Startups are one-time redundancies as a way to control cash consumption and raise new capital.
The news that Fast, a one-click checkout software provider targeting the e-commerce market, is offering investors sharp staff cuts in hopes of raising new capital is noteworthy, but a single data point. However, a public database that tracks start-up layoffs indicates the company isn’t alone in looking to cut its workforce.
The Exchange explores startups, markets and money.
Read it every morning on Marketingwithanoy+ or get The Exchange’s newsletter every Saturday.
It is doubtful whether an accelerated staff reduction will drastically make the starting labor market less talent-friendly. Startups aren’t the only companies in the market hiring technology workers. Technology startups must compete with established companies, such as Apple and Microsoft, for talent, as well as with traditional companies building their own in-house engineering and data teams. So it’s likely that even as startups cut staffing, the job market for tech workers will remain more than subdued.
But reducing the workforce is a quick way to reduce burns and extend the runway. If cash is business oxygen, laying off staff makes a company breathe more slowly, extending life expectancy without an infusion of outside capital (air).
It doesn’t seem likely that we’re on the precipice of a similar spike in layoffs that the onset of COVID-19 brought with it in 2020. That moment is essentially impossible to reconstruct from a business point of view. This time people better know what’s coming. Shifting public market valuations for tech companies and a frozen IPO market have soured private market sentiment towards high-growth, fast-burning startups. But the damage will grow more slowly as startups each count down to a different amount of money, meaning their respective hard choices about staffing won’t happen all at once.
Let’s take a quick look at the latest in the Fast saga, review the recent startup layoffs to see if we can spy a trend, and wonder what we’re going to see in the second quarter.