Rappi and Oyo pare staff as Vision Fund companies trim costs, target profits

This week we’ve covered layoffs at unicorns both inside the Vision Fund and out. This afternoon we add two more to our list: Oyo and Rappi.

The staff reductions are surprising — and not. They are surprising, as Oyo (India-based, low-cost hotels) and Rappi (Latin America-focused e-commerce) were bright lights in the Vision Fund’s crown. And the layoffs are not surprising as other famous unicorns have recently cut staff in a bid to reduce costs, diminish losses and aim closer to profitability.

Our net lack of shock is underscored by the Vision Fund itself, which signaled late last year that it wants portfolio companies to get profitable and get public. The cuts are therefore a little more than unsurprising; we should have anticipated them.

A lesson from watching hypergrowth unicorns like Luckin Coffee is worth retelling here; when Luckin was blowing up as a private company, the state of its financials were occluded; private companies mostly won’t tell you a damn thing unless it makes them look delightful.

Then we got our hands on its F-1 and, golly gee, did it lose money. In the first quarter of 2019, Luckin lost $82.2 million against revenue of $71.3 million, a net margin of worse than -100%. (In its most recent quarter, sales of $215.7 million led to a more modest $74.4 million net loss.)

But Luckin’s ability to pull off an IPO — and grow its market value afterwards — while losing as much as it did looks more and more like an anomaly after what the markets once did to Snap; especially in the wake of the Uber, Lyft and WeWork IPOs, only two of which made it across the line and just one priced where it wanted to.

For Rappi and Oyo, then, perhaps huge raises and fast growth led to overspending (see Getaround’s notes on its operations from earlier today for more on the same point). And the cure to overspending is curbing burn, often through staffing eliminations.

Details

Oyo, which has raised billions of dollars during its short life, has cut “5% of its 12,000 employees in China partly due to non-performance, while dismissing 12% of its 10,000 staff in India,” according to Bloomberg. Those numbers are not terrifying in terms of their percentage. But what those percentages imply, given the size of Oyo’s staff, is notable. Doing the sums, 5% of 12,000 is 600 people and 12% of 10,000 is 1,200 people.

Rappi is cutting a similar 6% of its staff, according to Reuters. The numerical scale of the staff reductions isn’t known. In a statement provided to TechCrunch confirming the figure, the company made a few notes worth sharing. First, that the cuts will, in its framing, allow it to “double down on our technology team and to focus on our user experience.” I read that as indicating that Rappi is cutting headcount in one area to allow it to hire more in another.

The company also stressed that the choice to cut staff was not driven by SoftBank, who Rappi called “one of [its] most valuable investors.” You can read that however you’d like, but I’d take it to imply that Rappi doesn’t want to irk one of its key shareholders.

Context

The list of unicorn layoffs is getting long. Indeed, the topic has quickly risen in our coverage here at TechCrunch, including a look back at the somewhat difficult year for Vision Fund portfolio companies coupled to 2019 and 2020 layoffs at scooter unicorns Bird and Lime. This post merely continues the trend.

The unicorn era, once a seemingly unstoppable juggernaut, now appears to have entered a new phase; a period in which losses are odious, and expensive growth suspicious. Efficient expansion, adjusted profit and limited cash burn? That’s investor catnip.

Build your startup accordingly.