Reeling startups downsizing teams to stay afloat

After job cuts by e-commerce giant Daraz Bangladesh, now top food delivery platform Foodpanda Bangladesh has started downsizing its team thanks to drying up venture capital flow, macroeconomic turbulence and high inflation altogether leading to a slowdown.

Foodpanda Bangladesh, an arm of Berlin-based multinational online food-delivery service Delivery Hero, has already said goodbye to around 20 employees out of its around 1,000 full-time team members, according to an email reply from the company.

"As the global macroeconomic environment continues to be challenging, we, unfortunately, need to make the difficult decision to downsize some of our teams," reads a company statement.

"We are doing all we can to support impacted employees during this transition, including employee assistance programmes and extended insurance and benefits," it added.

The laid-off full-time employees would receive several months' salaries to survive and look for another job. 

One of the laid off employees, however, said the number of job cuts was already bigger than that and there might be two more rounds in the coming days.

The IT professional was asking for a job in the technology industry.  

Just like Daraz Bangladesh that followed the global-level decision to slash the regional team by 11% through laying off 5% of the local full-time employees, Foodpanda is following its South-East Asian sister concerns after their parent firm Delivery Hero cut 156 jobs in Berlin. 

Amid the challenging environment, Bangladesh's startup sector is running with 10%-20% fewer full-timers nowadays compared to their peak days a year ago, estimates technology entrepreneur AKM Fahim Mashroor who founded the country's top online job portal BDjobs, and some other tech ventures like ecommerce platform AjkerDeal, smart logistics firm Delivery Tiger.  

More than doubling in less than three years, over 30,000 full-time jobs were created by 300-400 startups in the country before the Ukraine war, he said, adding that at least eight in every ten startups are running smaller nowadays. 

Of them, around half said goodbye to some of their full-time employees, while the rest merely avoided hiring and the regular vacancies left unfilled. 

Due to the inflation, online orders declined by around 20%, compared to the average of the previous few quarters, said industry people. 

Two things together triggered the slowdown – firstly, inflation hit consumers who are conservative while ordering, secondly, companies are not burning cash to offer discounts like they were doing before the crisis to scale up, said Waseem Alim, co-founder and CEO of the top online grocery Chaldal.

Before the Ukraine War, his company was expanding its services to new cities fast and with the decreased appetite of venture capital investors it slowed down and focused on cash conservation by serving the existing customers. 

Having slowed down, Chaldal closed its Sylhet, Rajshahi and Gazipur operations a few weeks ago and there had been some job losses. 

"We are prioritising the team members from the closed areas while filling up our regular vacancies in other offices," Alim said. 

Adnan Imitaz Halim, CEO of Sheba Platform Ltd said that surprisingly missing an expected foreign investment in the middle of last year the company caught a financial crisis, and it had to cut costs aggressively. 

Sheba turned into a 200-member team by July, down from 500, it survived and the local investors' support helped the largest platform for blue-collar workers start growing again to make the number of its full-time employees nearly 350, Halim added. 

Even some of the employees let go by the firm came back eventually and were absorbed, according to him.  

"Every online business is impacted by the situation as online orders dropped around 20% nowadays, compared to the previous quarter," said Rahath Ahmed, co-founder and chief marketing officer of the leading smart logistics firm Paperfly.  

Unlike the pre-war days, startups, that even are not terminating workers, now sit tight on filling the vacant chairs.  

Rahath Ahmed said, "We all are also observing the situation, deeply analysing things to set the cost priorities to survive the tough time and if it demands downsizing teams we all will have to do it. 

"The businesses which created the better-paid jobs, if they survive, will come back in hiring again," he added.

According to the LightCastle compilation of disclosed deals, Bangladeshi startups received $103 million in funding in 2022, which peaked at $415 million in 2021, including the $250 million Softbank investment in Bkash.

Globally, venture capital investments peaked at over $185 billion in the last quarter of 2021. Following consecutive quarterly declines, it came down to $81 billion in the July-September period last year, according to the Crunchbase compilation.

In continuation of the declining trend, global venture funding dropped to $22 billion in November, a 69% year-on-year and 19% month-on-month decline.

In 2022, the US tech industry fired over 90,000 workers.

The number of startups practically shutting would be at least 30-40, estimates Velocity Asia Limited Managing Director Shawkat Hossain, also a director of Venture Capital and Private Equity Association of Bangladesh.