Global Startup Employee Termination Continues to Happen

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Recently, the world has been shocked by the news that several startup companies have gone bankrupt. Even in Indonesia itself, several startups massively fired their employees. What is this?

Based on data obtained from Layoff.fyi, globally there have been 21,002 startup employees in the world who have been laid off from early April to June 6, 2022. That number has jumped by 114.3% compared to 9,800 people in the first quarter of 2022.

In Indonesia, several startup companies in Indonesia are on the rise to lay off their employees in recent times. Several startups fired these employees, such as Pahamify, Zenius, JD.ID, LinkAja, and Mobile Premier League (MPL).

The phenomenon of layoffs at various startups apparently does not only occur in Indonesia. The same thing is happening in various parts of the world.

Based on data from Layoff.fyi, there have been 21,002 startup employees in the world who have been laid off from early April to 6 June 2022.

That number has jumped by 114.3% compared to the first quarter of 2022 which amounted to 9,800 people. Seeing the trend, global startup layoffs have started to increase since the fourth quarter of 2021.

The wave of layoffs continues to soar to this day. Meanwhile, the trend of startup layoffs in the world is one of them caused by the tight liquidity regime that occurred after The Federal Reserve (The Fed) raised its benchmark interest rate.

This is also exacerbated by the ongoing Russia-Ukraine conflict, which makes investors more cautious in pouring their funds.

Meanwhile, many startups have been running their business by “money burning”. Because they need a large number of funds, these startups have to make efficiencies to cut their operations.

As reported earlier, Several economists are still investigating the cause of the bubble burst, which affects startup companies. Especially the factors that underlie the occurrence of the bubble burst phenomenon which cannot be defined with certainty. However, bubble bursts are usually only identified after a massive price decline occurs.

Institute for Development of Economics and Finance (INDEF) researcher Nailul Huda suspects that the bubble burst economic phenomenon is hitting the startup industry in Indonesia. According to him, the growth of startup companies is not comparable to the number of funding companies.

Not only that, Nailul assesses that funding companies are also more selective in investing in a startup now. Thus, the opportunity for startups to get investors is also not as easy as before.

Not only that, Nailul assesses that funding companies are also more selective in investing in a startup now. Thus, the opportunity for startups to get investors is also not as easy as before.

In addition, venture capital is also starting to wait and see because the Fed will continue to raise the benchmark interest rate until the end of 2022. This has the potential to affect Bank Indonesia (BI) in setting the benchmark interest rate in Indonesia.

Meanwhile, a researcher from the Center of Reform on Economics (CORE) Indonesia Ebi Junaedi assessed that what happened to Zenius and LinkAja was triggered by current macro conditions. Understandably, the world and domestic economies are currently shrouded in quite high uncertainty.

Thus, investors are more selective in investing in startups. This is different from the situation a few years ago when it was easier for startups to get investors.