In July 2022, the global startup market woke up to news like a thunderbolt, when Airlift - Pakistan's largest and most funded startup ever - officially announced its complete collapse, closing its doors and laying off 1,300 employees at once. This tragic step led to the economic crises the world is going through, including economic downturn and inflation, as well as the results of the Russian-Ukrainian war and its repercussions.
The Pakistani company specializing in e-commerce and high-speed delivery within 30 minutes, which has raised about $85 million since its founding in 2019 to become the most funded startup in Pakistan, with a value of about $275 million;
It was exposed to sudden death after failing to collect more investments that are in line with its expansion plans, in light of the stagnation of markets in the world and the Pakistani market (1).
This news contributed to sounding more alarm bells for the situation of startups around the world, with the exacerbation of the global economic crisis and the increasing inflation due to the post-pandemic period and the impact of the war, especially in the employment sector, which is witnessing alarming levels of layoffs of employees and workers, and what this means is an increase in unemployment. And the attendant increase in social tensions.
Layoff is the new trend
Tesla for electric cars announced the layoffs of some of its employees and the freezing of employment of others - (Reuters)
In June 2022, an internal letter reached Tesla's electric car company employees, signed by its founder and CEO, Elon Musk, saying that the company had laid off 10% of its employees after it had become overcrowded with employees and workers in proportion to the global downturn.
This message represented the slogan of the stage, as it revealed that the giant companies also, and not only the start-ups, began to take more narrow paths on their recruitment movement.
In turn, the auto giant, "Ford", announced the laying off of 8,000 workers and employees at once, in order to save 3 billion dollars, which the company announced that it would put it to build its unit for the manufacture of electric cars, as an alternative to organic fuel cars based on expensive gasoline.
As for Twitter, it announced a 30% cut in its workforce in one of the largest cuts in the history of the famous social media company.
On the other hand, "Netflix", the entertainment company for broadcasting the Internet, announced the laying off of 300 employees in its various departments around the world, which is the same as what was announced by the global digital mediation platform “Robinhood” by cutting 9% of its entire staff.
The news of laying off 4,480 employees from the Turkish giant “Getir” company, which specializes in transportation and ordering, was one of the largest layoffs witnessed by emerging companies in May 2022, as the layoffs included 9 markets in which the company, estimated at $12 billion, is active.
Also, the giant global insurance technology platform, Polytech, announced the layoff of a quarter of its employees, just three months after it raised a massive funding round that raised $125 million(2,3).
Employment has become a privilege
Dar Khosrowshahi, CEO of the global transportation company "Uber" - Reuters
At the beginning of last May, Dara Khosrowshahi, CEO of the global ride-sharing giant Uber, sent a message to all company employees in all sectors, saying that the company would sharply reduce expenses in its marketing and incentives plans, and that it would deal with Recruitment in her company in the coming period is considered a "privilege", and that its departments will carefully study when and where it will ask for more employees.
Khosrowshahi explained this trend from Uber that the company is forced to start downsizing due to the "seismic shift" that hits the markets, as he described it (4).
It was no different with the giant tech companies. Alpha Bit, the parent company of the Google search engine, announced that it will reduce the pace of hiring in all its projects and departments around the world until the end of the year, and that it will give the highest priority to qualified engineers and technicians, justifying this decision that it is not immune to the problems that the global economy is going through.
Apple also announced that it will also reduce the pace of hiring in its departments until early next year.
As for the Meta company, which owns Facebook, it announced freezing its plans to hire more new employees, and reduced its plan to hire engineers by 30%, with its president, Mark Zuckerberg, declaring that he expects more economic contraction during the coming period.
It was no different for Microsoft, which in May officially announced that it was reducing hiring rates in its companies and divisions, freezing job opportunities that were available, and actually making a set of layoffs that included 1% of its job capacity.
Even the global e-commerce giant "Amazon", which has more than 1.6 million employees worldwide, as the largest number of employees in a technology company;
He was not spared the effects of this wave, as the company announced last April that it had included more employees in its crews around the world during the pandemic period due to increased demand, and that layoffs for some employees may be close, but it needs more time to determine which employees can do With work that covers the absence of a percentage of other employees (5).
The sectors most affected
According to the TechCrunch report, the huge wave of layoffs witnessed by emerging companies around the world in the first half of this year (January-June) was the share of the financial technology sector (Fintech).
In fact, this particular sector was the most fortunate in 2021 in raising funds from venture capital funds around the world, as startups specialized in this sector raised about $131.5 billion through about 5,000 deals, but it did not take one year until this became The sector is hardest hit by the global downturn.
Swedish financial technology platform Klarna announced the layoffs of hundreds of its employees – Reuters
During the first half of 2022, the financial technology sector achieved 10-11% of the total layoffs witnessed by all sectors of startup companies around the world;
What makes it ahead of the other two sectors are the food and transport sector.
These numbers increase even more if companies specializing in digital currencies are combined with them, which witnessed large waves of exclusions during the second quarter of this year, with the decline in the value of digital currencies globally (6).
At the top of the financial technology companies that recorded large waves of layoffs was "Klarna", the Swedish financial technology giant, which laid off 10% of its employees, equivalent to 700 employees.
The giant cryptocurrency exchange Coinbase also announced the layoff of a large number of its employees, reaching 1,100 employees, representing 18% of its entire workforce, with a freeze on hiring until the end of the year (3).
The wave has reached the Arab region
Although the global wave of layoffs in startup companies has not yet reached the Arab region so intensely that it becomes a media phenomenon, its signs were when the Egyptian startup SWVL, headquartered in the Emirates, and one of the most important startups announced Arab and the most funded;
It laid off a third of its employees at once, the equivalent of 400 employees, last May.
The Egyptian company, SWVL, for participatory transport, based in the Emirates, announced the layoff of a third of its employees at once (400 employees) – Reuters
Swvl said that the wave of exclusions includes its employees in both Pakistan and the UAE, and that in return, it provided a set of compensation for the excluded employees, including an aid package, maintaining the employees' share of shares, maintaining health insurance and its benefits, and facilitating their return to the company after the end of the crisis and the improvement of global economies, And also keep their devices that they got from the company.
Swvl explained that this procedure by excluding a large number of employees, and replacing them with automated systems, on the grounds of rationalizing expenses, was the only procedure for the Arab startup listed on the Nasdaq Stock Exchange so that it could complete its ambitious endeavors by acquiring more international companies and opening more markets, to accelerate its steps in Starting to achieve positive profits starting from the year 2023 instead of the year 2024, as was planned before the exacerbation of the global economic slowdown and inflation crisis (7).
Several weeks after Swvl announced the layoff of a third of its employees, the Egyptian startup Vezeeta announced that it was also laying off 10% of its employees, which is equivalent to approximately 50 employees.
Vezeeta is considered one of the largest Arab startups that has received funding exceeding the $40 million ceiling, and is currently operating in more than 50 cities spread over several Arab countries, including Egypt, Lebanon, Jordan and the Gulf.
Despite the great leap achieved by the emerging medical platform that was established in 2021 during the period of the Corona pandemic, especially in the field of telemedicine, where its work base has multiplied 3 times, the platform was forced to reduce its team after life relatively returned to normal, and the start of a new expansion plan in more cities in the Middle East and North Africa, reaching 10 million patients (8).
Why all these layoffs?
Although the waves of layoffs affected most companies to varying degrees, the largest and most influential waves of layoffs have been witnessed by emerging technology companies operating in various sectors.
The reason is that the economic slowdown and uncertainty in global markets are pushing investors to provide safe havens for their money instead of continuing to invest in risky projects.
In those times, the goals of startups shift from “expansion” in the markets to another goal, which is to achieve profits as soon as possible, that is, to shift from the state of “growth” and break into new markets (Growth) to the state of rapid profitability, to ensure the continuity of It remains in the bear markets, while at the same time gaining the confidence of more investors who refrain from investing in emerging companies with the increase in inflation and the high interest rate.
Certainly, one of the most important aspects of accelerating the achievement of quick profits is reducing expenses, by excluding many employees in sectors that can be “automation” in digital technology companies, or freezing sectors that do not achieve or are expected to achieve profits in the future, according to market monitoring data. And, of course, freezing the employment of more employees who were intended to be employed in normal circumstances (9).
In the end, as of the moment of writing these lines, the global economic landscape is still confused and it is not possible to ascertain what will happen, with the continuation of the inflation crisis, the rise in prices and the continuation of the Russian-Ukrainian war and its aftermath that directly harm the global economy in all its sectors, especially the start-ups that are trying to Most focus on "survival" more than on growth.
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Sources
1 – Airlift, Pakistan's top startup, shutting down following funding crunch
2 – Ford to Fund Its EV Efforts in Part by Laying Off 8000 Workers
3 – Companies that announced major layoffs and hiring freezes
4 - Uber CEO tells company staff will cut down on costs, treat hiring as a 'privilege'
5 - Microsoft, Google Are Latest Tech Giants to Hit Brakes on Hiring
6 – Fintech startups lead the layoff wave
7 - The Egyptian startup SWVL is laying off a third of its employees, in conjunction with the layoffs of thousands around the world
8 – Egyptian healthtech startup Vezeeta cuts 10% of 500-person staff
9 - Job cuts are rolling in.
Here's who is feeling the most pain so far