Stripe lays off 14% of workers

Online payments giant Stripe is laying off around 14% of its staff, CEO Patrick Collison wrote in a memo to staff on Thursday.

In the memo, Collison said the cuts were necessary amid rising inflation, fears of a looming recession, higher interest rates, energy shocks, tighter investment budgets and more scarce start-up funding. Taken together, these factors signal “that 2022 represents the start of a different economic climate,” he said.

Collison acknowledged that the company’s management made “two very consequential mistakes” when it misjudged the growth of the internet economy in 2022 and 2023, and when it increased operating costs too quickly.

Stripe said its workforce will be reduced to around 7,000 employees, meaning the layoffs will affect around 1,100 people. A Stripe spokesperson was not immediately available to provide the exact number of affected employees.

The cuts will affect many Stripe divisions, though most will occur in recruiting as the company plans to hire fewer people next year, Collison said in the memo.

In addition to laying off staff, Stripe intends to contain costs across the business, Collison said.

Earlier today, Stripe CEO Patrick Collison sent the following note to Stripe employees.

Hi people —

Today we’re announcing the toughest change we’ve had to make at Stripe to date. We are reducing our team size by approximately 14% and saying goodbye to many talented Stripes. If you are one of those affected, you will receive an email notification within the next 15 minutes. For those of you leaving: we are so sorry to take this step and John and I are fully responsible for the decisions leading up to it.

We’ll give you more details later in this email. But first, we want to share a larger context.

The world around us

At the start of the pandemic in 2020, the world turned to e-commerce overnight. We have seen significantly higher growth rates during 2020 and 2021 compared to what we have seen previously. As an organization, we have moved to a new way of operating and our revenue and payment volume have since more than tripled.

The world is changing again. We face persistent inflation, energy shocks, higher interest rates, shrinking capital budgets and scarcer start-up funding. (Last week’s tech company earnings provided many examples of changing circumstances.) On Tuesday, a former Treasury secretary said the United States faces “as complex a set of macroeconomic challenges as at any time. in 75 years”, and many parts of the developed world. the world seems to be headed for recession. We believe that 2022 represents the start of a different economic climate.

Our business is fundamentally well positioned to weather difficult circumstances. We provide an important foundation for our customers and Stripe is not a discretionary service that customers turn off if budget is tight. However, we must adapt the pace of our investments to the realities around us. Doing the right thing for our users and shareholders (including you) means accepting reality as it is.

Today, that means building differently for tougher times. We have always prided ourselves on being a capital efficient company and we believe this attribute is important to preserve. To appropriately adapt to the world we are heading into, we need to reduce our costs.

How we manage departures

Approximately 14% of Stripe employees will leave the company. We, the founders, made this decision. We’ve been overhired for the world we find ourselves in (more on that below), and it pains us that we can’t deliver the experience we hoped those affected would have at Stripe.

There’s no right way to lay off, but we’ll do our best to treat everyone who leaves as respectfully as possible and do whatever we can to help. Some of the basic details include:

  • Severance pay. We will pay 14 weeks of severance pay for all departing employees, and more for those with more seniority. That is, those who leave will be paid until at least February 21, 2023.
  • Prime. We will pay our 2022 annual bonus for all departing employees, regardless of their departure date. (It will be pro-rated for those hired in 2022.)
  • PTO. We will pay for all unused PTO time (including in regions where it is not legally required).
  • Health care. We will pay the cash equivalent of 6 months of existing health care or health care continuation premiums.
  • Acquisition of RSUs. We will accelerate anyone who has already reached their one-year vesting threshold to the February 2023 vesting date (or later, depending on the start date). For those who have not reached their acquisition cliffs, we will 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 deciding to start a new business now or in the future.
  • Immigration assistance. We know this situation is particularly difficult if you are a visa holder. We have extensive dedicated support for those of you here on visas (you’ll get an email setting up a consultation in a few hours), and we’ll support transitions to non-employment visas wherever we can.

Most importantly, while this is certainly not the separation we would have wanted or imagined when making hiring decisions, we want everyone leaving to know that we care about you as former colleagues and appreciate everything you have done for Stripe. In our mind, you are valued graduates. (To do this, we’re creating email addresses for everyone who leaves, and we’ll be rolling it out to all former employees in the coming months.)

We will be setting up a live, 1-1 conversation between each departing employee and a Stripe manager over the next day. If you’re part of an impacted group, look for a calendar invite.

For those not concerned, there will be some bumps over the next few days as we navigate many changes at once. We ask that you help us do good for Stripe users and Stripes who leave us.

Our message to other employers is that there are a lot of really great colleagues out there who can and will do great things elsewhere. Talented people come to Stripe because they are drawn to tough infrastructure issues and complex challenges. Today, that doesn’t change anything, and they would be fantastic additions to almost any other business.

Go forward

In making these changes, you might reasonably wonder if Stripe management made any errors in judgment. We would go further than that. In our opinion, we made two very serious errors, and we want to highlight them here because they are important:

  • We were far too optimistic about near-term growth for the internet economy in 2022 and 2023 and underestimated both the likelihood and impact of a broader downturn.
  • We have increased operating costs too quickly. Building on the success we’re seeing in some of our new product areas, we’ve let coordination costs rise and operational inefficiencies creep in.

We will correct these errors. So, in addition to the headcount changes described above (which will bring us back to our February headcount of nearly 7,000), we have all other cost sources firmly under control. The world is hard to predict right now, but we anticipate these changes will allow us to generate robust cash flow in the coming quarters.

We are not applying these staffing changes consistently across the organization. For example, our recruiting organization will be disproportionately affected as we hire fewer people next year. If you want to see how your organization is impacted, Home will be up to date at 7:00 a.m. PT.

We will soon describe what this means for our business strategy. Nothing in it will change drastically, but we will be making some significant changes that make sense for the world we’re heading into and tightening up our prioritization significantly. Expect to hear more about that over the next week.

While today’s changes are painful, we are very excited about the prospects for innovative companies and Stripe’s position in the internet economy. The data we see is consistent with this encouraging picture: we signed 75% more new customers in Q3 2022 than in Q3 2021, our competitive win rates are still improving, our growth rates remain very strong and on Tuesday, we set a new record for the total volume of daily transactions processed. Our small users (many of whom are just “big customers who aren’t big yet”) are, overall, growing extremely rapidly, which shows that there are plenty of tech S-curves left in the early innings. and that our customers remain incredibly resilient in the face of major global challenges.

People join Stripe because they want to grow the internet economy and drive entrepreneurship around the world. In times of economic crisis, it is all the more important that we find innovative ways to help our users grow and adapt their businesses. Today is a sad day for everyone as we say goodbye to a number of talented colleagues. But we’re ready for a launched effort, and we’re putting Stripe on the right footing to handle it.

For the rest of this week, we’ll be focusing on helping people who are leaving Stripe. Next week we will reset, recalibrate and move forward.

Patrick and John

This news is growing. Please check for updates.


Add Comment