Layoffs continue to rise at Canadian tech startups as the economic outlook deteriorates.
On Thursday, three Canadian companies – online furniture retailer Article and online marketing technology providers Unbouce Marketing Solutions Inc. and Flyp Technologies Inc. (known as Uberflip) – announced nearly 300 removals of jobs between them. The CEO of a fourth web-based building materials delivery service, RenoRun Inc., told tech news site BetaKit that his Montreal startup had laid off 70 of its 600 employees and halted expansion to new ones. markets. It came six months after RenoRun said it raised US$142 million led by hedge fund giant Tiger Global Management, which largely exited the sector after flooding startups and scale-ups with cash. these last years.
Many other companies have already announced layoffs, while still others are quietly laying off employees. According to Layoffs.fyi, a website that tracks industry cuts, more than 65,500 people have lost their jobs at 477 startups this year globally. “We’re closer to the beginning than the middle,” said Maria Pacella, managing partner of Vancouver-based Pender Ventures. “I think with the uncertainty in the economy, we’ll see continued layoffs and a slowdown in hiring on average.”
It’s a stark contrast to last year, when tech companies flooded the markets with initial public offerings and raised record amounts of private capital at lofty valuations. Rising inflation and interest rates, supply chain challenges and a slowing economy have since hit valuations hard. Those that aren’t profitable or need financing to keep growing — or those that were overspent to deal with pandemic-fueled growth that didn’t materialize — have had to cut back.
That’s what happened to Article, officially called TradeMango Solutions Inc. Eight months ago, CEO Aamir Baig was about to list his company in Vancouver. which has about $500 million in annual sales, publicly. The article shelved that plan as markets crashed in January. Now Mr. Baig admits – as Shopify Inc. CEO Tobi Lutke did a week ago when he announced 1,000 layoffs – that he incorrectly assumed that the accelerated shift to online shopping during the pandemic would continue when life returned to normal. Instead, sales have “since reverted to pre-COVID trends,” Baig wrote in a LinkedIn post announcing the layoff of 216 people, or 17% of staff.
Mr Baig blamed himself, saying the company’s financial projections “showed that we were operating the business at a size greater than current demand.” Simply put, we were living beyond our means. I needed to scale our business to restore our position to financial strength. Uberflip meanwhile cut 31 people while Unbounce laid off 47, both due to economic uncertainty, their CEOs said on LinkedIn.
Dragon’s Den star Michele Romanow also admitted last week that his e-commerce finance company CFT Clear Finance Technology Corp. had grown too rapidly in anticipation of international growth that proved “unsustainable” this year. Clearco cut 125 jobs, or 25% of its staff, last week. Clear is also facing challenges as the cost of capital and customer defaults rise in some markets, prompting it to briefly stop offering cash advances to customers last month to tighten underwriting practices. and increase fees.
The news is not uniformly bad across the industry. Lightspeed Commerce Inc. CEO Jean Paul Chauvet said his Montreal-based company, which sells point-of-sale software to restaurants, retailers, golf courses and hotels, benefits from having their customers come back in person. and is sticking to his company’s revenue growth forecast for this year. “For us to hit those numbers, that means we have to keep hiring” and investing, he told analysts on a conference call Thursday.