European venture capitalists have reportedly urged tech startups to cut costs and stop hiring as economists predict another recession.
Following a stellar 2021 that was laced with mega funding rounds and IPOs, some of the most valuable European startups are now relieving a significant number of staff and upscaling their expansion plans.
Michael Stothard, an early-stage investor at London’s Firstminute Capital, suggested that startups need to either slash their costs or try raising more capital.
Nathan Benaich, an Air Street Capital venture capitalist, stated that the overall industry has been suggesting firms be more conservative instead of sanctioning previously viable plans.
Benaich added that it is sensible to focus on the present business scenario instead of making long-term plans until companies get a proper market understanding.
Stride Founder Fred Destin commented that every startup receives customized advice, but general advice for entrepreneurs is to slash costs wherever possible.
Destin initiated investments into European unicorns like property platform Zoopla, car retailer Cazoo, and food delivery service Deliveroo.
Interestingly, there are indications that founders are listening to their investors.
Klarna, the Swedish fintech giant which became the most valuable startup in Europe last June when it was valued at USD 46 billion, announced a week ago that it plans to lay off 10% of its global workforce.
The BNPL (buy-now-pay-later) firm, which hires close to 6,500 people worldwide, is seeking to raise funds at a substantially lower valuation of USD 30 billion.
According to data provided by VC analysis firm Pitchbook, VCs are downscaling their investments despite having more cash than ever to understand the development of the economy.
Oscar White, Founder, and CEO of travel tech platform Beyonk stated that such a scenario creates problems for founders who raised funds at high valuation during the COVID-19 pandemic and are predicted to run out of funds in the next year.
Meanwhile, the rapid boom of grocery delivery in Europe is experiencing a grinding halt. A week ago, Gorillas and Getir announced to relieve hundreds of employees.