ZD Tech: Unicorns gone, bubble about to burst?

Hello everyone and welcome to ZDTech, ‘s daily editorial podcast. My name is Guillaume Serries, and today I will explain to you why the most important startups, the unicorns, are starting to lay off employees, and why this may be the first symptom of a bubble about to burst.

Days later, record fundraising announcements gave way to plans for layoffs in the small world of weighty startups, the unicorns. To the point of talking about a mini-catastrophe.

Take Sweden’s Klarna, the brand new split-pay giant. Well, Klarna is about to lay off 10% of its workforce, or about 500 people, across Europe and the US. Reason? A turn in the economic situation that led to a drop in his valuation.

Capital intensive business

However, the company, which has raised $1.6 billion in 2021, is a leader in this new business poised to compete with the traditional world of consumer credit.

Yes, but now if Klarna is one of the first digital giants to be hit by the economic downturn, it’s because its lending activities are very capital intensive. And this capital with rising interest rates has become much more expensive than a few weeks ago.

Central banks are turning off free money faucets, and falling stock markets, starting with the Nasdaq, are leading to a decrease in the capitalization of technology players.

Loan players aren’t the only ones who hit rock bottom by failing to pick it up

The double effect of Kiss Cool, which particularly hit companies in the BNPL sector, is “buy now, pay later”.

Sebastian Siemiatkowski, Klarna’s big boss, admits in a letter sent to his employees that the world in May 2022 is very different from the world in November 2021, when Klarna’s strategy was laid out.

However, credit players are not the only ones who hit the bottom by failing to pick it up.

Getir, a Turkish delivery startup, also plans to lay off 14% of its staff worldwide.

“Growth at any cost is no longer rewarded”

This little giant, now 7 years old, is valued at $12 billion and delivers groceries to major European cities in minutes. It employs about 32,000 people. 4480 employees must quickly be on the street.

Again, launching a box like Getir requires a lot of money. To put it simply, Getir does not make money and spends its funds to attract a user base.

This was the $768 million that Getir has raised so far. And from the outside it is very difficult to understand how much of this military chest is left to function.

Yesterday, one of Getir’s big competitors in Europe, Gorillas, also announced the layoff of 300 people.

Klarna and Gethir may have nothing in common in terms of their activities. But both are backed by an all-powerful investment fund called Sequoia.

And this famous venture capital fund sounded the alarm this week on the companies in its portfolio. Be careful, a storm is coming, the fund explains, be prepared, it will shake.

The slide from the presentation was titled, and I quote, “Growth at any cost is no longer rewarded.”

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