Layoffs hit the startup world quickly, Hurt hospitality and travel starts, as well as recruitment and Scooter companies. New data show that some of these layoffs caused by COVID-19 may have a disproportionate impact on the satellite campus.
Satellite offices are inherently subordinate to the headquarters of a startup. Opening smaller offices is a strategic step when a company gets a new round of financing or wants to expand into a new market. We have seen satellite offices in cities like Portland, Phoenix, or Austin that have satellite offices for Apple. For example Facebook and Oracle.
While most layoffs come from companies headquartered in the Bay Area's major business centers and New York City, actual employees are located in the satellite cities, according to redundancies, a tracker created by former Y Combinator graduate Roger Lee.
EasyPost 75 people were fired in San Francisco, almost all in Salt Lake City and Louisville. Challenger Bank based in the UK Monzo recently fired 165 customer care representatives in Las Vegas.
Boston-based Toast fired 1,300 employees, or 50% of all staff. Layoffs.fyi said 12% of these layoffs were in Omaha and another 10% in Chicago.
KeepTruckin, based in San Francisco and most recently worth $ 1.25 billionfired around 350 employees, and 33% of these employees were in Nashville or Chicago.
These numbers represent only a fraction of the total layoffs across the country, as the Layoffs.fyi data set contains only publicly disclosed measures and tips. But even if the data is just an anecdotal snapshot, this is an important clue.
What the dates mean
Once the economy has returned to normal, it is unclear whether the capitals or satellite cities can recover better. We met some investors in Boston, a top one Startup hub that has seen a number of layoffs latelyto hear their thoughts.
According to Lily Lyman, a partner of the Boston-based venture capital firm Underscore, satellite offices often have employees for sales, customer success and business development. Logistically, these roles are most vulnerable when consumer activity slows down. For many companies, there are currently no sales or transactions to be made.
"(These roles are) disproportionately influenced in (reduction of forces) as companies expect a slowdown on the commercial side," said Lyman. "Although extending the runway is a logical decision, there is a risk that this payout could damage relationships with customers that may be difficult to restore."
Not everyone sees cuts the hardest in satellite offices. Michael Skok, another Underscore partner, said, "In some cases, we have seen satellite offices set up in emerging markets that are cost-saving, so these offices may be better protected during these times." In other words, if you cut costs, spending on employees in San Francisco can be higher than spending on employees in Denver because the former have exorbitantly high living costs. Revolution ventures, The company, which invests in start-ups in emerging tech scenes, has not heard of satellite office layoffs from its portfolio until recently.
And finally, to put it bluntly, layoffs in a city outside of headquarters could suppress some of the negative signals that founders and venture capitalists are trying so hard to avoid (Well, at least most of them). Losing weight on operations becomes a proactive response, not a reactive strategy, as the pandemic continues to develop.
Today's data reminds us that layoffs are rarely a one-off event and that layoffs seem to be landing harder in less robust technical ecosystems.