Southeast Asia’s start-ups have fired hundreds of workers, and this may be just the beginning

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  • At least six tech companies, including C Ltd, the owner of Singapore-based e-commerce site Shopee, have let their employees go.
  • Tech investors say this is the beginning of more job cuts in the region’s tech industry. As interest rates rise and economic uncertainty increases, companies are now being forced to focus on profitability rather than growing quickly.
  • But the Southeast Asia-focused venture capital fund has raised $900 million so far this year, the same amount throughout 2021, Prekin data showed.

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Hundreds of workers from start-ups in Southeast Asia have been fired in the past few months. This proves that the fast growing industry is not untouched by the global economic slowdown.

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At least six tech companies, including C Ltd, the owner of Singapore-based e-commerce site Shopee, have let their employees go.

Tech investors say this is the beginning of more job cuts in the region’s tech industry. As interest rates rise and economic uncertainty increases, companies are now being forced to focus on profitability rather than growing quickly.

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“Last year, all that happened was a lot of cheap capital flooded the market. [which] It “allowed companies to really grow at any cost,” said Jessica Huang Pouleur, partner at venture capital firm OpenSpace. “What happened hired people too fast. You have a problem, you just throw people at it.”

“I think we’ll likely see more of that coming in the next few months,” Huang Pouleur said, referring to more layoffs in the tech space.

job losses

Shopee has also laid off its food delivery and payment arms, as well as teams in Argentina, Chile and Mexico, according to an email from chief executive Chris Fang sent to employees affected by the job cuts.

“Given the high uncertainty in the broader economy, we believe it is prudent to make some difficult but significant adjustments to increase our operational efficiency and focus our resources,” according to an email seen by CNBC.

NYSE-listed C Ltd — which had 67,300 employees as of the end of 2021 — did not say how many employees were affected. The company did not respond to CNBC’s request for comments.

Singapore-based digital wealth manager Stashaway laid off 31 employees, or 14% of its workforce, between the end of May and June, according to a spokesperson.

malaysian online shopping platform iPrice one-fifth sorting of its employees in June. The company said it had 250 employees before the layoffs. Meanwhile, Indonesian education tech company Genius has laid off more than 200 employees, the company said in a statement.

With the unpredictable future, start-ups are becoming more cautious in rapidly scaling up their teams.
ethan ang
Co-Founder, Nodeflare

based in singapore Digital Currency Exchange Crypto.com A spokesperson told CNBC that 260, or even 5% of its workforce, were laid off. Jobs were cut in the Asia-Pacific, Europe, the Middle East and Africa region and the Americas.

In separate statements to CNBC, the companies attributed the layoffs to the current uncertain economic conditions.

JD.ID, the Indonesian arm of Chinese e-commerce site JD.com, has also cut jobs. General Management Director Jenny Simon said the redundancies were “to maintain the company’s competitiveness in the competitive market of e-commerce in Indonesia”. He did not say how many were cut.

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Dozens of workers were also reportedly laid off from Indonesian start-ups, including e-commerce enablers light and digital payment providers linkaja,

Job openings in Singapore’s tech sector have decreased slightly compared to last year. According to tech jobs portal Nodeflare, vacancies in the city state fell from around 9,200 between July and August 2021 to 8,850 in April and May 2022.

“The unpredictable future is causing start-ups to become more cautious in rapidly scaling up their teams,” NodeFlare co-founder Ethan Eng told CNBC.

high interest rates

Rising interest rates are a particular concern for the tech industry.

“An increase in the interest rate will increase the cost of doing business, and the cost of capital, and the expectation of return” [for investors]said Jeffrey Joe, managing partner of venture capital firm Alpha JWC. Higher interest rates will weigh down companies. profit margin, he said. “Do we expect more layoffs? I think it’s fair to say yes.”

“As borrowing costs rise and the economy faces uncertainty, “it would be strange not to see companies layoffs,” said James Tan, managing partner at venture capital firm Quest Ventures. he has to face a board which [questions] their underlying beliefs and ability to deal with the crisis.”

Tan said startups will need to extend the cash runway to 18 to 36 months, compared to the normal 12 to 18 months before trying to raise funds again.

Since valuations have fallen from last year’s highs, companies will want to avoid raising funds with the potential to be lower than in their previous fundraising rounds. He said he would try to cut costs, and get out of this downturn before fundraising again.

no more easy money

If a storm is brewing, why are Southeast Asia-focused venture capital funds still able to raise large amounts of money and invest them?

Prekin data showed these funds have raised $900 million so far this year, the same amount raised throughout 2021.

The “spirited atmosphere” for start-ups has changed recently, Tan said, and the window for easy money has now closed.

Southeast Asia is still a fundamentally good region to bet in, investors pointed to middle class population growthHigh Internet usage rates, and a growing number of frequent start-up founders – those who previously worked with other tech companies.

Joe said the current recession may be a good time for investors to pick companies that are performing really well and invest in them when their valuations are low.

If investors start investing in a bear market, “the consequences for that will be great because we will exit in the next five to 10 years and … hopefully the market will recover already,” he said.

“There’s going to be an increasingly important divide between [good-]quality companies and [bad-]Quality companies,” said Huang Pouleur. “By leaving employees with lots of good talent with lots of weak companies, it’s going to allow even bigger, stronger companies to hire better.”

Credit: www.cnbc.com /

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