Cash-strapped startups failing to keep salary expectations and company culture alive amidst downturn

The UK’s startup sector is navigating through a period of severe turbulence following a steep drop in valuations in H1 of 2022, which globally, saw certain tech-heavy indexes like Nasdaq fall up to 23%. The recent announcement of the mini-budget, coupled with further interest rate increases and soaring inflation, has led many UK tech stocks to crash, further affecting private company valuations.

This has resulted in substantial lay-offs across the sector, with an array of companies like Zapp – the grocery delivery app – to propose a staff reduction of up to 10%. More grocery delivery apps like Gorillas – which announced a reduction of 300 staff – and Getir – which announced 14% staff redundancies across 4500 roles – are setting a precedent in what will likely be a year of significant layoffs for big scaleups with very high cash burn due to cautious investment behaviour. According to M&A and corporate financing expert, Claire Trachet, it is crucial for startups, particularly those that saw causal growth thanks to the pandemic – like delivery service apps or HealthTech apps – to adjust to a new investment climate.

Among much of the actionable fundraising and M&A guidance, Trachet – a leading business advisory firm – highlights the critical point startups are facing to keep company culture alive amidst layoffs. Claire Trachet says that company culture begins at the top, with the founder and C-suite team and trickles down. If the founders are experiencing high pressure, it is likely staff will also experience this. Trachet commissioned landmark national research to understand the impacts of this on founders which found 34% of business leaders state that in running their business, they have no one to support them, they do all key tasks alone and that disconnects them from their passion.

The cost of living crisis has created pressure at every level for organisations as companies and staff are struggling to cope with rising costs, Trachet’s research further unveiled that nearly one in three (29%) Brits is actively looking for another job as they’re not being paid enough to cope with the rising cost of living. For those working in startups, the cost of living pressure is now exacerbated by a decrease in human resource and fears of being layed off which may lead many to pursue a career in a different organisation. Data from the study shows nearly 64% of Brits would be happy to compromise their career aspirations in order to preserve their mental health, further illustrating the importance of keeping a positive overarching outlook.

CEO and Founder of business advisory, Trachet, Claire Trachet comments on keeping company culture alive amidst lay-offs due to the current investment climate:

“In recent years, there has been a wealth of funding available for founders to help accelerate growth – billions of pounds of capital have been invested into startups through private equity and public markets. Startups have been attracting the best of UK talent thanks to competitive salaries and forward-thinking company culture, with big flexible working and personal benefits. However, as these companies face major layoffs because of reduced funding and their high cash burning nature, the atmosphere at these cheery startups has dramatically changed.

“Many startup founders can attribute their success to having high versatility in playing different roles, from finance and fundraising to product management, founders take on a series of responsibilities that many would find overwhelming. Over a scarcity of resource and funding, this will lead to a highly strained workforce across the sector – it is crucial for founders to seek out council from someone with experience in times of economic downturn to help navigate their continued growth plans in an attainable way which helps keep the startup culture alive.”