Startup employees are reeling as they brace for back-to-back rounds of layoffs: ‘When it happens again, you start to lose that confidence and faith in your leadership.’

• Some startups are laying off workers for the second, third, and even fourth time.
• The cuts come as the tech industry faces a historic downturn and a pullback in VC funding.
• Startup employees say surviving multiple rounds of cuts is demoralizing and stressful.

Sean Reay was attending a conference for enablement professionals in San Diego on behalf of his employer, marketing startup Sendoso, in early October when he received notice of a last-minute global all-hands meeting.

“It’s always something big with a last-minute calendar invite, and it used to be that we were getting acquired, or acquiring someone, or raising money.” “Exciting stuff,” he said in an interview with Insider. “Now, that means that a company is laying off a handful of folks.”

When Reay joined the call, Sendoso’s leadership announced that it was cutting staff and that, instead of individual calls, affected employees’ computers would be turned off in the next five to ten minutes and they would receive a message in their personal email.

It was an unfortunate case of déjà vu for Sendoso employees: the startup, which helps companies send marketing gifts to business connections and is backed by SoftBank and other well-known investors, laid off workers for the first time in June 2022 and has cut jobs twice more in the last 16 months.

Reay received an email a few minutes later informing him that he had been fired from the startup’s enablement team.

Sendoso is just one of many startups that have gone through multiple rounds of layoffs in the last year and a half as a result of a VC funding freeze in the midst of a broader economic downturn.

According to Crunchbase, VC investment in the first quarter of 2023 was down 53% year on year after a funding frenzy in 2020, 2021, and the beginning of 2022. As startups fail to secure additional funding, they must cut costs internally — and many are resorting to layoffs, given that headcount is the most significant expense for most businesses.

Last year, a wave of layoffs swept through the tech industry, beginning with behemoths like Facebook parent company Meta, Twitter (now known as X), and Salesforce. Many startups have reported layoffs, including Sendoso, GV-backed fertility startup TMRW, and security software provider OneTrust.

According to the layoff tracker Layoffs.fyi, over 244,000 workers have been laid off from tech companies in 2023. This is a significant increase from the nearly 165,000 tech workers laid off in 2022.

Many companies are now laying off employees in droves, with some startups laying off employees for the second, third, or even fourth time in less than a year.

The constant threat of layoffs is having a negative impact on company morale, according to startup employees interviewed by Insider.

“It has an impact, including trepidation, wondering what’s next, and feeling like I’m constantly having to prove myself in different ways,” she said. “I was on the defensive while doing regular work and constantly trying to remind leaders that I’m valuable.”

Repeat layoffs are giving startup employees “strategy whiplash” and constant feelings of fear.

Almost a year and a half after the tech community came to a halt in mid-2022, startups and big tech are still struggling — and in many cases, laying off employees for the second, third, or even fourth time. LinkedIn cut 668 jobs in mid-October, Google just cut dozens in its news division, and Facebook cut 10,000 jobs earlier this year.

Many startup jobs have been eliminated in a similar manner: SchoolMint recently laid off 14.5% of its workforce, the second time the edtech startup has done so, and online tutoring unicorn Paper laid people off this summer and in September–the third time it has done so–after raising $270 million in Series D funding.

Mortgage lender Better, which went public in SPAC this summer, laid off more employees last month, as did rapid-delivery startup GoPuff and restaurant software company Nextbite.

When startups slash jobs repeatedly, remaining employees are constantly fearful that they will be next, according to a number of employees who remain employed at their respective startups. Employees who spoke with Insider requested anonymity out of fear of losing their current positions.

“I’m worried, ‘what if I’m the next to get laid off, and I just don’t know it right now?'” said one employee at a growth stage startup that has laid off three times this year.

This anxiety can spread throughout the workplace: “I know a lot of people are thinking very similar things,” said the employee.

For Reay, a former Sendoso employee, the constant rounds of layoffs gave him and his surviving colleagues “strategy whiplash.”

“Over the last year and a half or two years, I’ve probably had eight different reporting lines, which is tough because you develop relationships on those levels and want to trust who you’re reporting to,” he told me. “When a company is constantly reevaluating work that’s being done and telling you to start, stop, and continue certain types of projects, it’s really disorienting.”

Employees at the edtech unicorn Paper learned of a third round of layoffs through internal leaks before management announced it to the company, according to one current employee, causing a wave of panic and frustration with leadership among the employees.

“When it happens again, you lose confidence and faith in your leadership,” a current employee explained.

An employee who was laid off from Paper in the second round of layoffs told Insider that their severance package was less than what was offered earlier in the year when the company was looking for voluntary buyouts. Employees laid off in August were offered a maximum of six weeks’ pay for two years or more of service, compared to the volunteers’ eight weeks.

“It was good if you hadn’t been there long but it was almost insulting if you’d been there longer than two years,” the worker said.

Sendoso and Paper representatives did not respond to Insider’s requests for comment on this story.

Some startup employees are reconsidering their future in the industry

As startup employees brace for more job cuts, they say the experience has made them reconsider whether to stay in the industry at all.

Reay, the former Sendoso employee, says he’s been debating whether he wants to work for another software startup, given the industry’s current volatility, or move to a more established company with lower pay but more job security.

“I’m considering it almost like 10 years ago when I first got into the space,” he told me. “Will this provide me with a long-term source of income for myself, my family, and my children?” “I’m not sure.”

A former SchoolMint employee who was laid off in September has similar concerns. While they would be interested in working at another startup, the individual stated that they would conduct much more research on a company, its leadership, and its investors before accepting a position.

“The downside will always be that a lot of these startups hire their buddies and replace leadership roles or teams that know what they’re doing with people that don’t,” the individual was quoted as saying.

SchoolMint representatives declined to comment.

One Paper employee who was laid off during the company’s second round of layoffs has since found a new tech job but is no longer working at a startup. They said they were fortunate to find a new job quickly, but they advise other job seekers to be wary of accepting a position at a VC-backed startup right now.

Communication is critical for startups that want to maintain employee morale through multiple rounds of layoffs and other difficult business decisions, according to Jackie Xu, founder and CEO of startup staffing firm Xu Talent and a former talent partner at VC firm Kleiner Perkins.

“Founders might not be the strongest at communication, but they need to quickly get up to speed on how to create more transparency and how to educate employees in this market,” she said in an interview with Insider.

Xu added that, especially when times are tough, it’s critical for startup leaders to accept responsibility for mistakes and explain why they made difficult decisions like laying off employees multiple times in a row.

“Some founders don’t want to be super transparent and believe that too much information isn’t helpful — but when you’ve gone through a second round of layoffs, it’s important,” she told me. “Admitting that you didn’t cut deeply enough or that you were hoping for X result demonstrates vulnerability and thoughtfulness.” You have a responsibility as a founder and executive team to do everything possible to support your people.”