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Winter Has Arrived in the South: LatAm Unicorns Vtex and Bitso Make Layoffs

After Sequoia instructed founders to “do the cutting exercise” immediately, hundreds of tech company employees were laid off on Thursday alone

Shutterstock Image/Art by Bloomberg Línea
May 26, 2022 | 03:27 pm

Bloomberg Línea — Latin American unicorns Vtex and Bitso laid off hundreds of employees on Thursday (May 26).

Brazil’s Vtex (VTEX) alone has cut nearly 200 employees, according to a person familiar with the company. That number is equivalent to 13% of the team, the person said. In Mexico, crypto exchange Bitso terminated at least 80 people in technical and commercial areas.

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The e-commerce software company and Mexican cryptocurrency startup are two more that add to the layoffs of dozens of PayPal employees on Thursday, as tech stocks have been melting on the exchanges.

Vtex went public on the NYSE in June 2021 at a valuation of $4.7 billion. Today, the company has a market capitalization of $820 million. A person familiar with the layoffs at Vtex said that in recent weeks the company’s founders have called for greater efficiency to save money and cut costs. In April, Vtex resumed its annual Vtex Day event in São Paulo, which brought Formula One champion Lewis Hamilton as a speaker. “It was hugely expensive. And now they’ve cut the team because they said 70% of Vtex’s resources are allocated to people,” said the person familiar with the layoffs, who preferred not to be identified because discussions are private.

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For startups bankrolled by venture capital, it’s not easy either. Unicorns and smaller companies have cut thousands of jobs this fall, according to the Layoffs.fyi platform. In the past few days alone, Klarna, Gorillas, and Olist have laid people off. And if autumn is already being cold, the southern hemisphere winter promises to be even harsher, with major venture capital managers like Sequoia, QED, and even accelerator Y Combinator warning entrepreneurs to prepare for a more challenging economic backdrop and lower liquidity.

On Wednesday, US fintech Bolt, valued at $11 billion, laid off around 250 people for what CEO Maju Kuruvilla described as “market conditions affecting the industry and the technology sector changing”. And the investors’ warning to startups is clear: they need to cut costs. Calling the current environment a “melting pot moment”, Sequoia said the good times are not only over, but there is no indication when they will return.

Sequoia instructed founders to “do the cutting exercise” immediately, if they haven’t already, by examining ways to save money by eliminating or reducing projects, R&D, marketing, and other expenses.

In a LinkedIn post, co-founder of entrepreneur network Latitud, Brian Requarth, said tough times are coming. “The caveat is that we are still at the beginning of Latin America’s digital transformation and most VCs are well capitalized. I guess that the next few months will be super hectic and then things will settle down,” he said.

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According to Requarth, the hardest part will be for founders of late-stage growth companies to accept that they may need to do a so-called downturn, a round at a lower valuation than the previous round.

“I remember when we went out to raise capital for VivaReal/Zap. I had a term sheet from General Atlantic that priced us significantly lower than I thought we were worth based on our last round, but the market had reset and we weren’t growing as fast as we should have been,” he said. Requarth recalled that at the time he should have taken the investment at a lower valuation because it would have allowed him to invest in the future growth of the company. “If you can stay sustainable, you control your own destiny,” he wrote.

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Sought by Bloomberg Línea, Vtex said that it announced a new stage in its cycle of efficient expansion and that this step directly impacted 193 professionals.

“We highly value our exceptional team, we deeply appreciate and thank everyone for their commitment and hard work. In general, the decision to let the people go was not specifically about the potential or performance of each individual. The decision to reduce our work force was taken as a strategic judgment on which organizational structure can deliver our priorities adjusted and aligned to this cycle oriented to growth with efficiency. All of our initiatives, including any reduction and restructuring of the workforce, will always be treated with transparency, respect and responsibility. We are committed to helping the impacted officials with the necessary resources for their transition”, it said in a press statement.

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Bitso: ‘It’s part of our strategy’

Through a press statement, Bitso said that decisions about the people who work at the company are made based on the long-term business strategy to support customers and the strategy as a company. “We work in a fast-paced industry that forces us to constantly rethink the skills we need to move even faster to where our customers need us to be, taking into account the long-term development of the market and the industry,” said the startup.

VTEX shares on the New York Stock Exchange closed the trading session on Thursday up 8% and were traded at $4.49 in the after hours at 18:16 GMT.

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Read Also:

From Europe to LatAm, Startups Lay Off Staff Amid Belt-Tightening

(Updated to add Vtex share price)