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Tech start-ups cut nearly 70 000 jobs in four months

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 07 Jul 2020

Tech start-ups across the globe retrenched 69 623 employees between March and July, as a result of the economic upheaval caused by the coronavirus (COVID-19) pandemic.

This is according to a report compiled by financial markets firm BuyShares, which notes the fallout from the COVID-19 pandemic caused job losses across the globe to escalate, with nearly half of the global workforce at risk of losing their livelihoods.

Ride-hailing firm Uber, online marketplace company Groupon and home-sharing platform Airbnb had the biggest retrenchments amid the COVID-19 pandemic so far, notes BuyShares.

The report, based on data sourced from research firm Statista and Layoffs Tracker, which tracks tech sector layoffs, found that transportation, finance and travel industry sector start-ups accounted for the highest number of retrenchments, cutting 31 000 jobs in four months.

Start-up companies in the finance industry ranked as the second-most affected, with 8 466 employees losing their jobs, while the travel sector ranked as the third-most affected industry, with 8 198 workers losing their employment.

“In March, the number of start-up employees who had been laid off amounted to 9 628. In the next 30 days, this number jumped by nearly four times, reaching 36 244 by the end of April. The number of job losses continued rising, reaching almost 62 000 in May. Since then, another 7 645 jobs were lost, with the combined number hitting 69 623 last week,” notes the report.

Transportation, finance and travel industry sector start-ups accounted for the highest number of retrenchments.
Transportation, finance and travel industry sector start-ups accounted for the highest number of retrenchments.

Revenues hit hard

Layoffs Tracker data reveals Uber laid off the most employees since the COVID-19 pandemic,with a total of 6 700 jobs cut since May.

With 2 800 layoffs (40% of its staff), Groupon ranked as the second firm on this list, while Airbnb had the third-largest tally.

In May, Uber, Airbnb, WeWork and Lyft announced they will retrench thousands of employees.

Uber and WeWork confirmed to ITWeb that their South African operations would be affected by the restructuring.

The announcement came after thousands of WeWork tenants across the globe had reportedly either cancelled their lease agreements or refused to pay rent.

“WeWork is currently going through a planned restructuring, first announced to employees in February, as we align certain functions to the priorities of the company’s long-term strategic plan for profitable growth with the goal of creating a more efficient organisation,” said a WeWork spokesperson at the time.

Ride-hailing companies have also suffered severely due to lower trip volumes after lockdown regulations were introduced by governments earlier this year.

Uber CEO Dara Khosrowshahi wrote in a regulatory filing report released in May: “Due to lower trip volumes in its rides segment and the company’s current hiring freeze, the company is reducing its customer support and recruiting teams by approximately 3 700 full-time employee roles.”

In the same month, Airbnb co-founder and CEO Brian Chesky sent a letter to employees, announcing the company is cutting 1 900 jobs (25% of staff).

“Airbnb’s business has been hit hard, with revenue this year forecast to be less than half of what we earned in 2019. In response, we raised $2 billion in capital and dramatically cut costs that touched nearly every corner of Airbnb.

“Out of our 7 500 Airbnb employees, nearly 1 900 teammates will have to leave Airbnb. Since we cannot afford to do everything that we used to, these cuts had to be mapped to a more focused business,” wrote Chesky at the time.

Uber and Lyft rival, Bolt, confirmed to ITWeb it had no plans to cut jobs, after securing R1.9 billion funding from UK-based investment firm Naya Capital Management.

The majority of SA’s estimated 35 000 gig workers lost their jobs entirely during lockdown, while those able to work have on average lost four-fifths of their income, according to a report compiled by The Fairwork Project.

The report found that the non-standard employment status of gig workers made them particularly vulnerable during the current economic shutdown, resulting in hundreds of job losses.