Mara and Chipper Cash, have recently faced tumultuous times marked by multiple rounds of layoffs. For ChipperCash, it was the company’s third round of layoffs in less than a year.
This time it got better. Not even the vice president of marketing, Alicia Levin was spared. The layoff further affected the global chief operating officer, and Leon Kiptum, the country director for Kenya.
These continuous layoffs come at a time when people are trying to regain their trust in crypto across the world. However, in the face of SVB collapse, stiff blockchain regulations, and a fall in bitcoin valuation, even the biggest blockchain startups have not been spared. The likes of Coinbase, Blockchain.com, and Stripe, have had to downsize their working force more than twice.
The bankruptcy of FTX last year caused a catastrophe for Mara. The co-founder Kate Kallot resigned at the same time and the first round of layoffs began as a result in December.
Particularly, ChipperCash had to reduce its employees in addition to losing 37.5% of its $2 billion valuation to $1.25 billion. Since the $250 million Series C round’s major investors, FTX and Silicon Valley Bank (SVB), have been in the news for internal issues, the company’s risk exposure is unknown.
Read also: Chipper Cash Denies Plans of Sell Off
In reality, several Nigerians are struggling to find new roles, with many having to adjust from lifestyles previously supported by tech salaries that are no longer available. The increased layoffs may be influenced by factors that will be examined here.
The Funding Winter
Several Nigerian startups across different industries have been affected by the tough decision of dismissing staff. Rightly, layoffs are practically one of the measures businesses use to stay afloat when they are hit with financial difficulties.
Source: CB Insights • Data: Aggregate value of venture capital deals, 2018-2022.
According to a 2022 analysis, at least 383 Nigerian startups raised more than $2 billion in total between 2015 and 2022. The Nigerian startup environment, however, came to a complete standstill as foreign funding slowed down last year. In 2021, venture funding for Nigerian founders peaked at $886 million, according to CB Insights’ State of Venture 2022 Report; in 2022, this amount fell to $563 million.
According to Luke Mostert, head of investment at Future Africa, some of the current layoffs may be related to startups growing too quickly in prior years. “[Investors] pressure founders to prematurely scale their firms to receive an outsized return on their investment.
Internal Economic Pressures
SAPA: a term used in Nigerian Pidgin English to describe a state of being extremely broke or poor.
In the past eight years, Nigeria has experienced recessions twice, and its currency, the naira, is predicted to lose 20% of its value this year.
A depreciated currency can have far-reaching implications for macroeconomic and financial stability. For businesses, it is capable of distorting the market mechanism; hence, it distorts merchandise trade as well as capital flows. In general, when a currency loses value, people’s purchasing power declines as well because products, especially imported ones, cost more money. And when that causes a general rise in prices, it’s called inflation.
The worsening case of SAPA in Nigeria may be reducing the ability of startups to stay afloat without layoffs. Senior functions are now also being eliminated as Nigerian companies strive to react to the new financial climate, albeit junior roles still tend to be more affected by layoffs. This is a sign that the situation is more complicated.