Stripe has issued a statement that it has cut 14% of its workforce as the challenging economy of sky-high inflation, rising interest rates, and slowing business activity hits home. Stripe said they expect to return to their February headcount of 7000 employees.
In a letter posted on the Stripe website, founder and CEO Patrick Collison said that emails have been sent notifying individuals who were being let go, claiming they have “overhired.”
Collison said while the Stripe business was “fundamentally well positioned,” they need to “match the pace of investment with the reality that surrounds us all.
“The world is now shifting again. We are facing stubborn inflation, energy shocks, higher interest rates, reduced investment budgets, and sparser startup funding. (Tech company earnings last week provided lots of examples of changing circumstances.) On Tuesday, a former Treasury Secretary said that the US faces “as complex a set of macroeconomic challenges as at any time in 75 years”, and many parts of the developed world appear to be headed for recession. We think that 2022 represents the beginning of a different economic climate.”
The ominous tone is being shared by a growing number of firms and with the Federal Reserve raising interest rates by 75 bps this week with more to follow – things are poised to become even more difficult.
Collison announced a generous severance package of 14 weeks and more for employees who have been with the firm for a longer period of time. 2022 bonuses will be paid for all fired employees.
Another benefit is that Stripe will pay the cash equivalent of 6 months of existing healthcare premiums or healthcare continuation.
Collison said they will “reset, recalibrate, and move forward.”
The Federal Reserve has found themselves boxed into a corner where they must move rapidly to crush sticky inflation. Many observers have criticized the central bank for being too accommodative for far too long. At the same time, the current Administration has pursued legislation that is very inflationary, with trillions of dollars in the pipeline, making the Fed’s job that much harder.
While other firms, including Fintechs, have announced layoffs, you can expect more large companies to do the same, as higher unemployment is one way to curb too much demand.