As RI tech giants face axing spree, small startups regain funding momentum

Reportedly, the decision was partly caused by the global macroeconomic situation.

Deni Ghifari

Deni Ghifari

The Jakarta Post


Up and down: The stock price of Indonesia’s decacorn PT GoTo Gojek Tokopedia Tbk (GOTO) is seen increasing on the monitor of Indonesia Stock Exchange (BEI) on April 12. Many startup companies across the world have been unable to perform, forcing them to lay off their employees en masse. (Antara/Handout/GoTo)

November 25, 2022

JAKARTA – The layoff wave that has been sweeping through the Indonesian-tech landscape within the past two months is nothing surprising, experts say, as the situation is bound to happen across the globe, insinuating a similar trend recently happened among tech giants in Silicon Valley.

The so-called “tech winter” phenomenon recently involved several Indonesian household names such as Shopee, Xendit and TokoCrypto. 

However, the most scrutiny arguably went to GoTo, one of Indonesian biggest tech firms that went public earlier this year who announced on Friday that it is cutting 1,300 people or 12 percent of its total workforce.

“This hard decision is inevitable for the company is looking become more agile and maintain the growth rate so it can keep giving positive impact for consumers, driver partners and sellers,” reads GoTo’s press statement.

The release said that this decision was partly caused by the global macroeconomic situation, albeit long-term sustainable business model was what it looked to forge.

“[GoTo] will keep on pushing a healthy business growth while, at the same time, practicing operational efficiency, so we can keep giving the best solution for the people,” GoTo chief of corporate affairs Nila Marita told the Post on Monday.

Yorlin Ng, chief operating officer of Momentum Works, a Singaporean venture outfit said that tech companies have had a good decade with an almost-zero interest rate which led the environment to be growth-focused without prioritizing efficiency.

For that reason, such layoffs were due sooner or later, said Ng, but also noted that “how they would take place and to what extent they would happen could not be predicted”.

“Big-tech companies have had a good decade, but no one should take good times with almost zero interest rate for granted,” said Ng on Tuesday.

Read also: Shopee joins start-up layoffs trend in RI, blames global economy

Adding fuel to the fire, macro-economic uncertainties place this business model even closer to the edge by making it increasingly difficult to secure external funding while, simultaneously, tech companies have to deal with drops in revenue, making them cautious on cost.

“In tough times like we are in now, efficiency and sustainability imperatives will override growth considerations, hence the current trend of layoffs to control costs,” Ng explained.

For her part, Ng said what’s important is how the market adapts to the macro environment so the companies can maintain their competitiveness once the storm has passed and, on the flip-side, non-tech companies and startups thinking about innovating can take advantage of these layoffs given how they are able to recruit talents.

Read also: Global layoff storm disrupts Indonesia’s tech companies

However, she underlined, the silver lining was that tech workers would become more conscious about the rapidly changing world and for that, they would build not only skills, but also competencies and insights to keep themselves relevant.

“Those who want to join the tech sector should really be forward-looking and join sectors or functions that have significant growth potential in the next 5-10 years,” said Ng.

In the long term, she added, the market will revert back to the equilibrium of supply-and-demand in talent and labor, as it always does.

Concurring with Ng, Roshan Raj Behera, the Southeast Asian partner of Indian management-consulting company Redseer, said that the current layoff trend is not entirely surprising.

“Larger players [are] taking some time to assess the situation and avoiding a knee-jerk reaction in terms of retrenchments. Unlike their smaller peers, the larger companies tend to take a more-informed decision given their higher relevance in the ecosystem,” Behera told The Jakarta Post on Monday.

Behera said that both the public and private sector are concerned about the uncertain economic outlook, but once there is better visibility, he said, they would see more constructive trends in the public and private markets.

Behera explained that the relatively low interest rates since the Great Recession could be treated as anomaly trends given how the interest rates were relatively higher in the preceding years and, accordingly, it is unlikely for the high-growth and high-cash-burn phase to reestablish its presence.

“We are likely to witness a balanced-growth trajectory going forward,” Behera said, emphasizing that this trend might result in a healthier climate.

No slowdown for funding

Despite the overall tech downturn, early-stage startups are still continuing their upward trajectory and Behera saw no reason for a slowdown in funding as companies that fill a need-gap and are able to clearly provide a growth path to a profitable trajectory will continue to get funded.

However, the same prospect cannot be said for medium-to-larger companies as they are already seeing a tapering of 25-percent investment value this year, plunging to a seven-quarter low in the July-September time window.

“[Big tech companies’] first priority will be to get their unit economics and cash runway sorted,” said Behera, adding that “once that is done, they will be back in the capital-raising mode and, in the meantime, big-tech companies can consider alternatives in the form of bridge loans or convertibles.”

The firing spree did not only take place in Indonesia; it also happened in the Mecca of tech, Silicon Valley, spelling out that not one company in the tech industry is immune to the drift.

Over the past week, 20,000 employees from Twitter, Meta, Stripe, Lyft and a growing list of smaller companies have been laid off.

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