The job engine is humming – actually: US companies created 372,000 jobs in June, both in Europe and in the United States United States the shortage of skilled workers and significantly rising wages are increasing the fear of a wage-price spiral. The latest job and wage data doesn’t fit in at all with recession concerns around the world. But some sectors are already showing that after years of boom, things can quickly go in the other direction: A wave of layoffs is rolling in the once celebrated tech and start-up scene, which has rocked again in the months of May and June .
The focus here is not on salary and bonus, but on who can stay on board. Last year, start-ups were showered with cheap money, but now venture capitalists are holding back their money and letting the ratings of the stars of yore plummet. The start-ups switch to emergency mode and in some cases drastically reduce the number of employees.
The wave of layoffs is increasing: In May alone, 71 tech start-ups laid off a total of around 17,000 employees worldwide, according to data from the tracking site layoffs.fyi
emerges. That was more than three times as much as in April. In June, the number of redundancies rose sharply again to around 24,000. Around 50,000 employees worldwide have lost their jobs in start-up companies since the beginning of the year.
But not only start-ups are currently sending employees home, but also well-known corporations such as Netflix, Tesla or Coinbase hit the brakes. From January to mid-July, according to the tracking site trueup.io
around 400 tech companies worldwide separated from a total of almost 70,000 employees. The following overview shows where the pressure is particularly high.
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The established ones: Netflix, Peloton, Tesla
The streaming giant Netflix already sent at the end of April Shock waves through the tech industry. The number of subscribers has fallen for the first time in years and is likely to fall further in the summer. At the end of June, Netflix boss Reed Hastings sent 450 employees home – 4 percent of the workforce. The cuts were even more drastic at the exercise bike manufacturer Peloton, which was still one of the three biggest winners on the Nasdaq in Corona year 2020. 2800 employees and thus almost one in five employees have had to leave since people are increasingly training outdoors and in the gyms again.
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Cost brakes: Tesla boss Elon Musk expects a recession – and fires employees
Photo: ODD ANDERSEN / AFP
The electric car maker Tesla cut 3,500 jobs in June because Tesla boss Elon Musk firmly expecting a recession in the USA. Musk wants to lay off every tenth permanent employee by autumn and at the same time increase the number of hourly workers. Since companies like Microsoft, IBM, Meta or Salesforce imposed partial hiring freezes and you Russiaclosed business, the following applies: Not only the former Corona winners have to save, the majority of the established companies are now also driving on sight.
Start-ups: Klarna, Gorillas and Getir are unsettling the entire industry
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Klarna boss Sebastian Siemiatkowski: Show the financiers that you can quickly become profitable
Photo: SUPANTHA MUKHERJEE / REUTERS
The Swedish payment service Klarna was and still is the most valuable start-up in Europe: However, the valuation of the “buy now pay later” specialist has risen from 46 billion dollars to now only tied up around 6.5 billion dollars. In May, Klarna laid off one in ten of its approximately 7,000 employees, citing inflation, volatility on the stock markets and an impending recession as the reason for the hard cut. The message is clear: If venture capitalists like Sequoia or the Abu Dhabi sovereign wealth fund have already closed their doors to flagship and role model companies like Klarna and only issue money on new terms, how difficult will the coming months be for the smaller start-up companies? become a company?
Panic prevails, especially in the delivery service industry, which is still burning a lot of money. Growth instead of profit was the motto there for years – now it’s time to save, shrink and survive. The Berlin delivery service Gorillas was hit particularly hard: Gorillas boss Hakan Sümer according to information from manager magazin laid off around 300 employees and thus half of the global team in order to become more attractive to investors again. Despite these austerity measures, the latest round of financing failed: Gorillas, which once reached a billion dollar valuation in record time, is struggling to survive. According to information from “Gründerszene”, the Turkish gorilla competitor Getir, which was already active in nine countries with around 32,000 employees, parted ways with around 4,400 employees, which is around 14 percent of the team. Companies in the supply industry, which is characterized by fierce competition, are now faced with the task of significantly reducing costs and becoming profitable as quickly as possible – otherwise there will be no more money.
Fintechs: Back to economy mode
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Fintechs are redefining the rules of the game in the financial sector. That may still be true, but they will do it with fewer employees for the time being. With venture capital running low, New York-based fintech Better laid off 5,000 employees, half of the workforce, at the end of April. At the competitor Bolt in San Francisco there were 250 and thus every third employee, at the US insurtech Root Insurance around 330 and thus around every fifth employee. The Berlin neobank Nuri (formerly Bitwala) has also announced that it will lay off around 45 of its 200 employees: Investors must now be shown that they are on the home straight to profitability, Nuri boss Kristina Walcker-Mayer wrote to the workforce. Terminations also affect the payment start-up Sumup, which is due to problems at the location Brazil has to reduce its workforce.
The US Federal Reserve’s recent rate hikes Federal Reserve also hit those fintechs that specialize in real estate brokerage hard. The US fintechs Compass and Redfin each had to lay off around 500 employees in June because the overheated US housing market cooled down noticeably after the Fed’s latest rate hikes.
Crypto companies: Coinbase warns of crypto winter
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Coinbase boss Brian Armstrong: Headcount shaved
Photo:
Matt Winkelmeyer / AFP
Even in the once hyped crypto industry, the heavyweights are leading the way with layoffs. The US crypto exchange Coinbase cut around 1,100 jobs in June, 18 percent of the jobs worldwide. Coinbase CEO Brian Armstrong warned of an impending recession that could cause a crypto winter with new price falls for Bitcoin, Ether and Co. The cryptocurrency lender Celsius, which has already caused shock waves with its impending insolvency, cut 150 jobs in early July, or one in four jobs. At the Celsius rival BlockFi, every fifth employee had to go, at the Viennese crypto specialist Bitpanda it was around a quarter of the workforce with 270 laid-off employees. As long as the willingness to take risks does not return to the stock markets and crypto assets, more employees will have to fear for their jobs.
Increase in May and June – and probably also in July
The wave of layoffs is currently being felt most strongly in start-ups and in the tech industry. But it doesn’t stop at other companies either. In the booming mobility industry, the US company Rad Power Bikes recently had to lay off around 10 percent of its employees, and the London company Cazoo, with 750 employees, even 15 percent. Los Angeles-based scooter rental company Bird, which also operates in Germany caught up in tough cut-throat competition, recently parted ways with 20 percent of employees worldwide.
Interest rates in the US are likely to rise again by at least 0.75 percent in July. The Fed wants to contain inflation in the US at all costs. Investors are likely to maintain their new, cautious course. It is therefore also likely that after the significant increase in layoffs in May and June, July will mark a new monthly high in layoffs. The wave is rising, it’s not breaking yet.