Stripe lays off 14% of workers

Patrick Collison, the CEO of Stripe, wrote in a memo to staff that the company is laying off about 14 percent of its workforce.

The cuts were necessary because of rising inflation, fears of a looming recession, higher interest rates, and tighter investment budgets. The beginning of a different economic climate is signaled by these factors.

The company's leadership made two very consequential mistakes byunderestimating how much the internet economy would grow in 2022.

Technology companies have announced layoffs and freezes in order to cut costs as the economy weakens. Meta has taken steps to rein in expenses. The companies that have announced layoffs are:

According to The Wall Street Journal, San Francisco-based Stripe became the most valuable U.S. startup last year with a valuation of $95 billion, but it reportedly lowered its internal valuation in July due to economic uncertainty and a tech downturn. It processes billions of dollars in transactions each year from the likes of Amazon, and it competes with other companies.

Roughly 1,100 people will lose their jobs as a result of the reductions at Stripe. The exact number of employees that were impacted was not available.

Most of the cuts will be in recruiting, as the company plans to hire fewer people, according to the memo.

The company plans to lay off staff and cut costs.

The full memo is here.

The CEO of Stripe sent a note to his employees.

Hello folks, I'm here.

The hardest change we have had to make so far is announced today. We are reducing the size of our team in order to say goodbye to many talented people. You will get a notification email within 15 minutes if you are affected. We are very sorry to be taking this step and we are responsible for the decisions that led up to it.

In this email, we will set out more detail. We want to give a bigger context.

The world we live in.

The world shifted to e- commerce at the beginning of the Pandemic in 2020. Over the course of the next two years, we saw a significant increase in growth rates compared to what we had seen before. Since transitioning into a new operating mode, our revenue and payment volume have grown more than 3 times.

The world is going in a different direction. Stubborn inflation, energy shocks, higher interest rates, and sparser startup funding are some of the problems we are facing. There were a lot of examples of changing circumstances provided by the tech company earnings last week. Many parts of the developed world appear to be headed for recession, and the US faces as complex a set of macroeconomic challenges as at any time in 75 years, according to a former Treasury Secretary. The beginning of a new economic climate is believed to be in 2022.

Our business is well-equipped to deal with harsh conditions. Stripe is not a discretionary service that customers turn off if budget is tight. We have to match the pace of our investments with reality. Doing right by our users and our shareholders requires embracing reality as it is.

Building differently is what it means today. Being a capital efficient business is important to us and we want to keep it. Reducing our costs is needed to adapt ourselves to the world we are headed into.

We're handling departures.

People are leaving the company at a higher rate. The decision was made by the founding team. We overhired for the world we are in, and it pains us to not be able to provide the experience that we hoped for.

We will do everything we can to help everyone leave as respectfully as possible, but there is no good way to do a lay off. The core details are included.

• Severance pay. We will pay 14 weeks of severance for all departing employees, and more for those with longer tenure. That is, those departing will be paid until at least February 21st 2023.
• Bonus. We will pay our 2022 annual bonus for all departing employees, regardless of their departure date. (It will be prorated for people hired in 2022.)
• PTO. We’ll pay for all unused PTO time (including in regions where that’s not legally required).
• Healthcare. We’ll pay the cash equivalent of 6 months of existing healthcare premiums or healthcare continuation.
• RSU vesting. We’ll accelerate everyone who has already reached their one-year vesting cliff to the February 2023 vesting date (or longer, depending on departure date). For those who haven’t reached their vesting cliffs, we’ll waive the cliff.
• Career support. We’ll cover career support, and do our best to connect departing employees with other companies. We’re also creating a new tier of extra large Stripe discounts for anyone who decides to start a new business now or in the future.
• Immigration support. We know that this situation is particularly tough if you’re a visa holder. We have extensive dedicated support lined up for those of you here on visas (you’ll receive an email setting up a consultation within a few hours), and we’ll be supporting transitions to non-employment visas wherever we can.

We want everyone that is leaving to know that we care about them and that we appreciate everything they have done for us. You are valued alumni by us. We are going to create alumni.stripe.com email addresses for everyone departing and we are going to give them to former employees as well.

We are going to have a live conversation between each departing employee and a Stripe manager on the next day. Look for a calendar invitation if you are in a group.

There will be some bumps in the road over the next few days for those not affected. We need your help to do right by Stripe users.

Our message to other employers is that there are many wonderful colleagues who will do great things elsewhere. Talented people come to Stripe to work on infrastructure problems. They would be great additions at most other companies.

In the future going forward.

You might wonder if the leadership made any mistakes in making these changes. We would go even further than that. Since they are important, we want to highlight them here.

• We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown.
• We grew operating costs too quickly. Buoyed by the success we’re seeing in some of our new product areas, we allowed coordination costs to grow and operational inefficiencies to seep in.

These mistakes will be corrected. We are reining in all other sources of cost in addition to the headcount changes described above. We expect these changes to set us up for robust cash flow generation in the quarters to come.

Across the organization, we are not applying these changes evenly. Our recruiting organization will be disproportionately affected since we will hire fewer people. Home will be up to date by 7 am.

The company strategy will be described soon. We're going to make some important edits that make sense for the world that we're headed into, and tighten up our prioritization considerably. There will be more on this over the next week.

We feel good about the future of innovative businesses and about the position of Stripe in the internet economy. We signed 75% more new customers in Q3 2022, our win rates are getting even better, and we set a new record for total daily transaction volume on Tuesday. Our customers remain impressively resilient in the face of the broader global challenges, as shown by the rapid growth of our smaller users, many of whom are just "big customers that aren't yet big"

The people join Stripe because they want to grow the internet economy. The times of economic stress make it more important that we find innovative ways to help our users. We say farewell to a number of talented colleagues today. We are putting Stripe on the right path to face it.

We are going to help the people who are leaving Stripe for the rest of the week. We will move forward next week.

Both Patrick and John are related.

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