Your favourite startup may be slashing salaries
Isolated event or a pattern?
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It’s been a brutal couple of months for American and European startups. Coinbase, Robinhood, Shopify and a host of other startups have laid off employees; Meta and Google have paused hiring. Venture Capitalists, who were once happy to sign cheques at breakneck speed have slowed down—in July, one VC walked away from funding Duplo after signing a term sheet.
Despite the turbulence happening abroad, some analysts believed that African startups would defy the global trends. In one article, Bloomberg shared that “as funding for startups falls across the globe, Africa is standing out as a notable exception, with its underserved population outweighing the impact of inflation and slowing economies.”
Nigerian founders and VCs figured that African startups would experience some of the effects of the global downturn. In May, Chijioke Dozie, the CEO of Carbon, told me, “I think we are a few cycles away from seeing layoffs in any real way. For the early-stage startups that have been funded, they have enough cash reserves. They will be fine. However, what you might see is a reduction in Startups spending indiscriminately to achieve growth because they are unsure of the funding environment.”
Two of the commonest ways startups cut overhead costs during tough times are laying off staff and slashing salaries. I heard the first whispers of layoffs at Nigerian startups in June when some sources at several startups said that management had begun to have conversations about revenues and the economy. At the time, it was difficult to verify some of the claims. In the last couple of weeks, I have spoken to sources who shared what how their companies are cutting costs at this time.
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Salary slashes at GetEquity and Quidax
Three employees at GetEquity who asked not to be named told me that the startup announced a salary slash at an all-hands meeting in July. The background to that meeting was a reported rash of exits within the company in June, with the CTO, William Okafor also leaving on June 30.
One current employee told me, “HR sent out a meeting invite for a Friday meeting sometime in July and it was during the meeting that Jude Dike (GetEquity’s CEO) assured us that the people who left weren’t laid off. He said most of the people who had left were employed on time-based contracts that had now expired. It was during the same meeting he announced that there would be salary slashes across the company.”
Two current employees confirmed that the salary cuts weren’t uniform, with some people getting 30% cuts while others got up to 50%. Employees say they were surprised by the decision to cut salaries, as management had shared earlier in the year that they were close to closing a seed round. “At some point, we were told that we didn’t need to worry because a lot of investors were interested and they even had to increase the amount we were looking to raise as a result,” another current employee told me. But things changed quickly, with fears of a recession spooking investors. “Jude told us that investors are looking to wait out the storm, and that delayed the funding round.”
While employees had a lot of questions during the call, the mood is said to still be upbeat at the startup. “We still had our team bonding at the end of the month, the last week in July. Spirits remained high and no one indicated that they were leaving. I think that morale is pretty much the same.”
GetEquity’s CEO, Jude Dike, told me via text, “Macroeconomic conditions seem to be affecting everyone, for the much larger companies, there seems to be a much stringent trimming of employees. It hit Africa as bad as we thought it would for the larger companies. With much smaller companies, salary slashes seem to be the best way to manage burn. We want to make sure we are able to weather the current storm of fundraising pause across global venture capital on the road to cash flow profitability, you want to keep burn to a minimum as you try to row your business”
At the crypto startup, Quidax, former and current employees told me that the company’s leadership held a meeting with them in June. One current employee who preferred not to be named told me, “Initially, we had a meeting where we were told that from July, there would be a 30% slash for other members, 50% for team leads.” Another Quidax ex-employee who was at the meeting confirmed this detail.
Both sources told me that the management made a modification days later. “A few days after the first salary slash meeting was called, we had another meeting. This time, the management told us they knew it would be difficult for a lot of people to handle the salary cuts. So they gave us the option of voluntary salary cuts.”
Employees could choose to take salary cuts for three months or ask to receive their full salaries. For those who chose pay cuts, the understanding was that they would get back all the money they forfeited by the fourth month. Both sources say that a majority of the people within the company opted for pay cuts.
The current employee who spoke to me shared that the salary slash has not dampened morale. “The general feeling I got was that everyone wants everything to work well and it was easy to opt into the pay cut because there’s openness. If you want to go, there’s no bad blood.” They also added, “We saw this coming when Y Combinator released that email warning founders of tougher economic conditions moving forward. The CEO shared the email in the group and said we’d have to talk about it.” Several attempts to reach Quidax’s management for comments were unsuccessful until the time of this report.
There’s a growing sense that there will be more salary slashes and layoffs moving forward. Several other sources at other startups spoke to me about layoffs but were reluctant to have any of their comments published even off the record. Others cited signing Non-Disclosure Agreements tied to their severance packages.
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Edited by: Alexander Onukwue
See you on Sunday!
*This article has been edited to add a longer comment from Jude Dike, GetEquity’s CEO