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Unless you’ve been living under a rock, there’s no way you haven’t heard this term: startup. Startups have been around for decades, but they have gained even more attention these days, attracting a growing share of the workforce, especially fresh graduates.
Do you know what a startup is? A startup or start-up company is a new business that is still in the early phases of development, working to establish its niche.
When people talk about startups, they usually refer to companies offering tech-based services. Compared to traditional businesses, these companies have grown exponentially.
With their rapid expansion, startups often disrupt the economy. Some even achieve unicorn status, meaning they are valued at over USD 1 billion (approx. IDR 14 trillion, assuming an exchange rate of USD 1 = IDR 14,000).
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However, behind these staggeringly high valuations, many startups are forced to resort to layoffs. This shows that not every startup skyrockets—many just crash.
News of mass layoffs at startups has become increasingly common,to the point where it’s now considered normal. But why are startups so prone to layoffs?
A local digital banking startup that recently laid off employees said that they had to go that route as the company has been experiencing the worst macroeconomic impact in the last few decades.
The macroeconomic climate greatly affects the industry, forcing startups to adapt to the new dynamics, as well as consolidate and streamline their business processes to ensure their survival.
Meanwhile, a fintech startup admitted that layoffs were necessary as part of a restructuring process.
By reorganizing their workforce to suit the roles better and to align more with business priorities, they hoped to reach optimum growth with a highly efficient team. They also see restructuring as a way to facilitate streamlined business operations.
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Every startup has its own reason for cutting employees. But what do the experts say?
A digital economy expert suggests that the primary reason behind startup layoffs is their reliance on external funding to stay afloat.
Many startups adopt a money-burning strategy, aggressively spending vast amounts of capital to gain market share quickly.
This strategy renders them dependent on funding rounds from venture capitalists and other investors. However, with the current global economy, funding for startups is diminishing.
As the global economy becomes more uncertain, investors are becoming more selective. Many now avoid high-risk startups, particularly as inflation and interest rates rise worldwide.
For startups to survive, they must move away from this unsustainable strategy and become financially independent. One way to do this is by prioritizing revenue generation and maintaining positive cash flow.
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Now you understand why many startups resort to layoffs. If you are considering joining a startup, it is essential to thoroughly research and gain a deep understanding of the company’s condition.
Most importantly, choose a company that can sustain its business and maintain steady growth, such as PT Serasi Autoraya or SERA. As part of the Astra Group, SERA has been in business since 1990, specializing in the transportation and logistics industry, and serves as the parent company of TRAC, SELOG, and IBID.