Tech layoffs in Southeast Asia mount as unprofitable startups seek to extend their runways

More tech startups in Southeast Asia laid off staff this 12 months, as macro headwinds widened losses and enterprise capitalists pushed startups to increase their runways.

Last week, on-line market Carousell introduced it was letting go of about 10% of its headcount — or roughly 110 positions.

In November, Indonesia’s GoTo Group — a merger between ride-hailing big Gojek and e-commerce market Tokopedia — lower 1,300 jobs or about 12% of its headcount.

Both firms cited difficult macroeconomic challenges.

They be part of Sea Group and different firms within the area in downsizing headcount. Sea Group, based on native media, laid off greater than 7,000 staff over the previous 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 model aggregator Rainforest, informed CNBC. Chai was beforehand a senior vp at Carousell and a managing director at Airbnb.

“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,” stated Chai.

In a notice to Carousell’s staff, CEO Quek Siu Rui acknowledged “critical mistakes” had been made. He stated he was “too optimistic” concerning the Covid restoration and underestimated the impression of rising his staff too shortly.

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

Quek additionally stated it is solely prudent that the corporate get to profitability as a gaggle as shortly as potential, as it’s unclear if market circumstances will enhance.

Carousell posted a slower income development of 21% in 2021 at $49.5 million, in comparison with a tripling of its income in 2020. Meanwhile, GoTo noticed its losses swell from the January to September interval.

“I was astonished that companies predicted that the Covid behavior changes would last forever,” Alex Kantrowitz, a Silicon Valley journalist, who additionally runs an unbiased e-newsletter and podcast referred to as Big Technology, informed CNBC’s “TechCheck” Monday.

“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,” stated Jefrey Joe, co-founder and managing associate at Indonesia-based Alpha JWC Ventures.

Tech startups in Southeast Asia are nonetheless largely unprofitable, with names like Sea Group and Grab amassing billions of losses yearly.

Existing traders within the firm are additionally actively advising founders to arrange for winter, Jussi Salovaara, Antler’s co-founder and managing associate for Asia, informed CNBC. Venture capitalists are pushing founders to have an extended runway, he stated.

“We say to the founders that they need to be prepared that next year is not going to be easier than this year,” stated Joe.

“These companies may be doing well operatively. They still have some growth. They might be close to profitability, but they need to make sure that they’re sustainable for the future,” added Salovaara.

Tech firms are solely seeing the start of layoffs, stated Kantrowitz.

Globally, tech firms have been conducting mass layoffs, particularly the U.S. tech giants. For instance, Meta lower about 11,000 jobs whereas Microsoft reportedly laid off lower than 1,000 individuals as a result of a slowdown in development.