Online payments giant Stripe is laying off about 14% of its workforce, CEO Patrick Collison wrote in a memo to employees on Thursday.
In the memo, Collison said the cuts were necessary in the face of rising inflation, fears of a looming recession, higher interest rates, energy shocks, tighter investment budgets and scarce seed funding. Taken together, these factors signal “that 2022 marks the beginning of a different economic climate,” he said.
Collison acknowledged that the company’s management made “two very momentous mistakes” by misjudging how much the internet economy would grow in 2022 and 2023 and when operating costs would rise too quickly.
Stripe said its headcount will be reduced to about 7,000 employees, meaning the layoffs will affect about 1,100 people. A Stripe spokesperson was not immediately available to give the exact number of employees affected.
The cuts will affect many of Stripe’s departments, although most will come in recruitment as the company plans to hire fewer employees next year, Collison said in the memo.
In addition to laying off employees, Stripe intends to contain costs across the business, Collison said.
Patrick Collison, CEO of Stripe, sent the following message to Stripe employees today.
Hello folks —
Today we’re announcing the biggest change we’ve had to make to Stripe to date. We’re downsizing our team by around 14%, saying goodbye to many talented Stripes. If you are one of those affected, you will receive a notification email within the next 15 minutes. For those of you who are leaving, we deeply regret this step and John and I bear full responsibility for the decisions that led to it.
More details will be explained later in this email. But first we want to share a broader context.
the world around us
At the start of the pandemic in 2020, the world turned towards e-commerce overnight. We have experienced significantly higher growth rates over the course of 2020 and 2021 than before. As an organization, we transitioned to a new mode of operation and both our revenue and payment volume have more than tripled since then.
The world is moving again now. We face persistent inflation, energy shocks, higher interest rates, reduced investment budgets and tighter seed funding. (Tech companies’ earnings over the past week provided many examples of changing circumstances.) On Tuesday, a former Treasury Secretary said the US “faces macroeconomic challenges as complex as they have at any time in 75 years,” and many parts of the developing world appears to be headed for a recession. We believe that 2022 will mark the beginning of a different economic climate.
Our business is inherently well positioned to weather harsh circumstances. We provide an important foundation for our customers, and Stripe is not a voluntary service that customers turn off when budgets are tight. However, we need to adapt the pace of our investments to the realities around us. Doing the right thing by our users and our shareholders (including you) means embracing reality as it is.
Today that means building differently for leaner times. We’ve always prided ourselves on being a capital efficient company and we think it’s important to maintain this trait. In order to adequately adapt to the world we are heading towards, we must reduce our costs.
How we deal with departures
Around 14% of Stripe employees will leave the company. We, the founders, made this decision. We’ve over-hired for the world we operate in (more on that below), and we’re heartbroken at not being able to deliver the experience we hoped for from stakeholders at Stripe.
There is no good way to go about dismissal, but we will do our best to treat anyone who leaves the company with as much respect as possible and do whatever we can to help. Some of the most important details are:
- severance pay. We pay all leaving employees 14 weeks’ severance pay, and more if they have been with the company for a longer period of time. This means that those leaving the country will be paid until at least February 21, 2023.
- bonus. We pay our annual bonus 2022 for all leaving employees, regardless of the leaving date. (It will be prorated for people hiring in 2022.)
- PTO shaft. We pay for all unused PTO time (even in regions where this is not required by law).
- healthcare. We pay the cash equivalent of 6 months of existing health premiums or continued health care.
- RSU award. We will be accelerating those who have already reached their one-year vesting cliff to the February 2023 vesting date (or longer, depending on departure date). For those who haven’t reached their cliffs yet, we skip the cliff.
- career support. We provide career support and do our best to match departing employees with other companies. We’re also creating a new tier with extra large Stripe discounts for anyone who decides to start a new business now or in the future.
- immigration support. We know that this situation is particularly difficult if you are a visa holder. We have extensive dedicated support for those of you here dealing with visas (you will receive an email setting up a consultation within hours) and we will support the transition to non-employment visas wherever we can.
Most importantly, this is definitely not the split we would have wished for or imagined when making our hiring decisions, but we want everyone who is leaving to know that we care about you as former colleagues and appreciate everything you do have done for Stripe. In our eyes you are valued alumni. (To this end, we are establishing alumni.stripe.com email addresses for all departing employees and will make these available to all former employees in the coming months.)
We will schedule a live face-to-face interview between each departing employee and a Stripe manager over the next day. If you’re part of an affected group, look out for a calendar invite.
For those not affected, there will be some bumps over the next few days as we have many changes to deal with at once. We ask that you help us be fair to Stripe users and departing Stripes.
Our message to other employers is that many really great colleagues are leaving who can and will do great things elsewhere. Talented people come to Stripe because they are drawn to tough infrastructure problems and complex challenges. Nothing changes today, and they would be a fantastic addition to almost any other business.
As you make these changes, you might be wondering, rightly so, whether Stripe’s leadership made some misjudgments. We would go further. From our point of view, we made two very consequential mistakes, which we want to highlight here because they are important:
- We have been far too optimistic about the near-term growth of the internet economy in 2022 and 2023, underestimating both the likelihood and impact of a broader slowdown.
- We’ve increased operating costs too quickly. Buoyed by the success we’re seeing in some of our new product areas, we’ve allowed coordination costs to rise and operational inefficiencies to seep in.
We will correct these errors. Therefore, in addition to the headcount changes described above (which will bring us back to our February headcount of nearly 7,000), we are reining in all other cost sources. The world is difficult to predict right now, but we expect these changes to position us for robust cash flow generation in the coming quarters.
We do not apply these headcount changes evenly across the organization. For example, our recruitment organization will be disproportionately affected as we will be hiring fewer people next year. If you want to see how this is affecting your business, Home will be updated at 7:00 am PT.
We will shortly describe what this means for our corporate strategy. Nothing about this will change radically, but we’ll be making some key changes that make sense for the world we’re moving into and significantly sharpening our prioritization. Expect to hear more about it over the next week.
While today’s changes are painful, we’re very excited about the prospects for innovative companies and Stripe’s position in the internet economy. The data we’re seeing is consistent with this encouraging picture: we added a remarkable 75% more new customers in Q3 2022 than in Q3 2021, our competitive win rates are getting even better, our growth rates remain very strong, and on Tuesday we have we set a new record for the total daily transaction volume processed. Our smaller users (many of whom are just “big customers who aren’t big yet”) are growing extremely fast overall, showing that many technology S-curves remain in the early innings and that our customers are impressively resilient in the early innings remain in the face of broader global challenges.
People join Stripe because they want to grow the internet economy and foster entrepreneurship around the world. In tough economic times, it’s even more important that we find innovative ways to help our users grow and adapt their businesses. Today is a sad day for everyone as we say goodbye to a number of talented colleagues. But we’re ready for a massive effort, and we’re putting Stripe on the right footing to face it.
For the rest of this week, we’ll be focusing on helping people who are leaving Stripe. Next week we will reset, recalibrate and move on.
Patrick and John
This message is evolving. Please check again for updates.