Earlier today a grip of new data presented a sharply negative picture of the American economy. And this afternoon, news broke that a trio of well-known, heavily-backed unicorns were cutting staff.
With stocks down as well, we’ve received negative signals from the private market, the public market and the economy as a whole in the same day. Let’s take a minute to set the macro stage, and then go over the latest cuts from Carta (first reported by Bloomberg), Zume (Business Insider broke that particular story) and Opendoor (via The Information).
Economic malaise
The backdrop for today’s cuts is a faltering American economy. A glance at recent news is sufficient. In the last few hours, home builder confidence recorded the “biggest drop in history,” while retail sales fell 8.7% in March, what CNBC noted was “the most ever in government data,” and CNN Business reported that American factories’ output fell 5.4% in March, “their steepest one-month slowdown since 1946.”
It’s perhaps no surprise, then, that we’ve seen unicorn layoffs all year. In January the news was Vision Fund-backed companies cutting burn to skate closer to profitability. Then, the first round of COVID-19-forced staff cuts landed at big companies; firms like Bird and TripActions slashed staff as their companies were rent by a slowdown in their core operations by the pandemic and its related economic and social changes.
Slimmer cuts at smaller companies have happened on a nearly chronic basis, something that TechCrunch has covered, as well.
Today, however, saw three cuts from three unicorns (private companies worth $1 billion or more) that have long been objects of TechCrunch’s attention. So, let’s talk about them briefly:
- Opendoor, a San Francisco-based home sales-focused startup with backing from SoftBank, announced deep cuts to its staffing today. In a statement provided to TechCrunch, the company’s CEO Eric Wu said that 35% of its employee base would be eliminated to “ensure that we can continue to deliver on our mission.” The CEO also said that exiting staff would get paid for eight weeks and “reimbursement of 16 weeks of health insurance coverage.” Wu is also donating his 2020 salary to a fund to support staff. Opendoor was most recently valued at $3.8 billion in a $300 million funding round announced last March.
- Carta, a San Francisco-based private company equity service platform, announced cuts worth 16% of its staff, or 161 roles, according to a memo that the company shared publicly. Previously eShares, Carta has grown from a provider of equity management for small private companies into a larger, broader service and software play supporting yet-private firms. Carta most recently raised $300 million at a $1.7 billion valuation last May.
- And finally, Zume. Zume didn’t respond to a request for comment by the time of publication and did not post a public note that we could find. Still, Business Insider reports that the company is cutting 200 more staff after earlier 2020 personnel reductions. The firm will be left with around 100 employees, working on compostable boxes. Zume last raised $375 million at a valuation of just under $1.9 billion (post-money) in November 2018.
It’s getting hard to keep track of all the cuts. Heck, I helped break Modsy layoffs recently with TechCrunch’s Natasha Mascarenhas, and we were first to the BounceX cuts as well. It’s a rough, bad economy, and it’s harming growth-oriented companies that like startup unicorns.
More when we have it, probably sooner than we’d like to report.
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