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Confirmed: Practice Fusion Lays Off 25% Of Workers To Create Positive Cash Flow

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Practice Fusion, a startup digitizing electronic health records (EHR) for hospitals and healthcare facilities, confirmed to TechCrunch that it trimmed a quarter of its workforce today in an effort to become cash flow positive.

The layoffs were across the board, including engineering, product, marketing and customer success departments and affect roughly 74 people.

CEO Tom Langan announced the company was letting workers go in a company meeting this morning. He told TechCrunch he believes the startup is doing well (it announced a 70 percent year-over-year growth in revenue last summer), but the move was necessary to get the business in the black.

Practice Fusion has received $150 million in funding from a bunch of investors in the Valley and is preparing for an IPO in 2017. The company’s founder Ryan Howard stepped down as CEO in August, replaced by Langan. The layoffs are likely part of a strategic move by Langan to get the company ready to go public.

But it could also be part of a larger trend. We’re starting to hear of more layoffs and rumors of layoffs in Silicon Valley – Zoosk laid off a third of its staff in January.

Is there cause for concern? The market is rough, and seems to be getting rougher and there wasn’t a single tech IPO in all of January.

Kleiner Perkins’ Beth Seidenberg, who is an investor in Practice Fusion, told TechCrunch that while there is definitely some market volatility, alarm bells are not going off here.

“No, it doesn’t worry me at all. Across the portfolio, revenue driving companies are reducing their burn rates. This will give them many more options to grow their businesses,” Seidenberg said.

We will have to wait and see if the layoffs are enough to get the company where it wants to be, pre-IPO.