Is it time to start thinking about layoffs at startups?

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Layoffs are being considered by startups once again as a method to reduce cash usage and attract new investors.

Fast, a one-click checkout software supplier aimed at the e-commerce business, is offering sharp employee cuts to investors in the hopes of securing new cash, which is noteworthy but only one data point. However, according to a public database tracking startup layoffs, the company is not alone in its desire to decrease its workforce.

Accelerating staff cutbacks are unlikely to make the startup labour market significantly less talent-friendly. Startups aren’t the only ones in the market looking for IT talent. Upstart technology companies must compete for talent with both sector stalwarts like Apple and Microsoft, as well as traditional companies building out their own engineering and data teams. As a result, even as firms cut employees, the labour market for tech workers is expected to remain more than stable. Cutting headcount, on the other hand, is a rapid way to reduce burn and lengthen the runway. If cash is a company’s oxygen, laying off employees allows it to breathe more slowly, allowing it to live longer without a capital infusion (air).

It doesn’t appear that we’re on the verge of another round of layoffs like the one that COVID-19 brought in 2020. In commercial terms, such moment is nearly impossible to recreate. This time, people will have a better idea of what to expect. Changes in public market valuations for technology businesses, as well as a stagnant IPO market, have sullied private-market opinion toward high-growth, high-burn startups. However, because each company is on a distinct financial countdown, the damage will be compounded over time, as critical decisions regarding staffing levels will not be made at the same time.

Let’s take a time to reflect on the current status of the Fast drama, skim through recent startup layoffs to see if we can spot a pattern, and speculate on what we’ll see next.

Kaitlin Welch

Kaitlin Welch manages to cover anything. She is our freelance contributor. Kristie is responsible for covering reporting in finance and business News categories. Kaitlin has experience of 5 years as a reporter to News insights. Kaitlin writes related to the News Category.

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