Startups are in hot news these days. This is because several startups carry out massive layoffs of their employees.
The employment termination by several startup companies was allegedly due to the bubble burst phenomenon. The bubble burst can be said to be a phenomenon of economic growth which is characterized by a very rapid increase in market value, especially in asset values, but after that, it is accompanied by a rapid decline.
Several startups in Indonesia were affected by this bubble burst. An example is PT Fintek Karya Nusantara (Finarya) or LinkAja which laid off hundreds of employees. This was done because the company’s policies made significant changes in business adjustments.
Head of Corporate Secretary Group LinkAja, Reka Sadewo said LinkAja as a startup company continues to make business adjustments to ensure healthy, positive, and optimal company growth. The impact is a reorganization of Human Resources (HR) or employees.
In addition, there is also Zenius Education. They laid off more than 200 employees. This is due to the business being undertaken being affected by the current economic conditions.
“After going through a comprehensive evaluation and review, Zenius announced that more than 200 of its employees had to leave Zenius,” said the management of this educational startup.
Launching Investopedia, a bubble burst is an economic cycle characterized by a rapid escalation or increase in market value, especially in asset prices.
This rapid inflation is followed by a rapid decline in value, or contraction, which is sometimes referred to as a bubble burst.
Several economists are still investigating the cause of this bubble burst. 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.
“So venture capital has been selected because it wants to increase profits. Just look at the example of SoftBank, it has already lost a lot from investing in several startups,” said Nailul.
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.
“However, it must also be seen whether this is a general trend, which means that no venture capital is aggressive with the current macro conditions,” said Ebi.