Online banking rival Wealthsimple Technologies Inc. has laid off 13% of its employees as market conditions shake up the tech sector, causing a slew of job cuts in recent weeks.
During a company-wide meeting on Wednesday, Wealthsimple CEO Michael Katchen announced that 159 employees, out of 1,262 working for the company, would be laid off at the end of the day.
Wealthsimple was one of the most notable beneficiaries of the increase in valuations and interest on venture capital during the pandemic. It became one of Canada’s most valuable private technology companies when it raised $ 750 million last year with a valuation of $ 5 billion.
In 2020, Wealthsimple nearly doubled its assets under management to $ 9.7 billion from the previous year. But Mr. Katchen says customers are now “experiencing a period of market uncertainty that they have never experienced before.”
As a result of market conditions, Mr. Katchen said in a note to employees after the meeting that the company should be “laser-focused” in its core business, such as investing and banking. He also stressed the importance of Wealthsimple’s cryptocurrency offerings, even though cryptocurrency markets have plummeted and the price of bitcoin has dropped 65 percent since November.
At the same time, Mr. Katchen, the company will reduce investments in areas such as peer-to-peer payments and tax and commercial services, and restructure hiring, marketing, customer success and research teams.
Wealthsimple suspended hiring last week, and just over a month ago, its major shareholder, IGM Financial, revealed that it had lowered the value of its stake in the company by 20% as a sale of listed technology stocks. widespread in private markets.
Layoffs are part of a global industry trend in which several unprofitable technology companies, especially in the United States, are cutting operating costs in an attempt to extend the time they can fund operations with existing capital. In addition, the shortage of workers in the technology industry led to a sharp increase in compensation.
According to the website Layoffs.fyi, which tracks the layoffs of the technology sector worldwide, the second quarter has already been the largest three-month period of staff reductions since the beginning of the pandemic, with 169 fences cut , which has meant the loss of 28,774 jobs until Wednesday. . Many U.S. technology companies have frozen hiring, such as Meta Platforms Inc., Salesforce Inc. and Intel Corp.
In Canada, Toronto-based e-commerce delivery company Swyft Technologies Inc., backed by Shopify Inc., laid off about 30% of its staff this week, joining a wave of Canadian startups stop hiring or firing workers that same year. month.
Wealthsimple is Canada’s first large technology company to announce layoffs of more than 150 employees. However, unlike some of its peers, Wealthsimple has the support of one of the largest financial institutions in the country: IGM Financial, a subsidiary of Power Corp. of Canada, which has a 23% stake in the company. This could help alleviate the pain of 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. sold a $ 500 million stake in Wealthsimple in the last round last year, reducing its overall stake.)
Now, IGM and Canada Life are stepping in to help those affected by the layoffs by securing job interviews for those interested in working for them.
In its staff note, Wealthsimple also said that employees will be offered “generous” compensation, expanded health and dental coverage and accelerated capital acquisition for those who have not met the required deadlines. They will also be allowed to store their company’s laptops and home office equipment.
With a report by Sean Silcoff
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