RALEIGH – A year ago, Dude Solutions was on a hiring spree. It was growing at astonishing 25 percent clip, and appeared to be flush with cash after getting acquired by a swish California-based firm.
Then COVID-19 struck, and in a matter of weeks the Cary-based software-as-a-service (SaaS) provider had slashed its workforce by 20 percent.
It’s a sudden reversal of fortune, but the company is far from alone.
As the pandemic continues, a growing number of startups and venture-back companies are making tough cost cuts to stay afloat, according to a new survey as reported in PitchBook.
According to compensation data provider J.Thelander Consulting, roughly 14 percent of VC-backed companies reported they had made pay cuts from March 18 to March 30, with that figure growing to 26 percent for responses from March 31 to April 7.
For companies that have made salary reductions, 50 percent involved cuts for lower staff-level roles and middle managers from March 31 to April 7, compared to 32 percent and 35 percent, respectively, from an earlier period.
Just the beginning?
Multi-billion dollar companies like Magic Leap, Vice Media and Houzz, all reported layoffs and furloughs this week.
Closer to home, Durham’s SportsMedia Technology joined Dude Solutions, furloughing 35 percent of its staff in early April, while Greensboro’s Center for Creative Leadership laid off up to 120 workers.
Survey: 87% small businesses struggling due to virus; 70% have made or plan layoffs
Wilmington’s Next Glass, parent company of Untappd, also confirmed layoffs to the WilmingtonBiz, though its new CEO, Trace Smith, declined to give numbers.
Though not a startup, contract research organizations Rho also announced the first layoffs in the company’s history, reported the Triangle Business Journal. It’s a drastic turnaround in the company’s position in the last year, it noted, as the clinical trial industry grinds to a halt amid the pandemic.
On the flip side, other companies like Raleigh software firm Pendo is continuing to hire.
Up until now, there are also few tech-related layoff notices filed with the state of North Carolina. Still, as the pandemic continues with no end in sight, many are starting to wonder if this will soon become the exception.
Short runways for cash
It’s understandable considering this grim statistic: 41 percent of global startups have less than three months’ worth of cash available, Startup Genome reported on Wednesday.
The research firm interviewed 1,070 respondents across 50 countries from March 25 to April 17.
It found that nearly half of those surveyed were in what the report called the “red zone” — with a few months of cash reserves. While 29 percent were already in that situation before the crisis, it found the pandemic put 40 percent more of them into that position.
For startups that have raised series A, B, or later rounds, the study reported 34 percent have less than six months’ worth of cash.
Of startups that had a term sheet before the onset of the crisis, nearly 20 percent have had the term sheet pulled by the investor and 53 percent have seen the process slow down significantly or have faced an unresponsive lead investor.
Only 28 percent have had the process continue normally or secured the funds.
