Layoffs continue to mount at Canadian tech startups as the economic outlook worsens.
On Thursday, three Canadian companies – online furniture retailer Article and online marketing technology vendors Unbouce Marketing Solutions Inc. and Flyp Technologies Inc. (known as Uberflip) – announced nearly 300 job cuts between them.
The CEO of a fourth, web-based construction material delivery service, RenoRun Inc., told technology news site BetaKit his Montreal startup had laid off 70 of its 600 people and had paused expansion to new markets. That came six months after RenoRun said it had raised US$142-million led by hedge-fund giant Tiger Global Management, which has largely retreated from the sector after showering startups and scaleups with cash in recent years.
Many other companies have already announced layoffs, while more still are quietly letting people go. According to Layoffs.fyi, a website that tracks cuts in the sector, more than 65,500 people have lost their jobs at 477 startups this year internationally. “We’re closer to the beginning than the middle,” said Maria Pacella, managing partner with Vancouver-based Pender Ventures. “I think with the uncertainty of 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 markets with initial public offerings and raised record amounts of private capital at heightened valuations. Since then, rising inflation and interest rates, supply chain challenges and a slowing economy have hit valuations hard. Those that are unprofitable or require funding to keep growing – or that overspent to meet pandemic-fuelled growth that didn’t materialize – have had to cut.
That’s what happened to Article, officially called TradeMango Solutions Inc. Eight months ago, CEO Aamir Baig was preparing to publicly list his Vancouver company, which has about US$500-million in annual sales. Article shelved that plan as markets tanked in January.
Now, Mr. Baig is admitting – as Shopify Inc. CEO Tobi Lutke did a week ago when he announced 1,000 layoffs – that he mistakenly assumed the accelerated shift to online shopping during the pandemic would continue when life returned to normal. Instead, sales have “since returned to pre-COVID trends,” Mr. Baig wrote in a LinkedIn post announcing a 216-person layoff, or 17 per cent of staff.
Mr. Baig blamed himself, saying the company’s financial projections “showed that we were operating the business at a size larger than current demand would sustain.”
“Put simply, we were living beyond our means. I needed to resize our business to restore our position of financial strength.”
Meanwhile, Uberflip cut 31 people while Unbounce let 47 go, both owing to economic uncertainty, their CEOs said on LinkedIn.
Dragon’s Den star Michele Romanow also admitted last week her e-commerce merchant financing company CFT Clear Finance Technology Corp. had grown too fast in anticipation of international growth that proved “unsustainable” this year. Clearco cut 125 jobs, or 25 per cent of staff, last week. The company also faces 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 raise fees.
The news isn’t uniformly bad across the sector. Lightspeed Commerce Inc. CEO Jean Paul Chauvet said his Montreal company, which sells point-of-sale software to restaurants, retailers, golf courses and hotels, is benefiting as their customers flock back in person and is holding to his company’s revenue growth forecast for this year. “For us to hit those numbers it means we need to continue hiring,” he told analysts on a conference call Thursday.
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