Despite being one of the most promising and highly-valued companies in Silicon Valley last year and with 75 per cent more new customers in Q3 2022 than Q3 2021, Stripe is to lay off 14 per cent of its workforce; the e-commerce platform announced this week.
The job cuts, which are expected to hit around 1,000 people of the platform’s workforce, were announced by the platform’s founders, brothers Patrick and John Collison in a company-wide letter to staff issued on Thursday this week.
In it, they cite ‘stubborn inflation, energy shocks, higher interest rates, reduced investment budgets and sparser startup funding’ as reasons behind the decision.
There’s no escaping the precarious position of the worldwide economy, and in acknowledging this environment, the founders’ statement recognised the two fatal mistakes that landed the platform in its current unfortunate position.
The first mistake was, as the Collisons put it in their announcement, the company being “too optimistic about the internet economy’s near-term growth in 2022 and 2023,” and that it had “underestimated both the likelihood and impact of a broader slowdown.”
Describing its second point of error, the founders admit that “we grew operating costs too quickly.”
“Buoyed by the success we’re seeing in some of our new product areas, we allowed coordination costs to grow and operational inefficiencies to seep in,” the statement continued.
But in retrospect, and in light of the global pandemic, the company’s prosperous start to the decade remains a certainty.
It expanded its services into emerging areas of the industry, like cryptocurrency and new banking infrastructures, while the scope of its services reached everywhere from Latin America to the Far East.
Its March 2021 fundraising round pushed the platform’s total valuation to a whopping $95billion, when it soon became the name on everyone’s lips in the sunny slopes of Silicon Valley.
However, as reported by the Wall Street Journal, a sustained sell-off of its shares this summer caused this once-promising figure to take a $21billion tumble, landing its end valuation at $74billion; so was this the first sign of trouble in paradise?
Thursday’s statement describes Stripe as “fundamentally well-positioned to weather harsh circumstances,” but that now it needed to “match the pace of our investments with the realities around us” with the latest cull of its workforce preparing the company for “leaner times.”
The company’s departing staff are set to receive a parting package including severance pay, paid time off and an annual bonus; among other condolences.
In addition to this, the company has established a dedicated alumni community that will offer support to the outgoing; “In our minds, you are valued alumni,” the statement read.
The company’s disheartening announcement this week all but confirms an emerging and worrying trend taking hold of the fintech industry.
Because on the very same day that Stripe made its announcement, Jeppe Rindom, the co-founder and CEO of the expense management solution Pleo, confirmed that the Danish unicorn was to lose 15 per cent of its workforce; accounting for the jobs of around 150 people.
In his online statement, Rindom painted a similar picture of the changing world portrayed by the Collison brothers.
His statement confirmed that the company was “no longer operating under a ‘growth first’ mandate but rather a reality of ‘growth through focus and efficiency’.”
“Focus on the many markets we now serve and focus on driving efficiency in everything we do,” he continues. “And what got us here, is not what will get us there.”
But the list goes on.
Just 24 hours prior to Pleo and Stripe’s announcement, The Information confirmed that the online banking startup Chime was to slash 12 per cent of its workforce, around 160 jobs, while a company spokesperson speaking to Reuters blamed “current market dynamics” as the reason behind the decision.
Tragically, the US online lender Upstart announced that it was to follow suit with the axing of 140 jobs; about seven per cent of its total workforce.
In its 8-K filing with the US Securities and Exchange Commission (SEC), the cloud-based AI lending platform cites ‘the challenging economy’ and a ‘reduction in the volume of loans on our platform’ as primary catalysts of the decision.
With the company’s share price diving 84 per cent this year, its lending platform is facing weakened demand for its loans in light of the Federal Reserve‘s interest rate rise triggered by worldwide inflation.
And just when you didn’t think the situation could go any further south, the credit monitoring and building platform Credit Karma announced this week that it is to pause all new hiring.
In an email to staff seen by The Fintech Times, the company is ‘continuing to see revenue challenges due to the uncertainty of the macroeconomic environment’.
The statement recognises the turbulence the past two years have brought to the company, when it was forced to cut salaries by 15 per cent to 50 per cent across the board to avoid layoffs, before reiterating that ‘this is not the same as 2020’.
The company was acquired by Intuit in the early days of 2020, with the $7.1billion deal, paid in cash and stocks, helping to protect it from the full force of the pandemic.
But as with its contemporaries, Credit Karma has now come to face the full reality of the economic downturn. However, the company’s statement does confirm no new pay cuts and that newly-vacant positions will be filled internally.
It appears that while fintech companies weathered fairly well during the pandemic, not even this seemingly unstoppable sector can outrun the dark clouds of the current worldwide economy.