Frankfurt The celebratory mood is followed by disillusionment: just a week after the Berlin neobroker Trade Republic announced the expansion of its last financing round by 250 million euros and thus increased its valuation to five billion euros, the fintech is parting with some employees.
A restructuring was announced to employees in an internal townhall meeting on Thursday. A spokeswoman for Neobroker said: “Yesterday we presented to our employees how we focus in order to achieve our strategic goals: In the future we want to position ourselves more specifically on the product side and see what contributes to profitability in the short term.” continue to focus on technology and automation in internal processes as well.
The consequence: Some employees have to leave the company, others are given new tasks. In a post on LinkedIn, a person affected, who appears to have just been hired at Trade Republic, writes: After the announcement about the financing round at the end of last week, “I celebrated with my new colleagues and I thought that I had absolutely made the right decision”. . But only a few days later he was released.
However, new employees would also be added, for example in the software area, according to the spokeswoman, who emphasizes that Trade Republic is not on a consolidation course. “We will maintain the company size of 700 employees,” she said. First, the industry newsletter “Finance Forward”/”Finanz-szene” reported on the layoffs at Trade Republic.
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The spokeswoman did not want to give any information on how many employees had to leave the company. At the end of May 2020, the number of employees was 150, compared to 400 a year ago.
The announcement of the redundancies is not surprising after the recent expansion of the financing round. Lars Hornuf, Professor of Financial Services at the University of Bremen says: “The current market situation with war, inflation and the expectation of rising interest rates is putting enormous pressure on fintechs to become profitable more quickly.” need, the pressure from investors to act quickly is increasing, he says.
Profitability in the foreground
This is also confirmed by Volker Brühl, Professor of Banking and Finance and Managing Director at the Center for Financial Studies at Goethe University in Frankfurt: “Just a year ago, fintechs could choose their investors,” he says. Now the conditions are much tougher. “The idea of efficiency has come to the fore, the profitability limit should be reached quickly.”
In addition, numerous fintechs have grown extremely quickly in the past. “Now they have to look at which areas are working and where staff can possibly be reduced,” says Brühl.
In the annual report published at the end of last year, Trade Republic reported a net loss of EUR 10.2 million for the period from October 2019 to September 2020. Figures for 2021 are not yet known.
It is questionable when as much money will be invested again as in the past. Last year, investors invested a total of 4.6 billion euros in fintechs in Germany. That is almost 2.6 times as much as in the previous record year 2019, as determined by Comdirect and Barkow Consulting. According to Hornuf, this liquidity will no longer be available in the next few years.
Klarna and Nuri have already cut jobs
Trade Republic is not alone with the restructuring. At the end of May, Europe’s most valuable start-up, Klarna, announced that it would cut 700 out of 7,000 jobs. A step that was apparently necessary because the Swedish payment service provider has made increasingly high losses.
Last year, the shortfall quintupled to almost 7.1 billion Swedish crowns (currently 670 million euros). And although more and more transactions are going through Klarna, the minus in the first quarter of 2022 was even higher than in the same period of the previous year.
Like other fintechs, Klarna spends a lot of money to attract new customers. That seems to be making investors nervous. As the US financial newspaper “Wall Street Journal” recently reported, Klarna would be valued about a third less than last time as part of a possible new round of financing. A year ago, Klarna valued it at nearly $46 billion. Now it could be around 30 billion dollars. The company does not comment on this.
The Berlin neobank Nuri also parted ways with about 45 of the 200 employees at the end of May. Nuri boss Kristina Walcker-Mayer justified it as follows: “The turnaround in interest rates in the USA, the rapidly increasing inflation and the Ukraine war are leading to uncertainty on the financial market and result in a change of strategy at Nuri.”
Now more than ever, companies must show that they are on the path to profitability: away from pure user growth towards higher sales and correspondingly lower costs, she said.
Insurtechs create jobs
But not all fintechs are cutting jobs. Insurance start-ups in particular are planning further job creation, such as the Berlin insurtech Wefox. Wefox says, “We are still hiring across Europe and currently have 150 vacancies in a wide variety of departments.
No cuts of the currently 1200 jobs are planned for this year. Insurance manager Clark is also looking for employees. “Our focus here is on insurance specialists for sales, developers and people who support the backend,” said the insurtech.
A Solarisbank spokesman also said on request that the Berlin neobank had grown very strongly in recent years and now has over 700 employees at eight locations in Europe and India. “We want to continue this growth this year as well,” it says.
Germany’s largest fintech N26, last valued at nine billion dollars (8.5 billion euros), currently has no intention of reducing the number of its current 1,500 employees, the smartphone bank said. “We will continue to invest strategically in the growth of our team with a focus on product, technology, compliance and financial crime prevention.”
Raisin, on the other hand, declined to comment on whether the company plans to cut jobs. The interest platform, which has merged with the competitor Deposit Solutions, only explains that the number of employees has constantly increased and is currently 620.
more on the subject: Trade Republic collects another 250 million euros