Layoffs at 54Gene and Alerzo raise questions about Nigeria’s tech utopia

Layoffs and salary cuts continue

If you missed Friday’s newsletter, catch up here. 

Today’s Notadeepdive is 761 words. Don’t miss another edition of the newsletter when you subscribe:

Notadeepdive is brought to you by Fincra and SweepSouth. Fincra provides reliable payment solutions for fintechs, online platforms and global businesses. Use my discount code, NADD, to get 30% off when you book a home cleaning on SweepSouth!

TOGETHER WITH FINCRA

With a single integration, you can receive payments from customers via debit/credit cards, virtual accounts, and bank transfers and make seamless payouts to beneficiaries across 100+ countries.

I’ve spent the past two weeks talking about salary slashes and job cuts in the Nigerian tech ecosystem. These conversations feel like throwbacks to 2020, when Covid-19 caused companies to worry about the future. At the time, salary cuts and furloughs were common, and I wrote about taking a 50% salary cut at TechCabal. RenMoney and TechAdvance were two other companies that downsized at the time.

Here’s an excerpt from that article:

“[Tomiwa Aladekomo] told TechCabal that decisions like this can be “life and death for a business that gets them wrong. It takes a lot of consideration and careful balancing. Cutting too deeply can be as dangerous as not cutting deeply enough, and no one has a crystal ball. So it’s difficult to know how long a crisis will last or where consumers or the economy will go next. There are no easy answers.”

Layoffs at Alerzo and 54Gene

In August 2021, Alerzo, a startup that describes itself as “harnessing technology to empower informal retailers,” raised $10.5m. That raise brought Alerzo into the public eye. At the time, it said that it would use the new funding to expand to Northern Nigeria and also launch a payment and lending platform. 

According to several sources who asked not to be named for this article, the company’s hiring increased in the time since it raised its funding, adding hundreds of casual workers. Those casual workers work in Alerzo’s over 40 warehouses all over Nigeria, with full-time staff making up less than half of what one source tells me is a staff strength of 2,000 people. LinkedIn shows that Alerzo has 770 full-time employees, compared to its competitor, TradeDepot, which has 428 employees. 

Another source told me that this headcount is a big cost centre for the company, and in the past weeks, the company laid off 100 people, most of whom were contract workers. Some full-time staff were also affected by the layoffs, while some persons within the company received some pay cuts. 

While the cuts are deep and represent some cost savings for the company, my sources insisted that the company still has significant runway and money in the bank. Alerzo did not respond to my email at the time of this report. 

---

TOGETHER WITH SWEEPSOUTH

Ever wondered makes you a 10 from a 5? Well, word on the street is that smelling good and being clean are some of the things that make you a 10.
The good news is that SweepSouth can help you be a 10! Book a thoroughly vetted, reliable and excellent SweepStar to clean your house and organize your space weekly. 

---

Another company where there have been salary cuts is 54Gene, the genomics startup that raised $25 million in September 2021. During the pandemic, 54Gene was at the forefront of providing accessible Covid-19 testing labs, but travel restrictions have since eased to pre-2020 levels. With those changing times have come new challenges to the business, and in an email, 54Gene confirmed that it has laid off workers. 

The company said in an email, “after a careful analysis of current market conditions, 54gene implemented a reduction in staff headcount. The restructuring cut across the countries where the company operates and reduced our staff numbers by around half.” While citing the “recent changes in the macro-environment,” 54Gene shared that it had mostly laid off contract workers. It did not share details on the number of full-time staff that had been laid off. 

Three sources who declined to be named shared that layoffs affected full-time staff with a majority of the marketing department moving on from the company. Some other members of staff within other departments also got laid off. 

Several sources also shared that some senior members of the company took big salary cuts. 54Gene confirmed this in an email, saying that, “a few senior employees have taken a reduction in salary in exchange for stock options. The company can’t disclose this number as it does not affect the vast majority of employees.” 

The arrangement to swap more equity for salary may prove tricky in the future, given how illiquid stock options often prove to be in Nigeria’s startup ecosystem. One source also told me that the stock options senior employees received would also be subject to a normal vesting period. It also remains unclear how long the salary cuts will last. 

At the home services startup, Eden Life, which raised $1.4 million in October 2021, two current employees who asked not to be named disclosed that the company’s leadership will take salary cuts. With 91 full-time staff, according to LinkedIn, it means that the salary cuts will only affect about 7% of the company. Eden Life could not be reached at the time of this report. 

TL;DR: These are tough times; prepare for the worst. 

See you next week!