Are German startups also threatened with a wave of layoffs?

The absolute numbers are significantly lower compared to the tens of thousands of employees laid off at US companies such as Google, Microsoft and Facebook. But the examples of the “unicorn” Infarm, valued at over one billion US dollars, and some smaller start-ups indicate that the wave of layoffs at start-ups could now also reach Germany.

Whether there will soon be mass redundancies among young German companies depends on how the economy and the financing environment develop.

The industry does not yet dare to make any clear forecasts. “The cuts are more serious than at the beginning of the corona pandemic,” says Daniel Breitinger from the digital industry association Bitkom. Multiple overlapping crises between disrupted supply chains, high energy prices and rising consumer prices made it difficult to say “how long the situation will last.”

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In anticipation of strong growth, start-ups often hire more people than they currently need. If they then grow more slowly than hoped, they terminate the employees who are no longer needed.

Because many start-ups are making losses and are financed by investor money. If they have too high personnel costs with falling growth, they will soon run out of money and the chances of further investor money also decrease.

The end of the boom in the corona pandemic has now triggered such a situation in many young companies. They are struggling with intensified competition, inflation and delivery problems and have to budget with the money they have collected from investors.

In addition to Infarm, this is currently affecting a number of smaller start-ups in particular. The Berlin menstrual app provider Clue, with more than 30 employees, laid off around a quarter of the workforce just last week because too many new jobs had been created beforehand. The car-sharing provider Share Now laid off almost 50 employees – they wanted to become profitable and economically sustainable as quickly as possible.

Last year, the German unicorns in particular cut staff, whose last cash injection was a while ago or who are not getting fresh investor money so quickly in the current crisis.

Layoffs at Grover, Forto and Tier Mobility

For example, the e-scooter provider Tier Mobility, which collected money for the last time in 2021 and whose market is highly competitive. In the summer of 2022, the company then laid off 180 employees. Tier currently has 1,400 employees. Now the company wants to become profitable as quickly as possible, otherwise there is a risk of further cuts.

Electronics equipment rental company Grover also recently laid off 40 employees, according to a report by industry service Grover himself gave no exact numbers. Regarding the plans for 2023, the company announced that there was “no general hiring freeze”.

The logistics start-up Forto, like Tier and Grover a unicorn from Berlin, laid off ten percent of its employees in November. In the meantime, the company is slowly recruiting staff again.

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Digital entrepreneur Katharina Wolff says that tech companies “hired too many in 2021 and these jobs have now been cut again. This contributes to the long-term recovery of the industry.” The companies themselves now see themselves well positioned after the layoffs.

Unicorns like Celonis and Personio create new jobs

According to a Handelsblatt survey, many German unicorns are currently even recruiting staff. The solar system rental company Enpal has currently advertised 200 jobs. In its own academy, the company offers two-week training courses for photovoltaic technicians and further education for electricians in order to counteract the shortage of skilled workers. However, the solar company only raised a financing round of 215 million euros at the start of the year and can therefore invest money in job creation – moreover, unlike most unicorns, Enpal is profitable.

The Cologne-based online translator DeepL, which rose to become a unicorn at the beginning of 2023, is also investing the money it has collected in expanding its workforce – the company currently has around 450 employees worldwide, compared to around 250 a year ago. Another expansion is planned for 2023.

Layoffs at start-ups

In Germany, too, some young companies are shedding staff. It is still unclear whether a wave of layoffs similar to that in the USA is imminent.

(Photo: imago images/Ikon Images)

The Chemnitz-based software company Staffbase increased its workforce by 60 percent in 2022. Business continues to grow, says company boss Martin Böhringer. The process management software provider Celonis from Munich currently has 300 vacancies, the hydrogen specialist Sunfire from Dresden wants to create around 70 jobs.

Thanks to the diversification and professionalization in the technology industry, Daniel Breitinger from the Bitkom industry association also expects further growth despite the crisis and says: “The chances are good that those who have been made redundant will soon be employed by such a company.”

Some companies are therefore now growing more cautiously: the logistics start-up Sennder, the long-distance bus provider Flix or the neobank N26 are hiring in a more targeted manner and concentrating on certain areas. Fintech Scalable Capital plans to create around 40 jobs in the current year based on strategic priorities.

The personnel service provider Personio also wants to fill 200 more jobs, after 700 new employees in 2022. Company boss Hanno Renner is planning “due to the unclear economic situation, however, with somewhat slower growth than in previous years.”

More: What is behind the layoffs and why Apple could be spared

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