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Nobody likes layoffs. Over the past seven months, they seem to be happening more and more often--especially at fast-growth businesses funded by Japanese mega-investment firm Softbank. First, Uber laid off more than 1,000 employees between July and October of 2019. Then, the floodgates opened: Softbank-backed startups like WeWork, Fair.com, Zume Pizza, Wag, and Getaround all followed suit.
On Tuesday, TechCrunch reported that San Francisco-based freight logistics startup Flexport is the latest to cut staff. The company's rationale--an organizational restructure to dial back on scaling and focus on efficiency--sounds pretty familiar by now. Here's the interesting part: The company is only letting go of 50 employees, or 3 percent of its global workforce.
The other companies listed above all cut 25 to 80 percent of their staffs. Flexport is an outlier--and that makes it a noteworthy case study for any founder who's had to consider the prospect of layoffs.
The startup may not be a household name, but it's been successful since launching in 2013. It ranked No. 8 on the Inc. 5000 list of fastest-growing companies in the U.S. in 2018 with $224.7 million in annual revenue. Last year, it attained a $3.2 billion valuation, thanks to a $1 billion Series D fundraising round led by Softbank. When Inc. staff writer Kevin J. Ryan spoke with Flexport founder and CEO Ryan Petersen about what fueled the company's growth, Petersen emphasized two factors: a high-margin industry and a huge technological advantage over competitors that weren't internet-native.
Those two factors may be what makes Flexport different from the other belt-tightening startups. Last year, Petersen wrote that his company's new $1 billion would go toward product development, hiring, and nonprofit partnerships. In contrast, as TechCrunch noted, companies like Uber and WeWork often used their gigantic fundraises to outspend their direct competitors and compensate for weak service margins. While they grew remarkably quickly, very little of that growth was sustainable. (For anyone interested in this topic, I wrote about it in November--and Inc. San Francisco bureau chief Matt Haber expanded on it in December.)
So when it came time to slash costs, Uber and WeWork had to bring out the machete. Flexport appears to be in a position where it can make cuts more like scalpel incisions: small and targeted.
Having to lay off staff is never an enviable position to be in. But a scalpel, wielded quickly and intelligently, surely makes the task somewhat less painful.