Online bank challenger Wealthsimple Technologies Inc. has laid off 13 per cent of its employees as market conditions rock the technology sector, prompting a flood of job cuts in recent weeks.
During a company-wide meeting on Wednesday, Wealthsimple chief executive officer Michael Katchen announced that 159 employees, out of 1,262 who work for the company, would be laid off by the end of the day.
Wealthsimple was one of the most conspicuous beneficiaries of soaring valuations and venture capital interest during the pandemic. It became one of Canada’s most valuable private technology companies when it raised $750-million last year at a $5-billion valuation.
In 2020, Wealthsimple nearly doubled its assets under management to $9.7-billion over the previous year. But Mr. Katchen says clients are now “living through a period of market uncertainty they’ve never experienced before.”
As a result of the market conditions, Mr. Katchen said in a memo to employees after the meeting, the company must be “laser focused” on its core businesses, such as investing and banking. He also stressed the importance of Wealthsimple’s cryptocurrency offerings, even though crypto markets have plummeted and the price of bitcoin has dropped by 65 per cent since November.
At the same time, Mr. Katchen said, the company will reduce investments in areas such as peer-to-peer payments, and tax and merchant services, and will restructure teams in recruiting, marketing, client success and research.
Wealthsimple put a hold on hiring last week, and just over a month ago, its largest shareholder, IGM Financial, revealed it had written down the value of its stake in the company by 20 per cent as the sell-off of publicly traded technology stocks spread to private markets.
The layoffs are part of a sector-wide trend globally in which a number of unprofitable tech companies – particularly in the United States – slash operating expenses in an attempt to prolong the amount of time they can fund operations with existing capital. Additionally, a shortage of workers in the tech industry led to sharp increases in compensation.
According to website Layoffs.fyi, which tracks tech-sector layoffs globally, the second quarter has already been the biggest three-month period for staff reductions since early in the pandemic, with 169 rounds of cuts, resulting in 28,774 job losses as of Wednesday. Many U.S. tech companies have frozen hiring, including Facebook parent Meta Platforms Inc., Salesforce Inc. and Intel Corp.
In Canada, Toronto-based Swyft Technologies Inc., an e-commerce delivery startup backed by Shopify Inc., laid off about 30 per cent of its staff this week, adding to a wave of Canadian startups that stopped hiring or laid off workers this month.
Wealthsimple is the first major tech company in Canada to announce layoffs that surpass 150 employees. Unlike some of its peers, however, Wealthsimple is backed by one of the country’s largest financial institutions – IGM Financial, a subsidiary of Power Corp. of Canada, which holds a 23-per-cent stake in the company. This could help ease the pain for many of the laid-off workers.
Power Corp. was one of Wealthsimple’s first public investors in 2015. Over the years, Power Corp – through IGM and another subsidiary, Canada Life – has supported Wealthsimple’s growth in additional rounds of funding. (Power Corp. did sell a $500-million stake back to Wealthsimple in the latest round last year, reducing its overall equity interest.)
Now, IGM and Canada Life are stepping in to assist those impacted by the layoffs, guaranteeing job interviews to those interested in working for them.
In its staff memo, Wealthsimple also said employees would be offered “generous” severance, extended health and dental coverage, and accelerated vesting of equity for those who have not reached required timelines. They will also be allowed to keep their company laptops and home office equipment.
With a report from Sean Silcoff
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