AlayaCare lays off 14 percent of employees, slows M&A plans

AlayaCare’s CEO said startup’s revenue growth has not followed its "aggressive investment.”

AlayaCare has laid off 80 employees, BetaKit has learned, joining a growing list of Canadian tech companies to cut staff and reduce costs in the face of tough market conditions.

The Montréal-based healthtech startup has also scaled back its near-term merger and acquisition (M&A) plans and let two of its office leases expire in Victoria, British Columbia, and Queens, New York, as part of a broader push to become more cash-efficient.

Current macroeconomic conditions have forced AlayaCare to contend with slower sales cycles and see lower than expected revenue growth, which the company’s CEO attributes in part to its adjusted M&A strategy.

“There’s this period of irrational exuberance in tech passing, and now we’re all back to running businesses.”

The layoffs impact nearly nearly 14 percent of AlayaCare’s team. AlayaCare co-founder CEO Adrian Schauer announced the staff cuts in an email to employees on Monday morning. In the email, obtained by BetaKit, Schauer said the moves put the company “on a path to become cash-flow breakeven as soon as the end of 2023.”

“We did four acquisitions over the last couple of years,” Schauer told BetaKit in an interview. “We, like all other tech companies, came through the frothy, growth-at-all-costs stage, and this was, I would say, a natural attrition to right-size the team for what we’re trying to achieve, which remains 40 percent year-over-year growth.”

Schauer described the layoffs as “an extremely difficult decision.” The CEO declined to disclose which AlayaCare teams or departments were impacted by the cuts, noting that they were felt across AlayaCare teams, geographies, and “disproportionately” on the acquired products side.

Founded in 2014, AlayaCare provides an end-to-end platform for home and community healthcare providers. The startup’s artificial intelligence (AI)-powered software offers scheduling, reporting, clinical documentation, billing, a care worker mobile app, and dedicated portals for patients, family members, and care workers. Today, the majority of the company’s revenue is derived from the United States.

The layoffs come just over a year after AlayaCare closed $225 million CAD in Series D funding led by Al Gore’s Generation Investment Management, with participation from Toronto’s Klass Capital and return, Québec-based AlayaCare investors Inovia Capital, CDPQ, and Investissement Québec.

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“When we closed our Series D financing round last summer, we set ourselves on an aggressive growth path,” stated Schauer in the email notifying AlayaCare employees about the layoffs. “We hired, acquired, and contracted hundreds of new teammates to help us accelerate the roll-out of our technology to a world recovering from COVID and thirsting for a new model of care. Our revenue growth has not followed this aggressive investment, and while I remain as optimistic and dedicated as ever to our mission to transform the model of care, our current rate of cash burn was simply unsustainable over the long run.”

Schauer noted in the email that this “course correction” will help “prevent more significant (and mission-damaging) consequences later.”

Rising inflation, interest rates, and geopolitical tensions have contributed to a broader market downturn that has led many high-growth tech startups to cut costs and lay off staff amid a difficult fundraising environment and prospective recession.

According to layoff tracking website Layoffs.fyi, 525 startups from across the world have cut a combined 70,955 employees so far this year.

Other Canadian tech companies that have laid off staff in recent weeks include Hootsuite, Dooly, Article, Mejuri, Uberflip, RenoRun, Shopify, Wealthsimple, Clearco, Unbounce, Coinsquare, Introhive, Ritual, and Bonsai.

RELATED: Hootsuite restructuring, laying off 30 percent of employees

“There’s this period of irrational exuberance in tech passing, and now we’re all back to running businesses,” said Schauer.

Schauer addressed AlayaCare’s reduced lower than projected revenue growth expectations in a separate email obtained by BetaKit sent to AlayaCare employees approximately two weeks before the layoffs were announced. The CEO stated that AlayaCare was “falling further and further behind its growth targets.” Schauer noted that the startup, which had initially been planning to end the fiscal year at $83 million in annual recurring revenue (ARR) was “now forecasting to end at closer to $68M of ARR.”

Speaking with BetaKit, Schauer attributed some of this to missing sales targets and some to previously forecasted M&A plans that the startup has scaled back amid the market downturn. He noted that AlayaCare remains on track to close the year at about 80 percent of its initial target.

AlayaCare is certainly not the only Canadian tech company to lay off staff after seeing its revenue growth slow in recent months. Most notably, Ottawa-based retail giant Shopify cut about 1,000 employees last month after over-hiring and seeing slower than anticipated growth.

Schauer described AlayaCare’s end market as “recession-resilient,” noting that demand for home care services “has done nothing but go up” during COVID-19, and that over 80 percent of the care delivered through the startup’s platform is publicly funded.

RELATED: AlayaCare bolsters C-Suite, board to support next phase of growth

But while AlayaCare hasn’t been hit on the demand side, AlayaCare’s customers are struggling to recruit and retain workers, the CEO said.

Schauer emphasized that while AlayaCare is not losing sales due to these conditions, as the startup’s customers contend with these challenging labour market conditions, some deals are taking longer to close and software decisions are being postponed, which has had an impact on the company’s growth.

The CEO told BetaKit that while AlayaCare certainly isn’t finished making acquisitions given its accretive M&A model, the startup is being “more prudent” acquisition-wise over the short term.

“Everyone wants to be cared [for] outside of the hospital or outside of long-term care settings, and so all those tailwinds are still at our backs.”

“Really good deals we’ll still do, but we’re very happy to have raised when we did, and we don’t want to be raising again in this environment,” said Schauer. “We decided to ease off of the acquisition path we were on until market conditions stabilize.”

Schauer said AlayaCare has “erred on the generous side” severance-wise, and plans to provide laid-off employees with lots of hands-on assistance finding new positions, including potentially with some AlayaCare partners and customers.

Despite these layoffs and challenging economic conditions, Schauer emphasized that AlayaCare remains well-capitalized, stressing that the startup’s global expansion plans and ambitions remain unchanged.

“Our differentiation from a data insights and patient outcomes point of view continues to grow relative to our competitors,” said Schauer. “We’re continuing to lead the digital transformation of the sector, and demand is higher than it’s ever been coming out of COVID. Everyone wants to be cared [for] outside of the hospital or outside of long-term care settings, and so all those tailwinds are still at our backs.”

Feature image from AlayaCare via company website.

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling and breaking Canadian tech and innovation stories. His coverage is more complete than his moustache.

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