As the economic outlook remains uncertain, many startups in Southeast Asia are implementing cost-cutting measures such as freezing hiring and trimming marketing budgets, and more layoffs are presumed to be in the pipeline. In addition, some startups are turning to profitability, rather than growth, as their key metric.
At least six tech companies have already announced staff cuts, including Sea Limited, the owner of Singapore-based e-commerce site Shopee. And according to tech investors, this is just the beginning.
CNBC reports that companies are now focused on profitability instead of growth, in light of rising interest rates and an overall sense of unease. This shift is putting pressure on startups that have been operating at a loss in the hopes of scale.
“Given elevated uncertainty in the broader economy, we believe that it is prudent to make certain difficult but important adjustments to enhance our operational efficiency and focus our resources.”
Other startups that have announced layoffs include:
- Singapore-based digital wealth manager StashAway, which laid off 31 employees, or 14% of its headcount in end-May and June, according to a spokesperson.
- Malaysian online shopping platform Price, which retrenched one-fifth of its workforce in June. The company said it had 250 employees before the layoff.
- Indonesian education tech company Zenius, which let go of more than 200 employees, the company said in a statement.
- Singapore-based crypto exchange Crypto.com, which laid off 5% of its workforce, or about 260 employees.
- Singapore-based crypto exchan get Bybit, which laid off around 20 to 30% of its workforce, or 600 of its staff.
- Indonesian e-commerce firm JD.ID, which is cutting staff as well. Managing director Jenny Simon said the company was forced to do so to “remain competitive in the Indonesian e-commerce market.”
James Tan, managing partner of venture capital firm Quest Ventures, said that startups will need to make do with less funding as investors become more cautious.
Tan added that startups will need to prolong the cash runway by 18 to 36 months compared to the usual 12 to 18 months before they attempt the next round of financing.
“Increase in interest rate will increase the cost of doing business, and the cost of capital, and expectation of return [for investors],” said Jefrey Joe, the managing partner of venture capital firm Alpha JWC. A higher interest rate will lower companies’ profit margins, he added. “Do we expect more layoffs? I think it’s fair to say yes.”
Around the world, startups laid off a total of 16,985 employees in May and 12,176 so far in June, reports Layoffs.fyi. These are record-breaking numbers since June 2020.
However, many investors remain positive that this is just a bump in the road. In April, Australian venture capital firm Square peg announced that it is raising $550 million for Southeast Asia-based startups.
Square Peg’s Tushar Roy told the news agency Reuters that a steep stock market decline in recent months has had an impact on privately organized businesses. Despite this, capital was accessible for certain firms, he added.
“You are seeing a flight to quality in private markets where a smaller cohort of companies that have healthy unit economics, healthy balance sheets, healthy business and a proven product market are attracting more and more attention,” Roy said.