COVID-19 Concerns Already Leading To Startup Layoffs In Austin

Over the past three years, I’ve been reporting on how the startup scene in Austin is booming. Record funding in 2019. New unicorns being born. More outside investors putting money into the market.

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But no city, no matter how much momentum it’s seen, is immune to the negative economic impact from the spread of COVID-19. Austin in particular already took a big hit when South By Southwest (SXSW) organizers had to cancel the massive annual event just weeks ago.

Now the city, like many other tech hubs across the world, is seeing a flurry of layoffs in its startup community.

Irvine, Calif.-based Restaurant365–which has developed cloud-based software focused exclusively on the restaurant and hospitality industry–confirmed to me via email last night that the company reduced its 400-person workforce by “a big chunk” this week. It has a significant presence in Austin. (Read more about that news here).

Also, so far this week, Austin Inno’s (very talented and just an overall good guy) Brent Winstrom reported on three companies–all of which have raised venture capital funding over the past eight months –that had to lay off staff.

For starters, Austin-based marketing software startup OutboundEngine said this week it would be letting go of 52 employees, according to Austin Inno. The company’s leadership team will also be seeing a 30 percent reduction in compensation, CEO Marc Pickren told Austin Inno. OutboundEngine has about 135 employees after the layoffs.

Pickren told Austin Inno: “The layoffs are a direct response to COVID-19 and its sea change impact to the financial markets.”

Last August, the company raised $14.3 million in venture and debt financing, which we reported on here. The venture capital was raised from S3 Ventures, Silverton Partners, Noro Mosely, Alerion Partners and Harmony Partners. Founded in 2012, OutboundEngine has raised a total of $48.1 million over its lifetime, according to Crunchbase data. The company’s marketing software provides “a responsive website, relevant content created and sent automatically across email and social media, and hands-free social advertising on Facebook and Instagram.” In 2018, the startup had a $23 million annual run rate, according to Pickren.

Layoffs abound

The Guild, an Austin-based hospitality startup aiming to bridge the gap between Airbnb and hotels, has laid off 38 people, according to an article in The Information cited by Austin Inno. In January, we reported on the fact that The Guild had closed on a $25 million Series B from Maveron, Convivialite Ventures, MarkVC and ATX Venture Partners, among others. At that time, the company had about 170 employees. That financing brought The Guild’s total known venture funding to $31.5 million. (Earlier this week, we reported on a number of other high-profile layoffs in the travel and hospitality industries here.)

Lastly, Yonder, which uses artificial intelligence to help companies identify disinformation campaigns, has let go of 18 of its employees. The startup announced a $3 million Series A from Lux Capital and BuildGroup last July, and has raised about $16 million since it was founded in 2015, according to Crunchbase data.

Unrelated to the coronavirus, Austin-based fintech startup ScaleFactor said last month it would be cutting dozens of jobs as part of a reorganization. That move came just a few months after the company raised a $60 million Series C, which we reported on here.

Earlier this week, we reported on nationwide layoffs in the travel and hospitality industries, affecting hundreds of employees at corporate travel startup TripActions, Zeus Living and Sonder.

Illustration: Li-Anne Dias