Latin American ecommerce unicorn Merama has cut nearly 10% of its workforce this week, according to its CEO, who described the move as part of a shift in focus towards a new growth phase rather than a cost-saving exercise.

The company, which has raised $345 million in funding from firms like SoftBank Group and was valued at $1.2 billion at the time of writing, is based in Mexico and Brazil. It aggregates fast-growing online brands to centrally manage areas such as marketing and supply chain management.

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The CEO, Sujay Tyle, stated that the total proportion of layoffs was around 8-9%, and the company’s staff remains above 400 employees. Those affected were linked to projects that were no longer a priority, as the company plans to refocus on brands that generated over $15 million in revenue.

Tyle described it as a difficult day but stated that there were no plans for further cuts. He also mentioned that the company had a “quite healthy” road ahead and was now cash flow positive.

This comes as Latin American startups faced an 82% year-on-year drop in funding in May, according to data group Sling Hub, as high interest rates and recession fears shook global markets and affected tech valuations. In recent weeks, several startups in the region have had to downsize due to funding constraints.

Companies like Provu, the Brazilian BNPL fintech, and Addi, a Colombian fintech unicorn, have announced substantial layoffs.

How does it impact venture capital?

  • The workforce reduction in Merama may impact venture capital by signaling a strategic shift in the company’s growth plans, potentially affecting investor sentiment and future funding opportunities.
  • The move could indicate a focus on optimizing resources and improving financial performance, which may attract venture capital investors seeking more efficient and financially sustainable startups.
  • Venture capital firms closely monitoring Merama’s progress may reassess their investment strategies and evaluate the company’s new growth trajectory, potentially influencing their investment decisions in the broader startup ecosystem.

How does it impact startups?

  • The reduction in Merama’s workforce could create a sense of caution among other startups, highlighting the need for efficient resource management and cost optimization strategies.
  • It may lead startups to reassess their own growth plans and prioritize revenue-generating initiatives to ensure financial stability and attract investor confidence.
  • The move could also increase competition for talent as displaced employees seek new opportunities, potentially benefiting other startups in the market by providing access to experienced professionals with relevant industry knowledge.

For detailed information, visit: Reuters