Apart from the Better.com case, the most loud layoffs in Fintech so far were the ones below.
Cutting down 83 staff members of 30,900 total globally might seem an insignificant change. However, that was a harsh turn for PayPal’s San Jose office, followed by further cuts in Chicago, Nebraska and Arizona.
The announced restructuring has resulted in more than 100 employees fired. The termination, Bolt’s CEO explained, was necessary to “secure [Bolt’s] financial position” in face of market instability.
Also in need to secure more funds amid the changing economic conditions, this BNPL financing provider has laid off 10% of its staff (approximately 500 people).
At the end of April, trading app Robinhood fired roughly 9% of its full-time workforce (340 employees). CEO Vlad Tenev said in his blog post that the company aimed to eliminate “duplicate roles and job functions.”
So far this Insurtech company has cut down as many as 170 employees, which is roughly 25% of the staff. The layoff came less than three months after the company had scooped $125 million for growth in Series E funding.
The Why and the How
Judging from most of the comments above, the main reason why companies have cut down on jobs is harsh market conditions. However, there are more perspectives on the matter, and there’s some context to put it in, too.
Thanks to a snowballing crisis: The blow that the public markets had received in 2022 reverberated across the private markets. An approaching bear market, inflation and recession concerns, increasing interest rates and geopolitical crisis add to the stock market tumult and poor quarterly results.
Let’s take the tech sector, and we’ll see that the value of S&P 500 dropped over 20% this year. As startup valuations have started to sink amid all of these shifts, startups say raising new funding is getting harder, hence the job cuts.
Rising labor costs top up the challenge: The crisis is creating all sorts of obstacles for businesses, and that is happening as the staffing costs are growing. Trying to compensate for the unwelcoming business environment, companies are leaving scarce-profit locations and balancing off sales volumes, explains Business Insider.
Not the job market downfall to blame: Strong for now and with hourly wages growing, the U.S. job market added 390,000 new jobs this May, The U.S. Department of Labor informs. “For now” is the operative word, as the economy reset in face of the looming recession will likely result in a further decrease of job offers, says CBS News Business Analyst Jill Schlesinger. The monthly job number dropping below 400,000 for the first time this year is indicative of the possible decline.
Following the Great Resignation: The wave of Great Resignation, when people quit empowered to look for better positions, broke over the layoffs marking the Great Reset.
It’s natural that the start of the COVID pandemic caught most tech companies off-guard and literally forced them to cut down on equally shocked employees. Now, while many companies are indeed suffering losses again, things are different. A large part of management in tech knew that their sweet time in the market wouldn’t last long, yet overspent on hiring and now are firing hundreds.