Software talent company Andela has laid off 135 staff – about 10 percent – across four of its locations including Nigeria, Kenya, Egypt and Uganda. Employees in Rwanda and Ghana offices are likely not to be affected. While the development affects every other department, the engineering team is exempted.
Jeremy Johnson, CEO of Andela made the announcement on Tuesday morning via a video conference call attended by more than 1,300 staff from the company’s seven locations. The decision was a result of the impact of the coronavirus pandemic on the customer base of the company.
“While our customer base has held up better than most, the majority have still been impacted by the economic downturn,” Johnson said. “Expectations for slow growth necessitate cost-cutting measures to ensure that we make it to the other side.”
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In an email BusinessDay received, Johnson explained that the company’s ability to attract future investment is determined by the ratio of how quickly Andela can grow in comparison to how much it is willing to spend to achieve that growth.
“If you are not growing, you can’t count on raising more money, so you have to adjust expenses so you don’t spend more than you bring in,” he said.
Andela has raised a total of $181 million in funding over 7 rounds. Their last funding was a $100 million Series D round raised January 23, 2019. The round took the company’s valuation to between $600 and $700 million.
Tuesday’s layoffs are not the first time the software training company is letting go of its talents. In September 2019, Andela cut over 400 junior engineers across Kenya, Uganda, and Nigeria.
While 135 employees are expected to leave on 8 May with severance packages and four months of health coverage, the remaining staff including directors would be taking a salary cut ranging from 10 percent to 30 percent depending on seniority.
The headcount reduction does not affect every department in the company equally. Teams like Technology are losing much less than others because they represent strategic investments Andela is making for the future.
Below is the full email sent to staff by Jeremy Johnson:
Over the last few weeks, we’ve talked about the work we are doing to prepare Andela to withstand a recessionary environment. As you know, even though we’ve known for some time that layoffs were a possibility, we have been working to try to minimize them. Unfortunately, as we shared today in the all hands meeting, it’s become clear that we have to make some really hard decisions to protect the future of Andela.
This morning we announced that we are laying off 135 Andela employees, or 10% of our company. To be clear, no engineers are impacted by this reduction, but every other department is.
When budgeting at the end of last year, we planned for significant growth. Like any venture backed startup, our ability to attract future investment is determined by the ratio of how quickly we grow in comparison to how much we spend to achieve that growth. If you aren’t growing, you can’t count on raising more money, so you have to adjust expenses so you don’t spend more than you bring in.
While our customer base has held up better than most, the majority have still been impacted by the economic downturn. And while I’ve been blown away by messages from engineering leaders explaining how much they value the Andelans on their team, we’re still going to see churn spike this year as well as a decline in new customers due to the economic uncertainty. Now that we know that growth is going to be much slower than anticipated, we need to cut costs to ensure that we make it to the other side.
We approached this process in three phases. First, we started by looking at everything we could cut that was non-headcount related, including pausing future hiring, rescinding offers, and meaningfully reducing consulting and software spend.
Second, we looked at salary reductions. While we initially considered cutting salaries across the board, we determined that the savings did not warrant the disruption to the lives of our entire employee base. However, all directors and above who are remaining with the company have agreed to take a salary cut ranging from 10% to 30% depending on seniority.
Unfortunately, given how much growth is likely going to slow and the fact that we can’t predict how long this period will last, that wasn’t enough. As a result, we had to look at headcount reductions, and we did this in two ways: which roles require fewer positions as a result of slower growth, and which roles have less direct impact on revenue.
Ultimately, we made the gut-wrenching decision to part ways with 135 colleagues. While every team is impacted, the headcount reduction is not uniform across the company. Certain teams like Technology were impacted less because they represent strategic investments we are making for the future. Later this week, we will be sharing more information about how these changes will impact how we operate moving forward.
Please know that our goal is to treat our colleagues who are impacted with fairness, dignity and respect. We are providing comprehensive severance packages as well as four months of health coverage in every country. In addition, due to the extraordinary circumstances of this period, we have secured two one-time approvals from the board to allow those who were granted options the ability to be an owner of Andela. The first is by removing the vesting cliff of any exiting employees who have been with us for less than a year so that they can exercise the options that would have vested if it weren’t in place. The second is that for all exiting employees, we have extended the exercise window from three months to one year. If you are impacted, you’ll receive an invitation for your departure meeting today, where you’ll have a chance to ask questions to make sure you understand your package.
After wrestling with this for the past few weeks, there are a couple things I want you to know. The first is that I’m sorry. We had a tough year in 2019, and even though nobody could have predicted this, it still feels like an elongation of that difficult period.
And second, to those impacted, you’ve done incredible work. Thank you. You are some of the smartest and most capable people I’ve ever worked with. I’m sorry that this has to come to an end, but your mark and impact will live on.
When society emerges from this period, the Andela you’ve helped build will continue to be a beacon of hope and inspiration for people all over the world. We will continue to break down the barriers that prevent talent and opportunity from connecting. Your work will not be in vain.
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