Shopify to cut staff by 20% and sell logistics business to Flexport for 13% equity

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Shopify today revealed that it is laying off 20% of its workforce, affecting more than 2,000 people, and selling its logistics business to Flexport for about 13% in stock.

The news comes about 10 months after Shopify announced it was cutting 10% of its workforce – about 1,000 people – and follows a trend that has seen many big tech companies engage in multiple rounds of layoffs in response to the winds. economic opposites.

“Side Quest”

In a blog post today, Tobias Lütke refers to “main quests” and “side quests,” with the former being the heart of the enterprise. purpose it’s what it’s best known for – e-commerce software for online retailers. However, shipping and logistics always go hand in hand with e-commerce, which is why Shopify has grown that side of its business as well.

For context, Flexport is a 10-year-old freight and logistics platform that has raised over $2 billion in funding from high-profile investors including Andreessen Horowitz and SoftBank. Shopify itself invested in Flexport’s Series E framework last February, and a few months later Shopify also acquired logistics startup Deliverr for over $2 billion. Clearly Shopify was betting big on the logistics side of its business, so selling all of that for a 13% stake in Flexport seems like a major write-off, at least on the surface.

Indeed, Flexport was recently valued at around $8 billion, which means Shopify’s new stake would be worth just over $1 billion, although that doesn’t include the stake that Shopify bought from Series E. from Flexport about 15 months ago.

Either way, this logistics company is what Lütke calls one of his “side quests,” which he says ended up getting in the way of his main operations.

“Side quests are always fun because the company has to focus,” Lütke said. “Sometimes it can be worth it, especially when the side quest creates the conditions in which the main quest can become more successful. In the beginning, as a small startup, companies are intensely focused. Big companies are often said to be slower, but it’s not because of their size, it’s because of all the side quests and distractions they pile up along the way. This happens because large corporations can afford to be somewhat inefficient, especially during times of steady economic booms. But once they have to adapt to a new paradigm, they can’t. They will either be replaced by more targeted competitors or collapse outright.

But while being “more focused” on its core product was one of the reasons Lütke cited for downsizing, he also pointed to the burgeoning AI revolution as another reason Shopify might do better. to return to his bread and butter.

“We are heading into a decade of high speed and massive change,” Lütke said. “We will need speed, agility and a lot of innovation. Technological progress is always in the direction of simplicity, and entrepreneurs are more successful when simplified. But we are now at the dawn of the age of AI and the new abilities unlocked by it are unprecedented. Shopify is privileged to be among the companies with the best chance of using AI to help our customers. A co-pilot for entrepreneurship is now possible. Our main quest asks us to build the best thing that is now possible, and that has just completely changed.

It’s becoming a familiar tale, which we’ll likely see a lot more of in the future. Just last week, Dropbox announced a major round of layoffs due in part to “the age of AI in computing,” which CEO Drew Houston says will “completely transform knowledge work.” .

It’s hard to know Exactly how many people are affected by Shopify’s latest round of layoffs, but according to its own website it has over 11,600 employees, a figure it only updated from 10,000 employees there a few months old. This increase in headcount doesn’t make much sense if it laid off 1,000 employees last year, but a likely answer is that Shopify simply didn’t update the figure following a trio of acquisitions made last year, including Deliverr.

Based on Shopify’s most recent self-reported numbers, today’s news is likely impacting in the region of 2,300 workers. The company says those affected will receive at least 16 weeks of severance pay, plus an additional week for each year with Shopify. They will also receive medical benefits for the same duration.

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