions, especially focusing on nuances that may be lost from headlines. To start, here are the companies leveraging layoffs this week:
Carbon Health laid off 8% of staff, or 250 people. Per our own Christine Hall, “the startup’s most recent funding round was a $350 million Series D round in July 2021, led by Blackstone Group, that reportedly put the company at a $3.3 billion valuation. We covered its $100 million Series C round in November 2020. In his letter to employees, CEO Eren Bali outlined two reasons for the decision to let go of staff — despite its continued and fast growth over the years. The first was winding down some of its business lines related to COVID. In 2020, Carbon Health developed both pop-up clinics and at-home test kits.”
Loom, an enterprise video tool backed by Andreessen Horowitz, laid off 14% of staff. The company’s most recent round valued the company at $1.53 billion, making it hit unicorn status for the first time. Kleiner Perkins, Sequoia, Coatue and General Catalyst are also investors in the company. Similar to Hopin, Loom benefited from a surge of people working from home in response to the COVID-19 pandemic; the product was positioned to help remote workers find better ways to connect with colleagues in a virtual-first world, and help hybrid workforces find a lightweight way to skip some meetings. Then, again similar to Hopin, the startup conducted layoffs to help it build in what it describes as a more sustainable way moving forward.
Coinbase will extend its hiring freeze and revoke accepted offers from some candidates who haven’t started their roles yet (...and inform them of their status via email). This news comes after Coinbase’s brutal Q1 results, which reported a $430 million loss.
The crypto platform Gemini, led by co-founders and twin brothers Cameron and Tyler Winklevoss, laid off 10% of its staff due to “turbulent market conditions that are likely to persist for some time.” Despite reacting to the market changes, Gemini’s co-founders also addressed that there’s a somewhat expected volatility in what they called the “crypto revolution.”
Social app IRL lays off 25% of team, says it has enough cash to last well into 2024. The cut comes around a year after the startup landed a $170 million SoftBank-led Series C and hit coveted unicorn status. Regarding the decision to cut staff, CEO Abraham Shafi wrote in a memo to staff that IRL has “more than enough cash to last well into 2024.” Over the last year, the startup increased its head count by 3.5 times, but Shafi noted that WhatsApp was able to grow to 450 million users with a team of 55. This suggests that the workforce reduction was less about trying to reduce runway and more about right-sizing the team after a period of overhiring.
Insurtech Policygenius cuts 25% of staff, less than 3 months after raising $125M. As Mary Ann Azevedo reports, “since its 2014 inception, Policygenius has raised over $250 million from investors such as KKR, Norwest Venture Partners and Revolution Ventures as well as strategic backers such as Brighthouse Financial, Global Atlantic Financial Group, iA Financial Group, Lincoln Financial and Pacific Life. While we can’t speak specifically to Policygenius, it’s been widely reported how poorly insurtech companies have fared in the public markets over the past year with Lemonade, Root and Hippo all trading significantly lower than their opening prices.”
Amsterdam-based TomTom let go of 500 employees, or 10% of its workforce. TomTom used to be known for car GPS navigation before we all had iPhones, but over the last few years, the company has attempted to pivot to mapping for self-driving cars. The jobs affected are in the maps department, where the company is pursuing more automation.
A digital mental health company backed by Softbank, Cerebral plans to conduct layoffs in July (which shouldn’t be anxiety-inducing at all for staff as they wait to learn their fate). The telehealth company also recently replaced its founding CEO amid a government investigation into its potential violations of the Controlled Substances Act -- Cerebral has been critiqued for over-prescribing ADHD drugs.
Tesla CEO and guy-who-needs-to-stop-tweeting, Elon Musk ordered a hiring freeze and job cuts, which would affect 10% of salaried employees. Currently, Tesla employs almost 100,000 people. Strangely, President Joe Biden weighed in, saying, "So, lots of luck on his trip to the moon, I don’t know."
Nuance of note
No one wants to be in the unicorn club
Despite cuts happening across all stages, many of the recent layoffs have come from companies that, just one year ago, hit unicorn status. The list includes Cameo, IRL and Loom, and there are a couple of reasons as to why that may be.
First, one year is a long time. And it feels even longer in a market that can’t make up its mind. Nonetheless, Startups that were hitting growth last year may no longer be on the same trajectory, making growth into their current valuation a significant stretch. As a result, the one year mark could be showing up as a reminder to reflect, and unfortunately for employees, scale down to a more realistic spot.
Second, being a unicorn is hard -- even in a bull market. Richly valued startups do need to eventually deliver on hopeful value, some would believe, and capital doesn’t necessarily ensure success. When you’re a late-stage company, there are specific growing pains that come with the title, such as integration with acquisitions, handling a remote workforce and learning how to iterate when the business is no longer as nimble as it was when it was just two people in a dorm room. In the past, layoffs may have been put off by another round of funding, but now that follow-on funding isn’t a given, layoffs are becoming more common.
Third, many of the pandemic-born unicorns are actually just piñatas filled with expired candy. Hard stop.
Layoffs should be treated as a worst case scenario, not a precaution
Companies like Coinbase, Tesla and IRL have enough runway to keep their staff employed during a tumultuous economic time and ongoing pandemic. But they cut costs anyway by letting go of their staff.
“Courage is a decision, and we will choose courage,” IRL CEO Abraham Shafi wrote in a company memo after laying off 25% of his staff. “Whatever we are facing today can’t be any worse than the uncertainty we met at the beginning of the COVID 19 pandemic.”
Unfortunately, workers can’t control getting laid off when their employer has enough money to retain them. And for those of us subject to the endlessly frustrating American healthcare system, losing your job also means medical instability for both you and your family. Let’s stop pretending that COBRA isn’t exorbitantly expensive.
Meanwhile, Coinbase rescinded already accepted offers from a number of employees. According to a LinkedIn search, many of the rescinded employees were students who were soon to graduate with PhDs and bachelor’s degrees alike. In those cases, a new hire may accept a job months before their start date, since they’ll need to graduate before filling the role.
Many soon-to-be graduates who accepted jobs at Coinbase turned down several other offers to work at the major crypto exchange, but now, they’re stuck scrambling to find employment. This situation is even more dire for international students, who risk deportation if they can’t find an employer to sponsor their visas.
Layoffs are sadly an inevitable part of corporate life, especially in startups. But so often, it seems like they’re caused by bad management choices that make it more difficult to keep paying staff. People make mistakes, but those mistakes can put innocent workers in situations of financial precarity, potential deportation and limited access to healthcare. So when layoffs are made as a precaution, or a correction to mitigate past mistakes and over-hiring, it’s personal.