Is the startup party over? Wave of layoffs at Latin America unicorns continues in Brazil and Mexico

RIO DE JANEIRO, BRAZIL – Brazilian company Vtex (VTEX) has laid off nearly 200 employees, according to a person familiar with the company. That number represents 13% of the team, the person said.

According to the company, in Mexico, crypto platform Bitso has laid off at least 80 employees in technical and commercial roles and confirmed by former employees.

The e-commerce software company and the Mexican cryptocurrency startup are two other companies that added to the layoffs of dozens of PayPal employees on Thursday as the tech stock melted on the exchanges.

Vtex went public on the New York Stock Exchange in June 2021 with a valuation of US$4.7 billion. Today, the company has a market cap of US$820 million. A person familiar with the layoffs at Vtex said the company’s founders have called in recent weeks for more efficiency to save money and cut costs.

In April, Vtex resumed its annual Vtex Day event in São Paulo, which featured Formula One champion Lewis Hamilton as a speaker. “It was costly. And now they’ve downsized the team because they’ve said that 70% of Vtex’s resources are for employees,” said the person familiar with the layoffs, who did not want to be named because the talks are private.

It’s not easy for venture capital-backed startups either. According to the Layoffs.fyi platform, one-person companies, and smaller firms have cut thousands of jobs this fall. Klarna, Gorillas, and Olist have laid-off employees in the last few days alone.

And if fall is already getting cold, winter in the southern hemisphere promises to be even more challenging. Leading venture capital managers such as Sequoia, QED, and even accelerator Y Combinator warn entrepreneurs to brace for a more difficult economic environment and lower liquidity.

On Wednesday, U.S. fintech company Bolt, valued at US$11 billion, laid off about 250 employees as CEO Maju Kuruvilla cited “market conditions for the industry and the changing tech sector” as the reason.

And investors’ warning to startups is clear: They need to cut costs. Sequoia called the current environment a “crucible” and said not only are the good times over, but there is no indication of when they will return.

Sequoia instructed founders to immediately do the “retrenchment exercise” if they haven’t already done so, looking at ways to save by eliminating or reducing projects, research, development, marketing, and other expenses.

Brian Requarth, co-founder of the entrepreneurial network Latitude, said tough times are ahead in a LinkedIn post. “The caveat is that we are still in the early stages of Latin America’s digital transformation, and most VCs are well-capitalized. I expect the next few months to be very hectic, and then everything will calm down,” he said.

Requarth said late-stage founders of growth companies would have the most challenging time accepting that they may have to do a recession, a round with a lower valuation than the previous round.

“I remember when we were raising capital for VivaReal/Zap. I had a term sheet from General Atlantic that was priced well below what I thought was appropriate after our last round, but the market had regressed, and we weren’t growing as fast as we should have,” he said. Requarth recalled that he should have invested in a lower value because then he could have invested in the company’s future growth. “If you can stay sustainable, you control your destiny,” he wrote.

Vtex told Bloomberg Line that it was announcing a new phase in its cycle of efficient expansion and that the move directly impacted 193 professionals.

“We greatly appreciate our exceptional team and thank them all for their dedication and hard work,” Vtex said in a press release.

In a press release, Bitso said that “our decisions about the people who work in our company are made based on our long-term business strategy and in support of our customers and our strategy as a company.”

“We work in a fast-paced industry that requires us to constantly rethink the capabilities we need to get to where our customers need us even faster while considering the long-term evolution of the market and the industry,” the startup said.

With information from Bloomberg

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