Colombian Startups Hit By Wave of Layoffs Sweeping Latin America

At least 20 local startups have begun to shed personnel amid higher interest rates and less capital availability, pointing to tough days to come

An empty chair in an office block in Germany. Photographer: Krisztian Bocsi/Bloomberg
June 02, 2022 | 11:35 AM

Bogotá — In the midst of a wave of layoffs in the larger Latin American markets, such as Brazil, Mexico and Argentina, Bloomberg Línea spoke to eight heads and founders of some of the largest Colombian technology startups, as well as with two venture capital funds active in the region, amid signs that the storm is approaching the country, if it has not already made landfall.

Entrepreneurs in sectors such as fintech, foodtech and edtech in Colombia have gone from talking about expanding into other markets in the region, launching new products and garnering new financing rounds, to using terms such as “burning dollars”, “bubbles”, “inexperience” or “a fictitious world”.

The wave of layoffs has coincided with a scenario of high interest rates following the global economic recovery, while the lack of investment and cash flow challenges have weighed on other companies, and which could point to a new reality regarding startup mortality after the euphoria generated by recent million-dollar investment rounds.

The wave of layoffs facing several Latin American countries “is inevitable if the public market continues in free fall and geopolitical uncertainty continues”, Daniela Izquierdo, co-founder of virtual restaurant company Foodology, told Bloomberg Línea, but added that her company itself has not laid off any staff, and neither does it plan to.


“There is no way to shield oneself, the reality is that if access to venture capital funds is reduced, all startups will need to take care of their resources and lengthen the runway, in terms of how many months of life they have with their current capital. One lever to lengthen that is to reduce staff, and each business has to understand whether to pull that lever or not,” she said.

“It was obvious that we were in a bubble. Many inexperienced entrepreneurs with bad ideas were able to raise tens of millions of dollars to create easily replicable businesses. But now that the market is returning to a more realistic state, many of these startups will not survive,” according to Alexander Torrenegra, CEO of Torre.

“For entrepreneurs and startups with solid foundations, this is an opportunity to consolidate themselves as leaders. For investors, this is an opportunity to invest at good valuations. For employees being laid off, this is an opportunity to get out of the fictitious world they have been painted into,” the serial entrepreneur told Bloomberg Línea.

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Although none of the entrepreneurs consulted said that they have an active layoff plan, they take it for granted that the wave will arrive in Colombia at any time, as acknowledged by one of the senior executives of the foodtech sector, who asked to remain anonymous.

Other executives consider that what is happening in Colombia is a kind of delayed effect, and agree that what happened with Latin American unicorns Vtex (where 200 people were laid off) and Bitso (which laid off 80 to 100 staff), could also happen in Colombia, although it is yet to be seen in what proportion or exactly when.

This situation has been repeated by other companies in Brazil, with cases such as 2TM (which will cut 12% of its workforce), QuintoAndar (with 160 employees laid off), Loft (159), Facily (139) and Creditas (11), or in Argentina with Buenbit (which has laid off 50% of its workforce).

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After Colombian startups raised more than $800 million in 2021, they are now preparing for a second half of the year that could be more challenging in line with what is also happening in the U.S. with Netflix, Carvana and Paypal, in the midst of a sharp slump by technology stocks.


Following the multi-million-dollar investment rounds that Colombian startups have closed so far in 2022, and which produced the country’s second unicorn in May (the proptech Habi), the country’s startup space has been given a reality check.

Currently, the local innovation ecosystem is estimated to comprise some 1,110 startups, employing more than 25,200 people, most of which are concentrated in the logtech (technology for logistics), fintech (technofinance) and retailtech (technology for commerce) segments, according to figures from KPMG.

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In this context of uncertainty, Colombian entrepreneur Daniel Bilbao, CEO of Truora, has launched a virtual platform called Pivot to receive applications from employees of startups that have been laid off in recent weeks and from companies that wish to relocate employees that they can no longer have on their payrolls.


The goal is to match employees with companies that require those profiles.

Bilbao told Bloomberg Línea that there are already 20 startups in Colombia that have registered with Pivot, although their names are not disclosed. And at least 70 people with profiles such as customer service, design, sales, engineering, data analysis, business development, operations, purchasing and finance are looking for new directions in the entrepreneurial sector.

Bilbao himself said that he has no plans to cut back at Truora, but acknowledged that, if forced to, the company would have to cut staff, but that the first to be informed would be the employees.

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“This is not isolated to the U.S., as all of Latin America is being affected [by the wave of layoffs],” he says, adding that, while the press is not reporting it, there have already been layoffs. “The assumption that somehow in Latin America it is different is to err on the side of naivety,” Bilbao said.


In a tweet, Bilbao called on those who have been laid off to get in touch with him, in a bid to help them to reposition themselves through his platform, Pivot.

Freddy Vega, founder of edtech company Platzi, told Bloomberg Línea that, despite the current situation, the company has not made any layoffs, but it is aware that this wave “will reach everywhere”.

Platzi’s founder associated this phenomenon in a tweet with the lack of investment and companies optimizing costs to survive, after an accelerated increase in fundraising in the last two years, which now, with the onset of a crisis, is beginning to falter.


This has caused “investors to demand that companies increase their runway. But even so, there are more job offers and more companies hiring than firing”, he said.

For his part, Sebastian Jasminoy, founder of influencer marketing company Fluvip, is also aware of the threat, but says that this “is not so much to do with the technology industry, but with the type of companies that do not have profitable business models”.

He also associates it with organizations with very small margins and too large a scale. “Sometimes there are also profitable models that need working capital to get to a certain point”, he said.

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‘Burning’ dollars

From the fintech side, Andrés Gutiérrez, co-founder of Tpaga, says that what is happening is a warning message for companies to be increasingly careful with the burning of cash and dollars, and that their growth must be sustainable, based on positive unit economics.

“No one is oblivious to the reality of the world, and I believe that funds will be more careful selecting companies that have a good, controlled rate. The most affected will be the largest, and those that have to raise money this year. And then it will come down to the smaller ones. We were very fortunate to have raised capital a few months ago, and which gives us a runway for at least two years. The way to protect ourselves is to concentrate on generating revenue and not to hire too many people,” he said.

But what do the venture capital funds say?


“The purpose of a venture capital-backed startup is not to raise money for the sake of raising money, but to develop and sell a product that meets a particular need, and then grow to be financially sustainable by selling that product at scale to customers willing to buy it,” according to Daniel Cossío, regional director of Village Capital in Latin America.

“Funds in Latin America, as in other regions, play a very important role in prompting entrepreneurs applying for equity rounds to focus on revenue and product market fit. So that venture capital money is a means to an end, not an end in itself,” he told Bloomberg Línea in an interview.

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And Diego Noriega, managing partner at Newtopia VC, said: “All funds are making decisions about how to adjust their investment thesis to the new reality. So, taking this into account, the funds that have had to adjust the most are those that invest in growth, that is, in more advanced stages, typically in series B or C”.


“In the case of Newtopia VC, by investing in seed or pre-seed stages, we have not had to make any major adjustments or changes in decisions, it simply serves to reinforce the fact that startups must grow with sustainable models, perhaps be more robust from the point of view of generating profits, and think more about real business than just projections, as was the case before the crisis. This is a market correction, and clearly investment funds and startups are adapting to the new reality”, he told Bloomberg Línea.

Javier Cardona, founder of virtual medical consultation platform 1doc3, told Bloomberg Línea that the current situation will define the companies that really have viable businesses, that can grow regardless of the capital they raise, and therefore will be privileged.

“In the worst case scenario, in which there is no more venture capital available, you will see some companies that will survive, we are a living company [that can cover its expenses with its income]. It is about having positive unit economics, and that allows you to grow, maybe not so quickly due to the absence of venture capital, which is what we will start to see, especially in mid-year. It will be more difficult to raise gigantic rounds because valuations are being radically compressed,” he said.

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Truora’s Bilbao says that, due to the monetary policies applied during the coronavirus crisis, there were ‘inflated public market prices’ and startups had more capital available, but after the economic recovery the panorama has changed radically, and “to reach the past valuation you have to be twice as big”.

“Back then, you had an execution plan, and you said, ‘I’m going to grow three-fold in the next 12 to 18 months, and with that I double my valuation.’ Now you’re going to have to grow three-fold in that same period to get to the same level as the last round. And we also know that the markets are tight, because people are worried as the capital market has declined, money is more expensive due to interest rates, so the possibility of funding the same business is more difficult than it was six or 12 months ago,” he said.

‘A bubble that has burst’

Founders are faced with the challenge of ensuring a more efficient and growing business with less cash on hand, which means spending less on marketing, with lower acquisition costs and generating cash efficiencies, which for many translates into staff layoffs.

Bilbao also said the situation may become more complex in Latin America given that there is the likelihood that some funds that are not based in the region may move to safer harbors once things start to get complicated, in a strategy that has been called ‘flight to quality’.

But on the other hand, there is the counter-argument that Latin America is so under-invested that leaving the region is a bad idea, and that is why more local funds have emerged, with operations in countries such as Brazil, Mexico and Argentina.

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According to Bilbao, these movements also respond to the natural dynamics of venture capital, in which “a few hit it out of the ballpark, and others die along the way. In Latin America we have a vision of failure that is a bit twisted”.

The entrepreneur concluded that there is “a bubble that has burst”, and that the strongest companies will survive in a more efficient market.

“Moreover, I dare to say that in the next 10 years if you take all Latin American companies by valuation and at least eight of the top 10 will be technology companies, some of which have already been launched, and some not.”

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Translated from the Spanish by Adam Critchley