Online payments giant Stripe plans to lay off about 14% of its employees, CEO Patrick Collison wrote in a memo to employees Thursday.
In the memo, Collison said the cuts were necessary amid rising inflation, fears of a potential recession with higher interest rates, energy shocks, tighter investment budgets, and tighter investment budgets. start-up funding is scarcer. Taken together, these factors signal “that 2022 represents the beginning of a different economic environment,” he said.
Collison admitted that the company’s management made “two very consequential mistakes” when it misjudged how well the internet economy would grow in 2022 and 2023, and when it increased operating costs too quickly.
Earlier today, Stripe CEO Patrick Collison sent the following note to Stripe employees.
Hello friends —
Today, we’re announcing the toughest change we’ve had to make at Stripe to date. We’re reducing our team size by about 14% and saying goodbye to a lot of Stripes talent in the process. If you are among those affected, you will receive an email notification within the next 15 minutes. For those of you leaving: we regret taking this step and John and I are solely responsible for the decisions that led to this step.
We’ll go into more detail later in this email. But first, we want to share some broader context.
The world around us
At the start of the pandemic in 2020, the world turned overnight towards e-commerce. We have seen significantly higher growth rates between 2020 and 2021 than we have seen before. As an organization, we transitioned to a new way of operating, and both our revenue and payment volume have since more than tripled.
The world is transforming again. We are facing stubborn inflation, energy shocks, higher interest rates, falling investment budgets and increasingly sparse funding for startups. (Last week’s tech company earnings provide plenty of examples of changing circumstances.) On Tuesday, a former Treasury secretary said the United States faces “a wide range of macroeconomic challenges.” complex as at any time in 75 years”, and many parts of the developed world appear to be headed for recession. We think 2022 represents the beginning of a different economic environment.
Our business is fundamentally well-positioned to withstand extreme circumstances. We provide a critical platform to our customers, and Stripe is not an arbitrary service that customers will turn off if budgets are tight. However, we need to match the pace of our investments to the reality around us. Doing it right by our users and our shareholders (including you) means accepting reality as it is.
Today, that means building differently for a leaner era. We have always prided ourselves on being a capital-efficient business and we think this attribute is important to preserve. To adapt to the world we’re heading into, we need to reduce our costs.
How we handle departures
About 14% of employees at Stripe will leave the company. We, the founders, made this decision. We’ve come to appreciate the world we’re in (world details below) and we regret not being able to provide the experience we hope those affected will have. Stripe.
There is no good way to go about doing layoffs, but we will do our best to treat everyone leaving as respectfully as possible and do whatever we can to help. Some of the core details include:
- Severance pay. We will pay 14 weeks of severance for all employees who are leaving and more for those with longer tenure. Meaning, those who depart will be paid until at least February 21, 2023.
- Bonus. We will pay an annual bonus in 2022 to all leaving employees, regardless of their departure date. (It will be prorated for those hired in 2022.)
- PTO. We will pay for all time the PTO is not in use (including in areas not legally required).
- Health care. We will pay the cash equivalent of 6 months of existing or continuing health care premiums.
- RSU vesting. We will be accelerating all those who have reached their one-year cliff to the match date in February 2023 (or longer, depending on departure date). For those who have not reached their cliffs, we will skip the cliffs.
- Career support. We will support careers and do our best to connect leaving employees with other companies. We’re also creating a new massive Stripe discount for anyone who decides to start a new business now or in the future.
- Immigration Support. We know that this situation is especially difficult if you are a visa holder. We have extensive dedicated support available to those of you here on visas (you will receive a consultation setup email within a few hours) and we will assist with the transition to a non-work visa do wherever possible.
Most importantly, while this is certainly not the separation we desire or imagine when making hiring decisions, we want everyone who leaves to know that we care as much about you as we do. old colleagues and appreciate all that you have done for Stripe. In our minds, you are highly regarded alumni. (In service of that, we are creating alumni.stripe.com email addresses for all departures, and we will roll this out to all former employees in the coming months.)
We’ll set up a one-on-one live chat between each departing employee and a Stripe manager throughout the next day. If you’re in the affected group, look out for invitations on the calendar.
For those unaffected, there will be some difficulty over the next few days as we navigate multiple changes at once. We ask you to help us get it right with Stripe users and those about to depart Stripes.
Our message to other employers is that there are a lot of really great colleagues leaving who can and will do great things elsewhere. Talented people come to Stripe because they are drawn to the complex infrastructure problems and complex challenges. Today doesn’t change that, and they would be a great addition at most other companies.
In making these changes, you may reasonably wonder if Stripe management made some mistake of judgment. We will go further than that. In our opinion, we made two very serious mistakes and we want to highlight them here because they are important:
- We were overly optimistic about the short-term growth of the Internet economy in 2022 and 2023 and underestimated both the likelihood and impact of a broad-based downturn.
- We increased our operating costs too quickly. Driven by the success we’re seeing in some of our new product areas, we’ve allowed increased coordination costs and operational inefficiencies to seep in.
We will correct these mistakes. So, in addition to the headcount changes described above (which would bring us back to a February headcount of almost 7,000), we are firmly examining all sources of expenditure. other fees. The world is hard to predict right now, but we expect these changes to help us generate strong cash flow in the coming quarters.
We don’t uniformly apply these headcount changes across the organization. For example, our Recruitment organization will be disproportionately affected as we will hire fewer people next year. If you’d like to see how your organization is affected, the Home page will be updated at 7 a.m. PT.
We will soon describe what this means for our corporate strategy. Nothing’s going to change completely, but we’re going to make some important tweaks that make sense for the world we’re heading into and tighten our priorities fundamentally. Expect to hear more about this in the next week.
While changes are tough today, we feel very good about the prospects for innovative businesses and about Stripe’s place in the internet economy. The data we see fit this encouraging picture: we signed a significant 75% more new customers in Q3 2022 than in Q3 2021, a competitive win rate of we are getting better, our growth is still very strong and on Tuesday we set a record of total daily transaction volume processed. Our smaller users (many of whom are just “big but not-so-major customers”) are, in general, growing extremely rapidly, showing that a lot of S-curve technology is still in its early stages and our customers remain impressively resilient in the face of broader global challenges.
People join Stripe because they want to grow the internet economy and promote entrepreneurship around the world. Stressful economic times make it all the more important for us to find innovative ways to help users grow and adapt to their businesses. Today is a sad day for everyone as we say goodbye to some talented colleagues. But we’ve got a big push ahead, and we’re putting Stripe in the right place to face it.
For the rest of this week, we’ll focus on helping those who are leaving Stripe. Next week we will reset, recalibrate and move on.
Patrick and John
This news is evolving. Please check back for updates.