By Amelia Isaacs on Sunday 12 March 2023
Layoffs have taken place at 1525 tech companies since covid started — nearly 20 per cent of which are fintechs.
Last week, accounting software giant Xero became the latest name to be added to an unfortunately long list of tech companies that have had to make layoffs this year.
The company is set to lay off between 700 and 800 people — roughly 15 per cent of its workforce — and is the 291st fintech to make layoffs in 2023, according to layoffs.fyi.
Following the collapse of Silicon Valley Bank, there could very well be another tidal wave of layoffs on the way as startups deal with the fallout or struggle to make payroll.
Even discounting whatever the aftermath of SVB may be, more than 127,000 people have been laid off at 1525 tech companies since the pandemic started, and companies in the finance sector make up almost 20 per cent of them at 291 — the largest proportion of all companies.
That’s not even including crypto companies — add another 102 to the tally — which combined with the finance industry make up more than a quarter of layoffs in tech.
But despite layoffs being on the up in the second half of 2022 according to Deel, and with this continuing into 2023 so far, global hiring has also grown across the board.
While a large portion of the startup world has been thrown into disarray this week, and the true extent of the after-effects will reveal themselves in the days and weeks to come, there are a record number of potential employees with a lot of fintech and tech experience out there.
For the startups that haven’t been affected, or have managed up until now relatively unscathed, those that struggled to find new employees over the past few years while major tech companies scooped up thousands of people, may now face an opportunity.
Startups’ time to shine
Yoko Sprig, co-founder and CEO of equity management platform Ledgy, told AltFi that while it’s never good to see rounds of layoffs, there is an opportunity for startups and scale-ups to hire top talent that knows ‘what good looks like’ from their time at the biggest tech companies.
“It’s easy to see layoffs, or events like the Silicon Valley Bank crisis, and assume that there are real systematic risks in the fintech ecosystem,” Spirig said.
“But it’s important to step back and remember that the pace of innovation in fintech has never been greater. I’m confident that we will continue to see innovation in the fintech sector as more legacy processes get disrupted.”
Just as we saw Airbnb and Slack rise from the ashes of the 2008 recession, there’s an expectation from many that we’ll see a similar phenomenon now.
It is clearly a time of disruption — or instability — for the tech industry at large, but this hasn’t been reserved solely for startups.
In fintech, we’ve seen companies across the board having to make cuts after a boom in funding and hiring, from those on the smaller end of things, like Paddle and Pleo, all the way to tech giants like PayPal, Klarna and Stripe.
“People’s impressions of the big tech firms as being super safe and stable employers may now have changed,” Spirig said.
“So in that sense, there is one more card that smaller startups have to play in competing for tech talent.”
Startups can often offer more competitive equity stakes — in exchange for taking a risk on an early-stage business — and the opportunity to play a bigger role as operations scale.
While companies like Meta, Google or Amazon might stereotypically have offered employees more job stability or better compensation, that’s not necessarily the case anymore — there’s risk involved wherever you are in tech right now.
Laurent Descout, co-founder and CEO of Neo, has seen the effects of this first-hand.
He told AltFi that since the layoffs began, the treasury management firm has had more applications from senior people than ever before.
“Given the size and scale of the layoffs, people are now doubting the stability of the largest players and are looking to up-and-coming smaller firms rather than the big tech monoliths,” Descout said.
“For smaller firms, what has been big tech’s loss has been their gain. For the first time in years, startups are able to compete and beat the biggest firms in the battle for talent.”
He noted that oftentimes people are being laid off based on their role, rather than their performance, meaning that there are now excellent candidates on the market “that startups should be trying to sweep up because they won’t be available for long”.
In many ways, these candidates come pre-vetted by the tech and fintech giants that laid them off.
“These people bring years of experience of working in highly successful firms and interesting insights into how we can do things better, faster and smarter, helping us to enhance our offerings,” Descout said.
“They also need less training and take less time to get up to speed, so they tend to hit the ground running and make an impact early on.”
Many fintechs will be after the same talent, Descout noted, so strong recruitment strategies will be key for startups looking to make new hires.
Making layoffs with empathy
But it’s a tough market for those who’ve been laid off, often with no warning, and companies that are in a strong enough position to do so should be setting up their former employees for future success where they can.
That starts with approaching layoffs from a place of empathy, and ends with giving employees the tools they need to move forward — as much severance pay as they can, career support, healthcare in countries where it isn’t free and immigration support where needed.
Tamsin Ashmore, CFO of cloud, security and digital managed service provider Ultima, noted the importance of remembering how personal work really is, and remembering to approach difficult conversations with humanity.
“You hear all of these horrible conversations about people [making layoffs] over the phone to groups of people. Why do they do that, though? They do that because they're scared because it's a really vulnerable space to be in when you're saying this stuff to people,” Ashmore said.
“And so when you take it down and you have the conversation with somebody at a compassionate level, you're opening up the floor to their emotion, aren't you? And that's uncomfortable.”
The aim is to have individuals walk out of the room thinking that despite what happened, they still think positively about the company and would still want to be part of the company, Ashmore said.
One way to help do this is by hanging on to the employees in HR and in the people function where possible.
Marketing and people budgets are often the first to be slashed, but it’s important to keep those who can help offboard people and provide a duty of care, Lloyd Wahed, founder and CEO of Mana Group, told AltFi.
There has been a clear move in the fintech space to support each other, and Mana, an “all-in-one” fintech search firm, and companies like it, have been building up communities by referencing those affected, setting up links with hiring managers or creating spreadsheets of contact information.
“If I was an employer, I would think through what lens people came into the opportunity,” Wahed said.
“I would up my empathy if you are incredibly bullish about the fact that you are a rocket ship forevermore versus if, in your process, you are very transparent about the risk that somebody was embarking upon to come on this opportunity.”
Reskilling > recruiting
Ashmore emphasised the importance of reskilling and developing employees so they have the skills to grow alongside the company.
“There's a massive responsibility that I think all businesses have when you're in growth, and the responsibility that you have is around future-proofing your organisation and ensuring that your growth decisions are around sustainable growth,” Ashmore said.
It is on the companies to ensure that the roles they hire for will continue to exist, Ashmore said, because for each hire that’s made, someone is choosing to leave a job or to pick yours over another.
“I think often people get wrapped up in the excitement of growth and they sometimes are maybe remiss in considering sustainable growth and the continued trajectory of that,” Ashmore continued.
For many companies, the focus right now will be shifting to the long term, looking to next year or even the next few years for growth and for profit.
“What I’m seeing people focusing on is possibly the things that haven’t been prominent enough in the space, so building where there is a business that can kick out a strong profit in, for sure, 2024, is the focus for most businesses,” Wahed said.
“We're not going to go back to 2022. It's never going to be like that in the short term.”
Wahed said the approach he’s seeing the best founders take — and the approach Mana is taking — is to be optimistic for the next two to five years.
“Good will come of this. Category leaders will be made. And so the best entrepreneurs are trying to take that opportunity.”
It is a tough time in fintech right now and layoffs have risen significantly this year, but this should not signal the end of innovation and growth within the space.
This is the time for businesses to build and for fast-paced and scaling fintechs to take advantage of the highly skilled people who are looking for new places to thrive.
We’ve seen the fintech community come together to support those affected over the past few months, and over the past few days in their hordes to support startups.
If this support continues, from both individuals and companies, then good will indeed come of this, and the industry will come through even stronger.
21 March 2023
Daniel Lanyon