Wealthsimple is reportedly laying off 13% of its staff members as the financial services firm joins the slew of global technology businesses facing market “immense volatility.”
In a letter to staff of the Toronto-headquartered company on Wednesday, CEO Michael Katchen noted that 159 of the 1,262 professionals who work for Wealthsimple will be leaving the firm through the move.
He added that the job cuts were a part of the fallout from months of seeing the market soar and Wealthsimple grow at a record rate amid the COVID outbreak.
The firm’s valuation reached $5 billion and it secured $750 million from a notable list of investors such as rap artist Drake and actors Ryan Reynolds and Michael J. Fox, as funds poured into the technology sector during the Coronavirus crisis.
Katchen wrote to company staff:
“Of course volatility works both ways, and we’re seeing the other side of it now as the pandemic market conditions unwind. Many of our clients are living through a period of market uncertainty they’ve never experienced before.”
The changing conditions mean the firm may now focus more on core businesses, such as investing and banking, and products the CEO thinks can accelerate financial innovation, like those within the cryptocurrency sector.
Wealthsimple noted that it would reduce its investment in other areas such as P2P payments, tax, and merchant services and restructuring teams focused on recruiting, marketing, client success and research.
The firm’s management added that today “is going to be hard — there’s no getting around it.”
However, the company’s mission “has never been more important.”
Wealthsimple’s job cuts have been announced as global technology firms are getting ready for a market correction and potential recession as the excessive hype around technology stocks starts to fade. Notably, some share prices have dropped as much as 50% from their COVID-19 highs.
Netflix, Klarna, Cameo and Bolt are among the firms that have announced layoffs, while others are freezing hiring.
Tech incubators such as the DMZ in Toronto and Communitech in Waterloo, Ontario have been advising startups to add to their cash reserves, get ready for significantly fewer investments from VCs and focus more on revenue-generating segments of their companies.
Wealthsimple was established back in 2014 by Katchen and is mainly owned by Power Corp.