In early October, Sean Reay was at a conference for enablement professionals in San Diego on behalf of his employer, marketing startup Sendoso, when he received a notification for a last-minute, global all-hands meeting.
“With a last-minute calendar invite, it’s always something big, and it used to be that we were getting acquired, or acquiring someone, or that we were raising. Exciting stuff,” he told Insider in an interview. “Now, that means that a company is laying off a handful of folks.”
Sure enough, when Reay joined the call, Sendoso’s leadership announced it was cutting staff, and that instead of individual calls, affected employees would have their computers shut off in the next five to 10 minutes and receive a message in their personal email.
For Sendoso staffers, it was an unfortunate case of deja vu: the startup, which helps companies send marketing gifts to business connections and is backed by SoftBank and other well-known investors, first laid workers off in June 2022 and slashed jobs twice more in the last 16 months.
A few minutes later, Reay learned via email that he lost his job on the startup’s enablement team.
Sendoso is just one of many startups that have undertaken multiple rounds of layoffs in the last year and a half, thanks to a freeze in VC funding amid a broader economic downturn.
Following a funding frenzy in 2020, 2021, and the beginning of 2022, VC investment in the first quarter of 2023 was down 53% year over year, according to Crunchbase. As startups fail to secure additional funding, they must look internally to cut costs — and many are landing on layoffs, given headcount is the most significant expense for most companies.
A wave of layoffs overtook the tech industry last year, beginning in waves with behemoths including Facebook parent company Meta, Twitter (now known as X), and Salesforce. Cuts have also been reported at many startups, with companies including Sendoso, GV-backed fertility startup TMRW, and security software provider OneTrust.
Over 244,000 workers have been laid off from tech companies in 2023 so far, according to the layoff tracker Layoffs.fyi. That’s a significant jump from the nearly 165,000 tech workers laid off in all of 2022.
Now, many companies are once again cutting jobs in droves, with some startups laying people off for the second, third, or even fourth time in little over a year.
For the startup employees interviewed by Insider, the constant threat of layoffs is having a detrimental effect on company morale.
“It has an impact, including trepidation, wondering what’s next, and feeling like I’m constantly having to prove myself in different ways,” Raey said. “I was on the defensive while doing regular work and constantly trying to remind leaders that I’m valuable.”
Repeat layoffs are giving startup employees “strategy whiplash” and constant feelings of fear
Nearly a year and a half after the tech community came to a screeching halt in mid-2022, startups and big tech alike are still struggling — and in many cases, slashing jobs for the second, third, or even fourth time. LinkedIn slashed 668 jobs in mid-October and Google just axed dozens in its news division, while Facebook cut 10,000 additional jobs earlier in the year.
Many startup roles have been similarly eliminated: SchoolMint just axed 14.5% of its workforce, the second time the edtech startup laid people off, while online tutoring unicorn Paper laid people off this summer and in September– the third time it’s slashed jobs – after raising $270 million in Series D funding.
Mortgage lender Better, which went public in SPAC this summer, conducted more layoffs last month, and rapid-delivery startup GoPuff and restaurant software company Nextbite have had multiple rounds of layoffs, too.
When startups slash jobs time and time again, it puts remaining employees in a constant state of fear that they could be next, said a number of employees who remain employed at their respective startups. The employees spoke to Insider requested anonymity for fear of losing their current jobs.
“I am worried, ‘what if I’m next to get laid off, and I just don’t know it right now?'” said one employee working at a growth stage startup that’s conducted three rounds of layoffs this year.
That fear can permeate throughout the workplace: “I know a lot of people are thinking very similar things,” the employee said.
For Reay, the former Sendoso employee, constant rounds of layoffs gave him and his surviving colleagues “strategy whiplash.”
“Over the last year and a half or two years, I’ve probably had eight different reporting lines, which is tough because you develop relationships on those levels and want to trust who you’re reporting to,” he said. “When a company is constantly reevaluating work that’s being done and telling you to start, stop, and continue certain types of projects, it’s really disorienting.”
Employees at the edtech unicorn Paper found out that a third round of layoffs was happening from internal leaks before management announced it to the company, one current employee told Insider, causing a wave of panic and frustration with leadership amongst the employees.
“When it happens again, you start to lose that confidence and faith in your leadership.” the current employee said.
An employee who was laid off from Paper in the second round of layoffs told Insider that they were frustrated with their severance package, which was smaller than what was offered earlier in the year when the company was looking for voluntary buyouts. Laid off employees in August were offered a maximum of six weeks pay for two years or more of work, compared to the eight weeks of pay for the volunteers.
“It was good if you hadn’t been there long but it was almost insulting if you’d been there longer than two years,” the employee said.
Representatives for Sendoso and Paper did not respond to Insider’s requests for comment for this story.
Some startup employees are reconsidering their future in the industry
As startup employees brace for the potential of more job cuts, they say that the experience has them second-guessing whether to stay in the industry at all.
Reay, the former Sendoso employee, says that he’s been thinking long and hard about whether he’s interested in working for another software startup, given the current volatility in the industry, or move to a more established company with lower pay but more job security.
“I’m considering it almost like 10 years ago when I first got into the space,” he said. “Will this allow me to have a long-term livelihood for myself, my family, and my kids? I don’t know.”
A former SchoolMint employee who was laid off in September is wrestling with similar questions. While they’d be open to working at another startup, the person said that they’d do a lot more due diligence on a company, its leadership, and its investors before taking a job.
“The downside will always be that a lot of these startups hire their buddies and replace leadership roles or teams that know what they’re doing with people that don’t,” the person said.
Representatives for SchoolMint declined to comment.
One person who was laid off from Paper during the company’s second round of layoffs has since found a new tech job but isn’t working at a startup anymore. They said they were lucky to find a new role quickly — but for other people job hunting, they recommend being wary of accepting a role at a VC-backed shop right now.
For startups that want to retain employee morale throughout multiple rounds of layoffs and other tough business decisions, communication is key, explained Jackie Xu, founder and CEO of startup staffing firm Xu Talent and a former talent partner at VC firm Kleiner Perkins.
“Founders might not be the strongest at communication, but they need to quickly get up to speed on how to create more transparency and how to educate employees in this market,” she told Insider.
Xu added that especially when times are tough, it’s essential that startup leaders take ownership over mistakes and explain the reasoning behind making tough calls like laying off staffers multiple times in a row.
“Some founders don’t want to be super transparent and believe that too much information isn’t helpful — but when you’ve gone through a second round of layoffs, it’s important,” she said. “Admitting that you didn’t cut deep enough or that you were hoping for X outcome goes back to vulnerability and thoughtfulness. You as a founder and executive team have a responsibility to do everything you can to help support your people.”
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