The new year has been rung in by a slew of cuts to a large number of employees by Big Tech.
The economic pressures causing some of the world’s largest tech companies to reduce staff also continue to be felt by Canadian tech startups. In recent weeks, PartnerStack, SSENSE, #paid, Shakepay, and Venngage have all joined the growing list of tech startups to make staff cuts.
Data shows that more tech employees have been laid off this month than any month since the pandemic started.
If 2023 seems to have brought with it an increasing number of companies making layoffs, it is not just by appearance. In just the four weeks since the year started, the number of tech employees cut has surpassed the second quarter of 2020—the first full quarter in which businesses had to face the COVID-19 pandemic, according to Layoffs.fyi. The layoff tracker’s data also shows that more tech employees have been laid off this month than any month since the pandemic started.
At time of publication, the data shows that more than 68,000 tech workers from 219 companies were laid off so far this month. Comparatively, in the second quarter of 2020, just more than 60,000 people were laid off from 428 companies.
Toronto-based PartnerStack has laid off approximately 20 percent of its team, with CEO and co-founder Bryn Jones citing a “larger” and “more volatile” economic shift than expected. The layoff amounts to 40 employees, reducing PartnerStack’s headcount to 175 people.
Toronto-based Venngage cut a similar percentage of staff recently with 11 people being let go, amounting to 20 percent of its 55-person team. The startup’s workforce now sits at 44 people overall.
#paid, another Toronto-based startup, recently laid off approximately 17 percent of its team, amounting to 19 people. The company now has 92 employees.
Cryptocurrency exchange Shakepay has also laid off employees with the company confirming the move to BetaKit citing simply “market conditions.” While Shakepay did not disclose the size of the cuts, multiple sources indicated to BetaKit that the Montréal-based startup laid off around 25 percent of its team. According to LinkedIn, Shakepay has around 87 employees, and a 25 percent reduction would amount to 21 people.
Retail startup SSENSE laid off approximately seven percent of its workforce, with the company confirming to BetaKit that the decision affected 138 individuals. SSENSE’s spokesperson called the cuts the first in the company’s 20-year history.
Each of the companies confirmed their layoffs to BetaKit, citing the need to set their companies up for long-term sustainability.
In the cases of the Big Tech companies and Canadian unicorns noted above, many cited a desire to reach profitability as the motivation for their staff cuts. However, whether layoffs are effective in helping companies to do so is not clear. A recent report by The Verge cited one expert who argued that there is little evidence to support the idea that layoffs help improve profitability. The expert, a deputy dean at the MIT Sloan School of Management, argued that companies’ problems usually lie more with revenue, but “cutting employees will not increase your revenue. It will probably decrease it.”
However, startups the size of PartnerStack, #paid, among others, have differing needs from those of large or publicly-traded tech companies. While the number of employees being laid off at Canadian startups is much lower than at Big Tech companies like Amazon, Microsoft, and Google, the impacts of these cuts is much more significant to a startup’s bottom line and burn rate.
With smaller budgets, reach, and safety nets, it can be even more important for startups to reassess their spending. One venture capitalist (VC) told BetaKit on background that the startups making cuts are being driven by where they want to find themselves in 12 to 18 months.
That VC also noted that they are discussing cuts with almost every company in their portfolio.
Companies are feeling the need to make budget cuts for a number of reasons: from the continually increasing interest rates to decelerated revenue growth and investor spend after COVID-19 led to a couple of years of a fast-paced tech boom.
According to CEO Eugene Woo, Venngage’s case is one of a profitable startup that tried to keep pace with the increasing salary rates driven by Big Tech hiring sprees in recent years. “Our expenses grew 40 percent – some department spend grew over 100 percent during the pandemic. This was mainly due to raising salaries,” he told BetaKit.
“We didn’t expand our headcount, but increased salaries to competitive market levels,” Woo added. “Pre-pandemic we were around 55-60 people too, but with 40 percent less expenses.”
Like many other companies, Venngage enacted a hiring freeze mid-last year, but when that proved not enough made the decision to reduce its headcount.
PartnerStack and #paid both saw their business grow during the pandemic tech boom but are now having to change course along with the market. Both companies noted either “record” or “strong” customer demand in the past couple of years.
For PartnerStack’s part, the company told BetaKit that “the plan we created in January 2022 to support that growth doesn’t work in January 2023, and we have to adapt to meet the needs of the market, our customers, and partners.”
Adapting is a core theme for any startup. But, as has been noted by a number of VCs that BetaKit has spoken with, many of these companies are having to adapt in ways they never have before, given many of the current crop of early-stage Canadian founders did not experience the last recession in 2008.
As one VC noted, the continually increasing interest rates in Canada were not something companies expected, nor was the need for some to do multiple rounds of cascading layoffs, as can be seen with Clutch.
But even as companies continue to make decisions to reduce spend, many present an optimistic front. As PartnerStack said following its cuts: “it’s a strategy that we’re very optimistic about. We’re still in growth mode but it is a new chapter, and we are confident that together we can continue to achieve our ambitious objectives.”