Japanese conglomerate Rakuten has pulled the plug on its U.S. online retail store, originally known as Buy.com, and will wind down its operations over the next two months, the company confirmed to TechCrunch. The shutdown means that the US headquarters will lay off its staff as well, meaning 87 people will lose their jobs, according a source familiar with the developments.
“We have decided to sunset the U.S. Rakuten Marketplace,” a company representative said in an email to TechCrunch. They clarified, however, that the “cash back rewards” referral business the company operates at Rakuten.com (formely Ebates, which it bought for $1B in 2014) “is definitely not shutting down and is stronger than ever.”
Rakuten bought Buy.com for $250M back in 2010 in an attempt to expand its retail business out of its stronghold of Japan. Unfortunately the evolving market, aggressive growth (and targeting of rivals) at Amazon, and likely the choice to rebrand the once well-known site under the Rakuten name, all led to declining business. The original CEO and COO left in 2012.
Customers of the Rakuten US store will be able to place orders for the next two months, after which the site will shutter completely. Users of the rewards and commission business shouldn’t see any major changes, and other businesses (like the Kobo e-reading division) aren’t affected either.
It’s a blow to Rakuten, but hardly one that can have taken them by surprise. The company has diversified and invested in a large number of businesses and verticals around the world (even launching a cryptocoin), so the failure of a marketplace like this, while unfortunate (especially for those laid off), won’t be affecting their bottom line much at this point.
Optimizely, a San Francisco-based startup that popularized the concept of A/B testing, has laid off 15% of its staff, the company confirmed in a statement to TechCrunch. The layoff impacts around 60 people, and those laid off were given varied levels of severance. Each employee was given six months of COBRA and was allowed to keep their laptops.
“As with so many other businesses globally, Optimizely has been impacted by COVID-19. Today, we have had to make a heartbreaking decision to reduce the size of our workforce,” Erin Flynn, chief people office, wrote in a statement to TechCrunch, adding that “today’s difficult decision sets up our business for continued success.”
The startup was founded in 2009 by Dan Siroker and Pete Koomen on the idea that it helps to have customers experience different versions of the website, also known as A/B testing, to see what iteration sticks best. A year after founding, the startup went through Y Combinator and in 2013 it signed a lease for a 56,000-square-foot office in San Francisco.
Optimizely last raised $50 million in Series D financing from Goldman Sachs, bringing its total venture capital secured to date to $200 million. Other investors include Index Ventures, Andreessen Horowitz and GV.
In June, Optimizely said it handles more than 6 billion events a day. Customers include Visa, BBC, IBM, The Wall Street Journal, Gap, StubHub and Metromile.
Optimizely was not listed as applying for a PPP loan, a program created by the government to help businesses avoid laying off staff. The loans were met with controversy in Silicon Valley, as some thought venture-backed businesses should turn to investors, instead of the government, for extra capital.
Optimizely’s layoffs are somewhat surprising, given recent earnings reports that show that enterprise SaaS companies have broadly benefited from the coronavirus pandemic. In an online work world, infrastructure and software services become more vital by the day. Box, for example, helps people manage content in the cloud and it beat expectations on adjusted profit and revenue. So why is Optimizely struggling?
There are a ton of reasons for layoffs beyond what the market thinks about a business. Optimzely’s customers are a mix of heavy-hitters in enterprise, but also include businesses that have struggled during this pandemic, including StubHub and Metromile — both of which had layoffs.
While the pace of layoffs is slowing down, cuts themselves aren’t disappearing. As the stocks show us, it’s a volatile time and businesses are looking for ways to stay financially safe.
Grab is laying off about 360 people, or slightly under 5% of its employees. Co-founder and CEO Anthony Tan made the announcement in a letter to Grab employees today.
A Grab spokesperson told TechCrunch that the company will not be shutting down offices, and that this is the last organization-wide layoff the company will perform this year.
“We do not face capitalization issues. We conducted the layoffs to become a leaner and more efficient organization and we did this by sunsetting non-core projects, consolidating teams and pivoting to focus on deliveries,” the spokesperson said. “We remain laser-focused on adapting our core businesses of transport, deliveries, payments and financial services to address the challenges and opportunities of the new normal.”
She added that the company will talk to affected employees over the next few days.
Grab is the largest ride-hailing platform in Southeast Asia, and like other travel-related companies, including Uber, Lyft, Oyo and Airbnb, its on-demand ride business has been hit hard by the pandemic. Grab also operates several other businesses, however, including deliveries and digital financial services, which is is currently reallocating resources toward because demand for them has increased during the pandemic and stay-at-home orders.
In his announcement, Tan wrote, “Since February, we have seen the stark impact of COVID-19 on businesses globally, ours included. At the same time, it has become clear that the pandemic will likely result in a prolonged recession and we have to prepare for what may be a long recovery period.”
“Over the past few months, we have reviewed all costs, cut back on discretionary spending, and implemented pay cuts for senior management. In spite of all this, we recognize that we still have to become leaner as an organization in order to tackle the challenges of the post-pandemic economy.”
He added that Grab will sunset some “non-core projects,” consolidate functions and reduce team sizes. It is also reallocating more resources to its on-demand delivery verticals.
“We were able to save many jobs through this redeployment of resources and it helped limit the scope of the reduction exercise to just under 5 percent,” Tan wrote.
Grab employees who are laid off will receive severance pay, as well as an enhanced separation payment; a waiver of annual cliffs for equity vesting; medical insurance coverage until the end of the year; encashment of unused annual leave and GrabFlex credits; and, for expecting parents, encashment of their parental benefits, as of the last day of employment.
Acorns, which helps millions of people invest their spare change in the stock market, has laid off between 50 to 70 people, TechCrunch has learned from multiple sources.
The Irvine, Calif.-based company would not confirm the total number of people laid off, but did confirm that there were cuts at the company as a result of broader business changes.
The news emerged days after the fintech company closed its Portland office earlier this week, one of four offices the company maintained. While Acorns offered Portland employees an opportunity to relocate to its Irvine headquarters, some roles were terminated as part of the relocation, the company said.
Employees laid off largely were members of Acorns’ support team. And the internal cuts are related to an external partnership with TaskUs, which out-sources customer care and support needs for other businesses. Acorns will bring on roughly 80 new TaskUs support roles in the next year, which the company said would grow its support team, just not its internal staff.
The internal Acorns support team will handle high-touch customer care situations via phone, while external roles will handle email support.
Beyond support roles, Acorns cut some people from various teams across the company.
Acorns has found unprecedented growth as the coronavirus brings new users into its world of investing and saving money. The company recently hit a milestone of 7 million sign-ups, continuing the trend that trading apps are benefiting from a down market.
At the same time, Acorns also launched a debit card that depends on users spending in order to make sense as a business product. Payment processing is a risky space to play in right now because consumer spending has nosedived due to shelter in place orders. It could be a weak spot for the company at the moment. Earlier today, Brex laid off 62 staff members, just one week after raising $150 million in venture capital money.
So, why does a company like Acorns, that is facing immense growth, need to do layoffs? Even if you’re winning right now, the pandemic and potential of an extended recession is forcing businesses to reevaluate the way they’re spending money. In Acorns’ case, it will have more headcount next year than it does right now. But dig a little deeper, and its choice to outsource roles and shut down an office means that growing right now can come at the cost of slimming down.
Investors in Acorns include PayPal, DST Global, Rakuten, Greycroft and Bain Capital.
Brex, last valued at $2.6 billion, is restructuring its credit card for startups business and cut 62 staff members, the co-founders Pedro Franceschi and Henrique Dubugras said in a blog post.
“Today we’re restructuring the company to better align our priorities with this new reality, while simultaneously accelerating our product vision. With that, I have some very sad news to share. 62 people will be leaving Brex today,” the post reads.
The cuts come as Brex’s customer base itself is struggling to stay afloat amid COVID-19: high-growth startups. The trickle-down to Brex’s core business, which depends on its customers spending money, was thus expected.
Brex has already cut some customer credit limits to mitigate some of the exposure risk, The Information reported, and Dubugras confirmed. Customers say the credit limit cuts came without warning or notice.
When TechCrunch talked to Dubugras about the latest fundraise, the co-founder said the capital was offensive, rather than defensive.
“I’m glad this round came together, but if it hadn’t, we would’ve been fine,” he said last week. “The capital is so we can play offensive while everyone else plays defensive.”
In the blog post, the co-founders wrote to former staffers.
“Please continue dreaming big and don’t lose the ambition that attracted you to Brex. Don’t let anything, not even a global pandemic, take that away from you. I wish we could give each one of you a hug, so instead I’ll end this message like I’d do it in Portuguese. Abraços, Pedro and Henrique.”
Those laid off will be provided with eight weeks of severance, their computer and equipment, and Brex will dedicate a part of its recruiting team to help find new opportunities for ex-staffers. Additionally, Brex is making adjustments to the equity cliff and has extended healthcare benefits through the end of 2020.
Brex has amassed $465 million in venture capital funding to date.
“I knew that I had to make a hard decision, not because we are a public company, or to protect or stock price, or to please our Board or investors,” Uber CEO Dara Khosrowshahi wrote to employees today in a memo, viewed by TechCrunch. “I had to make this decision because our very future as an essential service for the cities of the world — our being there for millions of people and businesses who rely on us — demands it. We must establish ourselves as a self-sustaining enterprise that no longer relies on new capital or investors to keep growing, expanding, and innovating.”
As part of the layoffs, Uber is expected to pay up to $145 million to employees via severance and other benefits, and up to $80 million in order to shut down offices, according to a filing with the SEC.
“I will caution that while Eats growth is accelerating, the business today doesn’t come close to covering our expenses,” Khosrowshahi wrote in the memo today. “I have every belief that the moves we are making will get Eats to profitability, just as we did with Rides, but it’s not going to happen overnight.”
In a memo titled “The Course Ahead,” Vice Media Group CEO Nancy Dubuc announced a large round of layoffs to staff. The number includes 155 workers — 55 of whom will lose their jobs today. The remaining 100, meanwhile, will be let go in the coming weeks. The figure comprises around 5% of the company’s overall headcount.
Dubuc cites “tough decisions” in the memo, noting that the company has “done absolutely everything we could to protect these positions for as long as possible, and your time and contributions will forever be part of who we are and who we will become.”
Vice’s union confirmed the figure, noting that the 55 are coming from U.S.-based operations, while the other 100 will be pulled from the company’s international operations. The union adds that, contrary to Dubuc’s claims, “Vice repeatedly refused to discuss workshare programs” that might have been used to lower the impact on job figures. The union for Vice Media-owned Refinery29 echoed the statements in its own tweet.
LAS VEGAS, NV – JANUARY 10: A+E Networks President and CEO Nancy Dubuc participates in a keynote panel on the future of video at CES 2018 at Park Theater at Monte Carlo Resort and Casino in Las Vegas on January 10, 2018 in Las Vegas, Nevada. CES, the world’s largest annual consumer technology trade show, runs through January 12 and features about 3,900 exhibitors showing off their latest products and services to more than 170,000 attendees. (Photo by Ethan Miller/Getty Images)
Vice is hardly alone, of course. Even as more people have their eyes glued to computer screens and news reports, revenue has declined during the COVID-19 crisis. Reporting on itself, The New York Times noted its own revenue struggles, even as digital subscriptions have climbed:
In keeping with a trend that has affected other news organizations during the pandemic, The Times attracted new readers while the money it brought in from advertising plummeted. Overall ad revenue fell more than 15 percent, to $106.1 million, in the quarter. Digital ad revenue declined 7.9 percent, while print ad revenue had a drop of 20.9 percent.
It’s a familiar and frustrating refrain across the board. Even with readership up for some, companies simply aren’t spending on ads during the pandemic. Times likes these, the ad revenue model feels like a precarious house of cards on top of which media empires have been built. BuzzFeed, Vox and Bustle have all announced either layoffs, pay cuts or employee furloughs in recent weeks, leaving many to ponder the future of the already precarious world of digital media.
It’s true that publications suffer every time a slight gust of wind upsets the state of the economy, but the COVID-19 recession feels different in virtually every way. In addition to the 36 million Americans who have filed for unemployment since the start of the crisis, the pandemic has had extraordinarily far-reaching impacts on every aspect of the economy. Not even ad giants like Facebook and Google are immune from the effects. A report from late March noted that the internet giants could see a combined loss of $44 billion in ad revenue before year’s end.
Digital media has felt like a precarious industry for some time. The effects of economic recessions and feelings of distrust against media sowed by the White House have made the last few years particularly difficult. The addition of the unprecedented uncertainty of COVID-19 is adding rocket fuel to that fire.
Namely, an eight-and-a-half-year-old, New York-based company that sells payroll, talent management and other HR services to mid-size businesses across the U.S. via subscription software, has let go of upwards of 40% of its roughly 400 employees.
The cuts are across the board, from high-ranking staffers, including a CFO who was brought on almost exactly two years ago, and a chief security officer who has spent just the last year with the company, to its entire customer success team.
In a call earlier today, Namely CEO Larry Dunivan said the company had reduced executive pay five weeks ago, hoping to avoid layoffs, but that the coronavirus and its impact on the business made that impossible. He also shared the difficulties of running a startup right now that depends largely on small- and medium-size businesses, noting that even though Namely’s customers sign up for between one- and three-year-long contracts — they also pay an additional amount for a minimum number of employees — many of those customers are finding it difficult to fulfill those contracts at the moment.
He pointed to one client who has numerous yoga studios and who earlier this year employed 500 people but has laid off all but 15 of them in the shutdown. Said Dunivan, “We just had a stark, painful conversation and you could tell I was one of many people she was calling. [But] because I care about that relationship, I waived that minimum for some period of time so she can conserve cash.”
Which means less revenue for Namely.
It’s a situation that many startups find themselves in, of course. According to Layoffs.ai, a site that’s trying to track industry layoffs as they happen, at least 356 startups alone have now laid off 34343 employees. That’s saying nothing of the many companies and small businesses like yoga studios that don’t register as tech startups. In fact, nearly four million people filed for unemployment benefits last week alone, bringing to more than 30 million the nation’s number of unemployment claims.
While the deep cuts are understandable in the current context, they also represent one in a series of milestones at Namely that no startup wants to encounter. Though it was once among New York’s most promising businesses and accordingly raised at least $217 million from investors, including Matrix Partners, True Ventures, and Sequoia Capital, it has seen more than its share of transition at the top. In the most devastating development for the company until now, Namely’s board abrupt fired the company’s cofounder, Matt Straz, as its CEO in 2018.
Accused of actions “inconsistent with that which is expected of Namely leadership,” as the company told employees at the time, Straz has gone on to launch an employee benefits startup called Bennie. But it cast a cloud over the the company (which still isn’t talking about what happened).
Soon after, the board member who led the investigation into Straz — longtime Silicon Valley executive Elisa Steele — was appointed as Namely’s permanent CEO, which at the time helped attract $60 million in new funding to the company led by GGV Capital.
Yet by last summer, she had also left as CEO, a decision that she made based on family commitments says one source, and owes partly to the relationship she had established with Dunivan, he said separately. Specifically, Dunivan said that in his previous role as the interim CEO of the human resources company ThinkHR, he was consulted by Steele on business and product strategy, and that “as sometimes happens, one thing led to the other and i joined” the company in her stead. (Steele remains on the company’s board.)
Certainly, he inherited a business that no longer enjoys the sheen it once did.
As says one person with a stake in the business, “I don’t think anyone is giving up on Namely but it had a modest growth plan at the start of 2020 and that’s now been made uncertain because of [COVID-19]. I think the company is just trying to control what it can and to structure itself so it can operate more efficiently with a major drop-off in revenue.” Adds this person, “It’s like a clean sheet of paper.”
It’s an optimistic perspective and surely one that remaining employees will need to embrace, at least until the fourth quarter, which is when Dunivan estimates that businesses across the board may pick up again.
“This is an extraordinarily difficult time, but we look at the world through a fairly conservative lens and we’re making certain assumptions about how new customers will buy, how existing customers will increase or decrease headcount, and how many businesses will be closed and never to come back,” said Dunivan when we spoke earlier.
“It’s my believe that the recovery will start to show signs of life in the fourth quarter and into the first quarter, and our current looks at it through that lens,” he added. “But in the meantime, employers will be paying fewer people.”
Faced with dwindling options, Namely is now among them.
Another startup has turned to downsizing and fund raising to help weather the uncertainty around the economy amid the global coronavirus health pandemic. People.ai, a predictive sales startup backed by Andreessen Horowitz, Iconic, Lightspeed and other investors and last year valued at around $500 million, has laid off around 30 people, working out to about 18% of staff, TechCrunch has learned and confirmed.
Alongside that, the company has quietly raised a debt round in the “tens of millions of dollars” to make strategic investments in new products and potentially other moves.
Oleg Rogynskyy, the founder and CEO, said the layoffs were made not because business has slowed down, but to help the company shore up for whatever may lie ahead.
“We still have several years of runway with what we’ve raised,” he noted (it has raised just under $100 million in equity to date). “But no one knows the length of the downturn, so we wanted to make sure we could sustain the business through it.”
Specifically, the company is reducing its international footprint — big European customers that it already has on its books will now be handled from its U.S. offices rather than local outposts — and it is narrowing its scope to focus more on the core verticals that make up the majority of its current customer base.
He gave as an example the financial sector. “We create huge value for financial services industry but have moved the functionality for them out to next year so that we can focus on our currently served industries,” he said.
People.ai’s software tracks the full scope of communication touch points between sales teams and customers, supposedly negating the tedious manual process of activity logging for SDRs. The company’s machine learning tech is also meant to generate the average best way to close a deal — educating customer success teams about where salespeople may be deviating from a proven strategy.
People.ai is one of a number of well-funded tech startups that is making hard choices on business strategy, costs and staffing in the current climate.
Layoffs.fyi, which has been tallying those losing their jobs in the tech industry in the wake of the coronavirus (it’s based primarily on public reports with a view to providing lists of people for hire), says that as of today, there have been nearly 25,000 people laid off from 258 tech startups and other companies. With companies like Opendoor laying off some 600 people earlier this week, the numbers are ratcheting up quickly: just seven days ago, the number was just over 16,000.
In that context, People.ai cutting 30 may be a smaller increment in the bigger picture (even if for the individuals impacted, it’s just as harsh of an outcome). But it also underscores one of the key business themes of the moment.
Some businesses are getting directly hit by the pandemic — for example, house sales and transportation have all but halted, leaving companies in those categories scrambling to figure out how to get through the coming weeks and months and prepare for a potentially long haul of life and consumer and business behavior not looking like it did before January.
But other businesses, like People.ai, which provides predictive sales tools to help salespeople do their jobs better, is (for now at least) falling into that category of IT still in demand, perhaps even more than ever in a shrinking economy. In People.ai’s case, software to help salespeople have better sales conversations and ultimately conversions at a time when many customers might not be as quick to buy things is an idea that sells right now (so to speak).
Rogynskyy noted that more than 90% of customers that are up for renewal this quarter have either renewed or expanded their contracts, and it has been adding new large customers in recent weeks and months.
The company has also just closed a round of debt funding in the “tens of millions” of dollars to use for strategic investments.
It’s not disclosing the lender right now, but it opted for debt in part because it still has most of its most recent round — $60 million raised in May 2019 led by Iconic — in the bank. Although investors would have been willing to invest in another equity round, given that the company is in a healthy position right now, Rogynskyy said he preferred the debt option to have the money without the dilution that equity rounds bring.
The money will be used for strategic purposes and considering how to develop the product in the current climate. For example, with most people now working from home, and that looking to be a new kind of “normal” in office life (if not all the time, at least more of the time), that presents a new opportunity to develop products tailored for these remote workers.
There have been some M&A moves in tech in the last couple of weeks, and from what we understand People.ai has been approached as well as a possible buyer, target and partner. All of that for now is not something the company is considering, Rogynskyy said. “We’re focused on our own future growth and health and making sure we are here for a long time.”
Online consignment company The RealReal is the latest tech company to lay off and furlough employees amid the COVID-19 pandemic. In the company’s quarterly earnings report today, The RealReal announced layoffs affecting 10% of its workforce and furloughs impacting 15% of employees.
By doing so, The RealReal says it will be able to reduce its operating expenses by about $70 million. In a press release, The RealReal said these changes are designed to “support its employees through the pandemic and ensure the team is well positioned for a strong restart on the other side of this health crisis.”
Those furloughed include employees in The RealReal’s e-commerce centers, retail stores, luxury consignment offices, sales organization and headquarters. The RealReal has also instituted a hiring freeze and reduced the salaries of executives.
The RealReal, which has been a public company for a little less than one year, joins the growing number of tech companies that have made personnel changes in the wake of the coronavirus.
“Given the unknown duration of the pandemic, we’ve focused on reducing operating expenses and preserving liquidity to weather the near-term challenges and ensure we are well positioned to capitalize on the significant opportunity in front of us,” The RealReal CEO Julie Wainwright said in a statement. “I am confident the strength of our balance sheet, customer satisfaction, healthy traffic trends, and buyer and consignor repeat rates, along with continuing progress in technology initiatives that support efficiently scaling our operations, will position us to bounce back quickly once the economy stabilizes.”