$5 billion software startup Toast just slashed its workforce by 50% despite a recent $400 million funding round, as coronavirus has wiped out its main source of customers
- Toast, a $5 billion Boston-based startup that makes software for restaurants, cut 50% of its workforce through layoffs and furloughs on Tuesday, a blog post from CEO Chris Comparato announced.
- "We froze hiring, pulled back offers, and halted merit increases. As a leadership team, we will reduce our pay across the board," the post said. "But with limited visibility into how quickly the industry may recover, and facing slower than anticipated growth, we now find ourselves in the unenviable position of reducing our headcount."
- The startup had just come off a year of 109% revenue growth, and raised $400 million in a Series F funding round in February - but its balance sheets still weren't padded enough to withstand the blow dealt by the coronavirus outbreak.
- The layoffs illustrate the ripple effects of the coronavirus outbreak, as restaurant sales plunged by 80% in most cities last month, in turn forcing the restaurant software startup to scramble.
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Toast, a $5 billion Boston-based startup that makes software for restaurants, just cut nearly 1,000 employees from its work force through a combination of layoffs and furloughs on Tuesday.
"This morning at Toast we shared the agonizing decision to reduce the size of our company by roughly 50 percent through layoffs and furloughs as a result of the COVID-19 health crisis," a blog post from CEO Chris Comparato announced. The company had well over 2,000 employees earlier, per Pitchbook.
Although Toast's main source of customers was a restaurant industry hit hard by the coronavirus outbreak, the news still caught some investors off guard. Toast had just raised $400 million in a Series F funding round in February from a series of investors including Bessemer Venture Partners and TPG, so investors assumed its balance sheets were padded enough.
Investors like Mitchell Green of Lead Edge Capital had even cited Toast's February funding round as a stroke of luck for the company. "Nobody knows how deep this will be, nobody knows how long this will be...If Toast had not raised that round in February, it'd be in big trouble," Green told Business Insider last week.
(An email from Green to Business Insider on Tuesday said that the outbreak had gotten to the point that most companies would soon be forced to lay off workers).
Some employees laid off from the company on Tuesday had only been there for a matter of months, according to their posts on LinkedIn - the unfortunate result of a hiring spree taken after Toast grew revenue by 109% in 2019, in anticipation of even more growth in 2020.
But as the coronavirus outbreak hit the country and caused restaurant sales to plunge by over 70% in most cities last month, it forced the restaurant software startup to scramble.
Over the past month, Toast began by rolling out a series of measures to help support its target customers hit by the coronavirus outbreak - blog posts with financial advice and resources for affected restaurant workers, a month's credit of software fees for Toast customers and an initiative to support all local restaurants by ordering takeout or buying gift cards.
Toast also begun pulling back on its own costs, by freezing hiring, pulling back on new offers, and halting merit-based raises, Comparato's blog post said.
But ultimately, continued uncertainty over how long the coronavirus outbreak would last and how long restaurants would be shut, forced it to cut jobs.
"But with limited visibility into how quickly the industry may recover, and facing slower than anticipated growth, we now find ourselves in the unenviable position of reducing our headcount," Comparato said.
The company said it was offering a severance package, benefits coverage and mental health support, and an extended window for employees to buy vested stock options. It also said it was developing programs to help laid-off employees search for new roles, but did not share further details on what that would look like.