In what could already be considered "black Wednesday" for technology companies in Argentina, at least three companies operating in Argentina have announced layoffs of various sizes. Near e-commerce company Tienda Nube, fintech Ualá, real estate developer Etermax and car rental company Kavak. Although the reasons are varied, almost all companies directly or indirectly point to both the global macroeconomic crisis and the change in the intensity of their activities after two years of boom during the pandemic.
One by one, all the companies that announced their layoffs
For example, the Mexican startup Kavak. He told Infotechnology that the decision is part of a "global strategy" emanating from the company's headquarters in Mexico., given the negative macroeconomic situation that they predict for 2023. In this case, the number of layoffs is about 200 people, a reduction that will be made in two batches. A bit of context: in 2016, the company knew how to become the first Mexican unicorn. In Argentina, Kavak has been operating since 2020 and offers more than 1,600 vehicles online. In 2021, he managed to grow 10 times over the previous year, according to official information from the company, and ended last year with more than 800 employees..
Huala, on the other hand, confirmed in a dialogue with this media that layoffs are as high as 3% at the regional level, of which 53 people worked in Argentina. While they deny it is related to the international crisis, the fintech led by Pierpaolo Barbieri claims the measure is linked to four strategic acquisitions the company made last year. which would lead to duplication of positions and functions among its new staff. The company took over the assets and operations Wilobank in Argentina and ABC Capital in Mexico, as well as Ceibo Créditos and Empretienda.
E-commerce company TiendaNube is laying off 50 people in all markets where it operates, but 17 of them are in Argentina. According to the company, it has more than 1,000 employees, more than 100,000 active stores associated with the platform and in 2021, sales in Latin America reached US$1 billion. The company is valued at $3.1 billion..
Most companies acknowledge worsening macroeconomic environment, which has dampened capital and investment infusions
The company claims that the layoffs, which account for 5% of its total workforce, are a reaction to changing market conditions, which explains the reduction in operations. “After exponential growth during the pandemic, the e-commerce industry is returning to more conservative but consistent levels of expansion.”they expressed. Two weeks ago, the company announced its expansion into the Colombian market, which it has completed with a $100 million investment. And late last year, he received a $500 million capital injection..
Finally, Etermax, another Argentinean video game development and technology services company. confirmed that he laid off 7% of his plant, 40 people. The company blamed "an unfavorable global context that directly impacts our industry" as a strong reason for the decision. Although the layoffs affected the entire company, the gaming industry was the hardest hit..
“Technology investment has always been volatile and the US could enter a recession next year. This is forcing large funds to pull investments from tech companies and move into Treasury bonds, fixed income, or investments at rising rates with little risk compared to them.", - explained Chronicler economist and director estudinero.netNikolay Litvinov.
“This is also a blow from the end of the pandemic, as many companies were overwhelmed by rising demand that did not materialize“He added. Another reason to reduce costs is the ability to show better numbers, in particular, in terms of profitability in a difficult 2023.
end of good times
According to the Argentine Association of Private, Entrepreneurial and Seed Capital (Arcap), in Argentina, investment in seed and entrepreneurial capital last year was a record $1,137.2 million. The data was replicated around the world, with investments in technology companies receiving $621,000 million and adding 537 unicorns to their ranks..
Argentina featured Vercel, Aleph, Mural, Bitfarms, Ualá and Tienda Nube. According to this year's report from consulting firm CB Insights, Volatility in public markets driven by macro volatility led to lower estimates and reduced private capital inflows to new rounds of investment.
Almost as an omen, companies in the crypto ecosystem are also facing their own crisis. With the collapse of industry giants like FTX and Celsius and projects like the failed algorithmic stablecoin Terra/Luna, other local crypto companies have announced cutbacks. In the middle of the year, it was BuenBit's turn, which cut 50% of its staff. And last week it was the turn of the Argentine company Lemon Cash, which announced a 38% reduction in staff due to financial problems..