Tech layoffs in Southeast Asia grow as unprofitable start-ups extend runways

More tech start-ups in Southeast Asia laid off employees this year, as macro headwinds broadened losses and investor pressed start-ups to extend their runways.

Last week, online market Carousell revealed it was releasing about 10% of its headcount– or roughly 110 positions.

In November, Indonesia’s GoTo Group– a merger in between ride-hailing giant Gojek and e-commerce market Tokopedia– cut 1,300 tasks or about 12% of its headcount.

Both business pointed out difficult macroeconomic conditions.

They sign up with Sea Group and other business in the area in scaling down headcount. Sea Group, according to regional media, laid off more than 7,000 workers over the previous 6 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 brand name aggregator Rainforest, informed CNBC. Chai was formerly a senior vice president at Carousell and a handling 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 note to Carousell’s workers, CEO Quek Siu Rui acknowledged “critical mistakes” were made. He stated he was “too optimistic” about the Covid healing and undervalued the effect of growing his group too rapidly.

“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 actually been cost-cutting steps in the previous couple of months and Carousell’s management will take voluntary pay cuts.

Quek likewise stated it’s just sensible that the business get to success as a group as rapidly as possible, as it is uncertain if market conditions will enhance.

Carousell published a slower income development of 21% in 2021 at $495 million, compared to a tripling of its income in2020 Meanwhile, GoTo saw its losses swell from the January to September duration.

“I was astonished that companies predicted that the Covid behavior changes would last forever,” Alex Kantrowitz, a Silicon Valley reporter, who likewise runs an independent newsletter and podcast called 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 handling partner at Indonesia- based Alpha JWC Ventures.

Tech start-ups in Southeast Asia are still mostly unprofitable, with names like Sea Group and Grab collecting billions of losses every year.

Existing financiers in the business are likewise actively recommending creators to get ready for winter season, Jussi Salovaara, Antler’s co-founder and handling partner for Asia, informed CNBC. Venture capitalists are pressing creators to have a longer 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,” included Salovaara.

Tech business are just seeing the start of layoffs, stated Kantrowitz.

Globally, tech business have actually been performing mass layoffs, specifically the U.S. tech giants. For example, Meta cut about 11,000 tasks while Microsoft supposedly laid off less than 1,000 individuals due to a downturn in development.