On June 9, Tifin CEO Vinay Nair emailed employees to update them on the status of the company.
In order to “rightsize” the adviser fintech startup for the current market environment, Nair laid off 10% of the company’s workforce (more than 20 people) and asked nine members of Tifin’s leadership team, including himself, to take a 20% pay cut, he said. Employees received the email, which was obtained by InvestmentNews, less than one month after Tifin closed a $109 million round of funding, valuing the startup at $842 million and bringing its total fundraising over 18 months to $204 million.
The company is done making cuts, which helped reduced Tifin’s costs by $10 million, Nair said in the email.
“These were not easy decisions,” he wrote, adding that the Tifin looked especially at time spent with the company to make decisions. “We had a target cost and we did this exercise across functions with duration as the main variable and only the absolute stars made it through this unreasonably tough standard.”
The company declined comment. Nair acknowledged the cuts on LinkedIn and attributed them to an “anticipation of tougher capital markets.”
Tifin isn’t the only fintech startup feeling the bite of the bear market. Wealthsimple, the Canadian robo-adviser that sold its U.S. book of business to Betterment in March 2021 and recently raised $610 million, laid off 13% of its workforce (about 159 people), according to TechCrunch. Cryptocurrency exchange Coinbase laid off 18% of its employees, or about 1,100 people, NPR reported.
More than 2,500 employees working across fintech have already lost their job in the month of June, according to data from Layoffs.fyi. Thousands more had been cut throughout the spring.
“When [JPMorgan Chase CEO] Jamie Dimon talks about hurricanes, a lot of people tend to listen,” said Jud Mackrill, general partner of venture capital firm Mammoth. “I think people are uncertain about what’s to come.”
It isn’t just the labor force feeling the squeeze. Y Combinator, a technology startup accelerator that has helped launch some of the biggest names in technology — Stripe, Airbnb, Coinbase and Dropbox, to name just a few — sent a letter in May advising startup founders to “plan for the worst” as many encounter a bear market for the first time. As reported by TechCrunch, Y Combinator suggested that firms cut costs and look to extend their runway within the next 30 days.
Venture capital may not be as easy to come by as it was during the market's 13-year bull run, Y Combinator said in the letter.
“For those of you who have started your company within the last 5 years, question what you believe to be the normal fundraising environment. Your fundraising experience was most likely not normal and future fundraises will be much more difficult,” Y Combinator wrote. “If your plan is to raise money in the next 6-12 months, you might be raising at the peak of the downturn. Remember that your chances of success are extremely low even if your company is doing well.”
The bull market led some companies to be a little carefree and spend more than perhaps they should, Mackrill said. Now they will have to trim back, refocus on their core products and simplify the business, he said.
“There are a lot of fintech companies that are more ideas or aspirations than truly proven business models,” Mackrill said. “I think a lot of times people start businesses hoping they find a fit, versus finding a fit, then starting a business.”
Not every fintech company is tightening the belt. Australian fintech Lumiant, which recently raised $3 million to expand in the U.S. wealth management market, is actively looking to grow its workforce this month, said U.S. CEO Blake Wood.
Because Lumiant charges a flat subscription fee rather than a percent of assets under management, the market’s movements won't affect its topline revenue, Wood said. He also believes a down market helps demonstrate the value of technology like Lumiant's, which helps advisers engage with clients on subjects beyond portfolio performance and retirement saving.
“We are aligned with industry trends,” Wood said. “We still see a lot of strong interest in our niche of fintech.”
Fintech companies serving advisers may in a better position than the broader fintech ecosystem. While funding in “wealth tech” dropped 8% quarter-over-quarter in the beginning of 2022, funding in the broader fintech market fell 18%, according to data from CB Insights. Even with the drop, nine companies raised at least $100 million, a drop of just 3% from the previous quarter.
That doesn’t mean everything is full speed ahead. Even though Lumiant is still hiring, it has taken some precautions for an extended bear market, such as managing its marketing budget and reducing spending on things like travel, Wood said.
“You’re seeing a lot of headlines where valuations are going down, so firms are getting more restrictive on their spend,” he said. “I think that’s the right approach.
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