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We don’t have to tell you that layoffs are a big part of the tech industry right now. Most of them are happening at late-stage companies that are struggling to raise more money and keep their valuations at the same level. What we think is important, though, is to pay attention to a frustrating trend that is emerging from all these news stories: some companies have announced layoffs after layoffs in quick succession, which seems like a surprising double reduction.
I’ve noticed for a long time that the same startups that laid-off workers in March 2020 had to cut back again in the wave of 2022. The first wave was about getting ready and being afraid, while this wave feels like a pullback after a surge. What confuses me is when startups lay off workers now and say it’s because of the economy as a whole. Then, a few weeks later, they do the same thing and say the same thing.
Most of the time, the second round of layoffs is bigger than the first, which tells us that the company didn’t go far enough with the first round. It’s also important to note that the rate of net new layoffs is slowly going down. According to the website layoffs.FYI, there were 150 new layoffs in July, which is about 18% less than the month before.
Nolan Church, CEO, and co-founder of the fractional work platform Continuum says that a founder may have to do two rounds of layoffs in a short amount of time for a few reasons. For example, the business may be getting worse, or the founder may not have done a good job of predicting the future. He also said that one reason could be that “leadership didn’t have the courage of awareness to cut deep” in the first place when it came to people and projects.
Continuum recently raised $12 million in a Series A round to expand a set of tools for fractional work, such as a service that helps startups lay off employees in a more humane way. When a client needs help with layoffs, the company puts them in touch with a seasoned executive who can help with anything from breaking the news on the day of the layoffs to giving high-level advice. He hasn’t seen any clients go through two rounds of layoffs. He thinks this is because his executives tell founders to “cut once and cut deep.”
“It’s not okay to lay off people two weeks apart. “The CEO or someone in charge of leadership made a huge mistake,” Church said. “I’m not surprised by layoffs that happen two years apart.” Most CEOs of companies in their early stages are best suited for two to three years of runway. When they first changed direction, they had to let some people go. During that event, they probably changed their plans and made a new bet. The second layoff happened because that bet didn’t work out.
With all of this in mind, here are some of the companies that have had at least two rounds of layoffs within months or even weeks of each other, according to data from layoffs.fyi and TechCrunch’s own reporting.
On Deck, a tech company that helps founders find each other, money, and advice, has laid off more people just three months after laying off a quarter of its staff. Sources say that the layoffs affected more than 100 people, or half of the staff, while the company, which confirmed the layoffs to TechCrunch via e-mail, said that only 73 full-time employees were let go. No top leaders were affected.
The startup’s second round of layoffs is based on a more detailed plan for what will happen next. The first round of layoffs was mostly due to changes in the capital and accelerator markets. This time, On Deck went further. It shut down a few communities and is turning its career development arm into a new startup.
It could be because they need to extend the runway more quickly. According to sources, the first round of layoffs happened because On Deck had only nine months of runway left. Now, Erik Torenberg and David Booth, who started On Deck with each other, say that the company has more than three years of runway.
This week, Robinhood said that it was letting go of 23% of its staff across all departments, with most of the cuts happening in operations, marketing, and program management. Just three months ago, Robinhood cut 9% of its full-time employees. CEO and co-founder Vlad Tenev said at the time that it was “the right decision to improve efficiency, increase our speed, and make sure we can meet our customers’ changing needs.”
Now that it was official that the second round of layoffs would happen, Tenev changed his tone. The co-founder took responsibility for the fact that Robinhood seemed to hire too many people in 2021. He said that the company hired people for a lot of its operations last year based on the idea that the “increased retail engagement” that was happening would still be going on in 2022.
“In this new situation, we have more people on staff than we need,” he wrote. He also said that the first round of layoffs “did not go far enough.”
“Since then, the macro environment has gotten even worse. Inflation is at its highest level in 40 years, and the crypto market as a whole has crashed. This has made customer trading and assets in custody go down even more,” Tenev said. Over the past year, Robinhood’s stock price has also changed a lot. At the time this article was written, the company was trading after hours for $8.90, which is 89% less than its 52-week high of $85. After hours, it’s also down 3.6%.
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