If 2021 was the year of creation of startup unicorns — a record 42 startups were minted that year — 2022 is turning out to be the year when they rationalize their operations.
Billing startup Chargebee has become the latest startup unicorn to announce layoffs in 2022. Chargebee has said it is firing 142 employees, which account for 10% of its workforce. The company said that the move was in response to “changing market conditions”. Chargebee had become a unicorn in April last year, and had been valued at $1.4 billion.
“We announced a reorg that impacted roughly 10% of the company. The decision was very difficult, and we want to thank everyone – especially outgoing employees – for all their hard work,” Chargebee’s CEO Krish Subramanian wrote on Linkedin. He added that the laid off employees would receive three months of pay, three months of medical benefits, outplacement services, and extension of time to exercise their stock options.
“This difficult decision was driven by external market forces as well as our need to address the operational debt we have accumulated in the last few years…we started implementing stricter fiscal discipline to reorient the company towards long-term sustainability,” he added.
Subramanian said that the company had initially slowed hiring in response to adverse macroeconomic conditions and the muted financing environment for startups, but “the new reality will require companies to move towards profitability at an accelerated pace”. “Our years in the high growth mode have created operational needs across the company, impacting our ability to execute. Facing a growing gap between revenue and spend, we’ve been reducing our expenses across various areas,” he added.
Chargebee had been founded in 2011 from an apartment in Chennai. The startup helps companies with their billing, subscription, revenue operations and compliance. Most of the company’s 3000 customers are based in USA and Europe. The company had entered the unicorn club after a $125 million fundraise in 2021.
Chargebee isn’t the only freshly-minted startup unicorn that has laid off employees in 2022. Previously, new entrants to the unicorn club including Vedantu, Unacademy, Cars24 and MPL have all laid off hundreds of employees. Other unicorns which have fired employees this year include Byju’s and Ola. Smaller growth stage startups like Trell and Furlenco have also laid off workers.
This is in stark contrast to last year, when funding was abundant, and startups had been hiring like there was no tomorrow. Most employees in tech roles had multiple job offers, and salaries had gone through the roof. But things have changed since then — as tech stocks have corrected globally, private company valuations have followed suit, and investors are being more circumspect with their cash. This made made startup sit up and rationalize operations, and many have been forced to lay off hundreds of workers. There’s now little doubt that the global startup ecosystem is now in slowdown, but it remains to be seen how long — and severe — this funding winter might end up being.