Southeast Asia’s Tech Layoffs Are Increasing As Non Profitable Startups Look To Stretch Their Ramps

This year, more Southeast Asian tech startups laid off workers as macroeconomic headwinds widened losses and venture capitalists pushed startups to extend their runways.

Carousell, the online marketplace, announced last week that it was laying off 10% of its workforce, or approximately 110 positions.

In November, GoTo Group, an Indonesian conglomerate formed by the merger of ride-hailing giant Gojek and e-commerce marketplace Tokopedia, cut 1,300 jobs, or about 12% of its workforce.

Both firms cited difficult macroeconomic conditions.

There are signs that we are entering, if not already in, a recession. As a result, customer demand is expected to slow in 2023.

They join Sea Group and other regional companies in reducing headcount. According to local media, Sea Group has laid off over 7,000 employees in the last six months.

“Founders are being prudent by managing costs in this environment to ensure there is sufficient runway till late 2024,” Jia Jih Chai, co-founder and CEO of Singapore-based e-commerce brand aggregator Rainforest, said. Chai previously worked at Carousell as a senior vice president and Airbnb as a managing director.

“There are signs that we are entering into a recession, if we are not already in one. Therefore, customer demand is likely to be slower in 2023,” said Chai.

CEO Quek Siu Rui acknowledged “critical mistakes” were made in a note to Carousell employees. He admitted to being “overly optimistic” about the Covid recovery and underestimating the impact of rapidly expanding his team.

“The reality is that we were quick to grow our expenses and hire, but the returns took longer than expected,” said Quek, adding that there have been cost-cutting measures in the past few months and Carousell’s leadership will take voluntary pay cuts.

Quek also stated that it is only prudent for the company to achieve group profitability as soon as possible because market conditions are uncertain.

Carousell’s revenue increased by 21% in 2021 to $49.5 million, compared to a tripling of its revenue in 2020. Meanwhile, GoTo’s losses increased from January to September.

“I was astonished that companies predicted that the Covid behavior changes would last forever,” Alex Kantrowitz, a Silicon Valley journalist, who also runs an independent newsletter and podcast called Big Technology, told CNBC.

“Clearly, once you are allowed to go out to restaurants, hang out with friends outside, your usage of Netflix, Facebook, Shopify and Amazon would go down. So why do all of them build as if that would last forever?”

“Previously, the companies were designed for fast growth. So there needs to be changes made when the organization is shifting from strong growth to sustainable growth. For example, you may not need too many marketing people if the marketing budget is cut,” said Jefrey Joe, co-founder and managing partner at Indonesia-based Alpha JWC Ventures.

Southeast Asia’s tech startups are still largely unprofitable, with names like Sea Group and Grab racking up billions of dollars in losses each year.

Existing Antler investors are also actively advising founders to prepare for winter, according to Jussi Salovaara, Antler’s co-founder and managing partner for Asia. According to him, venture capitalists are pressuring founders to have a longer runway.

(Adapted from CNBC.com)



Categories: Economy & Finance, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy, Uncategorized

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