Hundreds of workers from start-ups in Southeast Asia have been fired in the last few months, proving that the fast-growing industry is not immune to the global economic slowdown.
As borrowing costs rise and the economy faces uncertainty, “it would be odd not to see companies laying off,” said James Tan, managing partner of venture capital firm Quest Ventures. “Any start-up that does not do so will face a board that [questions] their underlying assumptions and ability to manage through a crisis.”
Startups will need to prolong the cash runway by 18 to 36 months compared to the usual 12 to 18 months before they try to raise funds again, Tan said.
As valuations have fallen from last year’s high, companies will want to avoid raising money with the possibility of being valued lower than their last fundraising round. They would rather try to cut costs, and ride out this downturn before fundraising again, he added.