How massive layoffs affect CEE big tech and startup ecosystem — overview
Global job cuts continue to reach new heights. The number of tech layoffs in Q1 2023 has already surpassed the whole of 2022, with 165,622 tech specialists fired globally and more than 40,000 in Europe. Due to economic and geopolitical factors, the CEE tech ecosystem has also been badly affected by this trend.
AIN.Capital makes a short overview on what is going on in the region, and explains how the layoffs influenced local markets.
Big tech layoffs
- The main reason for massive layoffs are the consequences of a massive hiring spree during the Covid-19 pandemic. In a pursuit to ensure both quality and quantity in a short amount of time, big tech companies hired large staffs of remote workers, who later turned out expensive to upkeep.
- In this regard, big tech companies like Google, Meta, Amazon, and Microsoft and outsourcing companies like EPAM, SoftServe, GlobalLogic, were hit the most, laying off hundreds of employees in their regional offices.
- The Russian full-scale invasion of Ukraine only deepened the economic crisis, with Central and Eastern Europe affected the most. Many companies were undergoing costly relocations to countries further west, massively downsizing their offices in Ukraine.
- For example, EPAM reported 15% fewer specialists in its Ukrainian staff in November 2022 compared to December 2021.
- Ciklum also noted at the time that its Ukrainian office employed 2,800 people, which was 14% less than in 2021.
- However harsh the economic situation is, some companies continue recruitment. Intellias reported 11% more employees, N-iX with over 10% growth, and Grid Dynamics with an increase of 21% in the end of 2022.
“The demand for specialists is almost double. The lack of specialists is the main barrier for a more accelerated growth of the industry. The talent gap is over 15,000 professionals per year and could reach an alarming proportion of up to 24% of the needed IT workforce in the following 3 years,”Matei Dumitrescu, General Partner of Roca X VC, told the Recursive.
The CEE startup ecosystem seems to be less affected by economic turmoil. As the regional investors explained to Sifted, local markets are smaller, transaction values have always been lower than in the West, so it’s easier to justify their valuations to investors, at least at this moment.
“Not all companies or startups in Central Europe, even if they raise money, scale their expenses and operations so wildly. So they might be a bit better positioned to survive those tough times with tough fundraising than startups that really go at full scale without any backup plan,”Jan Habermann, partner at Czech VC Credo Ventures, commented.
Nevertheless, during the period of 2022-2023 CEE has seen several large layoffs happen, according to Layoffs.fyi database:
- Austrian crypto company Bitpanda laid off 270 people, 27% of its staff, in June 2022.
- Helsinki-based startup Swappie downsized by 17%, with 250 employees affected, in Summer 2022.
- Vienna-based edtech GoStudent cut 200 of its employees in September 2022, and later in December laid off 100 people more.
- Estonian company Pipedrive reduced its staff by 15%, 143 employees, in November 2022.
- Bucharest-based Foodpanda cut 80 employees in May 2022.
- Estonian unicorn Veriff laid off 12% of its employees, or 66 people, in early 2023.
“The decision to initiate collective redundancies certainly did not come easily, and I sincerely regret that we had to take this step. I am grateful to all Veriff employees for their dedicated work and contribution,”Kaarel Kotkas, CEO at Veriff, said about that situation.
- Lithuanian Uber office in Vilnius fired 60 people in September 2022.
- Polish edtech Brainly reported reductions of 25 employees across teams in Poland, Spain, and the US in late 2022.
- And most recently, in March 2023, Polish IT recruitment platform No Fluff Jobs laid off 13 employees in Poland.
The good news is that the VC and startups ecosystems managed to quickly learn about how to deal with layoffs and its consequences. For example, KAYA VC spoke to several founders and affected employees (stayers/leavers) that went through a reduction in workforce (RIF) and shared valuable learnings for this challenging situation: