09 Nov Meta follows Twitter and Salesforce announcing mass layoffs
The global startup sector is navigating a period of severe turbulence following a steep drop in valuations in the months leading up to Q4 of 2022, which saw certain tech-heavy indexes like the Nasdaq-100 finish Q3 of 2022 with a YTD loss of 32.35%, according to Nasdaq. Following recent announcements of interest rate increases and soaring inflation, tech companies looking to combat low valuations – which resulted from weak Q3 performances – are scrambling to create cost-efficiencies to restabilise their market-cap value. Serving as testament to this, today, Meta – Facebook’s parent company – announced their plans to reduce staff by 13%, equating to roughly 11,000 jobs. This news came following Salesforce’s announcement of just under 1,000 employees facing a similar fate.
Earlier in the year, an array of companies like Zapp – the grocery delivery app – proposed a staff reduction of up to 10%. More grocery delivery apps like Gorillas – which announced a reduction of 300 staff – and Getir – which announced 14% staff redundancies across 4500 roles – are setting a precedent in what is resulting to be a year of significant layoffs for big scaleups with very high cash burn. According to M&A and corporate financing expert, Claire Trachet, it is crucial for startups, particularly those that saw causal growth thanks to the pandemic – like delivery service apps or HealthTech apps – to adjust to a new investment climate.
Among much of the actionable fundraising and M&A guidance, Trachet – a leading business advisory firm – highlights the critical point startups are facing to keep company culture alive amidst layoffs. Claire Trachet says that company culture begins at the top, with the founder and C-suite team and trickles down. If the founders are experiencing high pressure, it is likely staff will also experience this – Twitter serving as a perfect example.
Trachet commissioned landmark national research to understand the impacts of this on founders which found 34% of business leaders state that in running their business, they have no one to support them, they do all key tasks alone and that disconnects them from their passion. The research further highlights a third (33%) of UK workers state they’ve seen have seen their workplace’s headcount decrease and their workload increase in the last 12 months – seemingly causing a mass strain within the UK workforce. Trachet’s data also shows 20% of UK workers state their firm was slow to react and adapt, resulting in a loss of staff. This raises a crucial question, how far will business leaders expect their employees to stretch to counter the current market conditions and what impact will this have on the workforce?
The cost-of-living crisis has created pressure at every level for organisations as companies and staff are struggling to cope with rising costs, Trachet’s research further unveiled that nearly one in three (29%) Brits is actively looking for another job as they’re not being paid enough to cope with the rising cost of living. For those working in startups, the cost-of-living pressure is now exacerbated by a decrease in human resource and fears of being layed off which may lead many to pursue a career in a different organisation. Data from the study shows nearly 64% of Brits would be happy to compromise their career aspirations in order to preserve their mental health, further illustrating the importance of companies keeping a positive overarching outlook.
CEO and Founder of business advisory, Trachet, Claire Trachet comments on keeping company culture alive amidst lay-offs due to the current investment climate:
“In recent years, there has been a wealth of funding available for founders to help accelerate growth – billions of pounds of capital have been invested into startups through private equity and public markets. Startups have been attracting the best of UK talent thanks to competitive salaries and forward-thinking company culture, with big flexible working and personal benefits. However, as these companies face major layoffs because of reduced funding and their high cash burning nature, the atmosphere at these cheery startups is changing dramatically.
“Many startup founders can attribute their success to having high versatility in playing different roles – from finance and fundraising to product management, founders take on a series of responsibilities that many would find overwhelming. Now, especially given the added strains they will be facing, the issue of company culture will likely be pushed down to the bottom of their list of priorities.
“However, with mass redundancies in the sector causing employees to fear for their financial futures, founders must do their best to ensure their offices remain positive environments where people want to work – even if that means bringing in a specialist to fulfil this role. If they fail to do this, as our research suggests, they may face an exodus of experienced staff who leave in search of better job security elsewhere.”
