Ebanx lays off 20% of its staff in yet another startup cut

Curitiba-based fintech Ebanx is the latest startup to make mass layoffs this year.

This Tuesday (21), 340 people were warned that they would be terminated – partly immediately, partly within the next six months. The cut is equivalent to 20% of the group’s more than 1,700 employees in Brazil.

The company, which provides international payment services to companies operating in Latin America, reached a market value of US$ 1 billion in 2019. Among its clients are Shein, Uber and Airbnb.

In a statement, the company said it will discontinue projects and review its operation. Fired employees will receive additional amounts, health insurance extensions and a work computer, the group says.

The startup and technology sector has slowed down since the beginning of 2022, after a year of large investments. In 2021, US$ 9.4 billion (in December, about R$ 53 billion) were injected into Brazilian innovation, almost 2.6 times what was raised by companies in this segment in 2020 — US$ 3.5 billion.

Ebanx stated that the decision to review the operation was taken based on this scenario, “impacted profoundly and quickly by the macroeconomic environment”.

In March, the CEO and founder of Ebanx, João Del Valle, announced a postponement of fundraising to the second half of the year due to the volatility that impacted the valuation of companies and the mood of investors. The company also announced that it would not make a planned public offering (IPO) in the United States earlier this year.

In April, QuintoAndar, Loft and Facily laid off more than 400 people in a week. Like Ebanx, they are unicorns — a nickname for startups worth more than $1 billion.

In response to inflation, central banks have increased interest rates – as is the case with the Brazilian Central Bank and the American one, for example.

In March, after a long period of zero interest rates to stimulate an economy that almost came to a halt with the health crisis, the Fed (Federal Reserve, the US central bank) raised the rate by 0.25 percentage point.

Last Wednesday (15), the agency promoted the biggest increase in interest rates since 1994​: 0.75 percentage point. The country faces the highest inflation in four decades.

Higher interest rates make investments that are less risky than startups — fast-growing companies that in many cases burn cash to outperform their competitors more profitable.

The retraction of services that grew in the pandemic, such as online shopping, also weighs on investors’ calculations. The sector had benefited from the forced digitalization that social isolation promoted.