Citra had only joined GoTo Group, the massive Indonesian ride-hailing and e-commerce decacorn, in early October 2022. So it was a shock when, a month and a half later, she discovered she’d been fired as part of mass layoffs. On November 18, the Alibaba and SoftBank-backed company, valued at some $15 billion, announced it was laying off 12% of its roughly 10,500-person permanent workforce.
“I was on sick leave, so I found out about the news from Instagram,” recalled Citra, who requested a pseudonym to avoid potential friction with the company. “Very abrupt. I know someone who joined two weeks before the announcement and was also laid off.”
Citra had heard whispers of potential cuts in the days prior, but believed they would mainly affect ride-hailing arm Gojek while sparing Tokopedia, the e-commerce department where she worked. She was on track to enjoy many of the company’s generous benefits, including a special allowance when she gets married next year. But last Friday at 7 p.m, she received the email informing she’d be let go. Soon after, the company cut her access to the internal system.
“GoTo is the golden child of Indonesia, a national treasure. When they do layoffs, it shocks the entire industry,” said Elon Murz, the moniker of an administrator for Blind-like tech forum Ecommurz, who has since received hundreds of messages from self-identified current and former employees of GoTo.
GoTo management summoned workers to a Zoom town hall, where teary senior leaders announced the layoff decision. In an official statement to the Indonesia Stock Exchange, the company blamed “increasingly challenging global economic conditions.”
“Those [ex-employees] who are angry said the announcement was too long and overly dramatic, especially when the leaders were in tears mid-speech,” Murz told Rest of World.
The global wave of layoffs hitting U.S. tech companies like Meta, Amazon, and Twitter is finally cresting in Southeast Asia, impacting its most prized startups like GoTo, one of only four decacorns in the region. Sea Ltd., the Nasdaq-listed, Singapore-based internet giant and owner of Shopee, has reportedly shed 10% of its workforce — as many as 7,000 people — over the last six months. Popular edtech firm Ruangguru laid off “hundreds” in November; Xendit, once Indonesia’s most promising fintech star, downsized its team by 5%.
“Most of the startups that are doing mass layoffs now were ‘pandemic darlings,’” Bhima Yudhistira Adhinegara, a director of the Center of Economic and Law Studies (Celios), wrote in a memo. Their over-optimism for future growth led to overstaffing, he wrote. Business leaders dismissed the possibility of people going back to offline stores once Covid-19 restrictions eased, which was exactly what happened.
“I think this is [just] the beginning,” Harry Su, managing director at Jakarta-based advisory firm Samuel International, told Rest of World.
Now, the pandemic-driven tech boom has come to an abrupt halt. Earlier this year, U.S.-based venture capital firms, feeling the heat from a brewing economic downturn, shifted their demands of portfolio companies: They prioritized profitability over fast growth, the ripple effects of which led to abrupt cost-cutting efforts at mid-sized and soon-to-be unicorn companies across Southeast Asia. Those effects are now spreading to blue-chip names like GoTo.
Further expected rate hikes by the U.S. Federal Reserve, coupled with global inflation, weakening buying power, and intensifying geopolitical risk, mean that investors will continue pulling out from speculative sectors including tech, industry experts told Rest of World.
“Operational costs have swelled and become a burden,” Yudhistira wrote. Meanwhile, Indonesia’s food and energy prices have continued to rise, further dampening spending online.
GoTo’s net loss widened 75% to over 20.3 trillion rupiah ($1.29 billion) in the third quarter this year. The company said in a statement that it has launched various products like rewards system GoPay Coins and its pilot subscription program GoTo Plus, which has netted over 50,000 subscribers. Its continued attempts to achieve profitability will include “driving monetization, incentive optimization, and cost reductions,” the company said, claiming it’s already begun to see improving margins.
Reza Priyambada, a senior analyst at CSA Research Institute, told Rest of World that digital firms like GoTo will soon be forced to both abandon fierce competition for market share, and raise their fees. It has become critical for these companies to start giving returns to their private investors, he said.
“We, as consumers, want cheap services, but on the other hand, giving these services needs high effort and even higher costs,” Priyambada said. “There is a mismatch … and this is the one challenge that [the tech companies] will face.”
In April this year, GoTo decided to list on the Indonesia Stock Exchange, raising about $1.1 billion. By July, it said it had used around $287 million, more than a quarter of the amount.
GoTo is notorious for spending heavily on employees’ salaries and benefits. Between January and September this year, the company spent $720 million on its 10,500 employees — up over 100% from the same period in 2021. Industry sources told Rest of World the company often offered up to a 50% salary increase to attract talent from other firms, while workplace benefits included stays for Covid-19-infected workers at self-isolation facilities in five-star hotels in Jakarta.
Knowing that it needs to fuel growth in ways other than cash burn, the company continues to seek ways to raise more funds. GoTo’s shareholders have approved a plan to sell 10% of its shares through a private placement deal. But, at the current share price of 196 rupiah (around $0.013), that stake only has a market value of around $1.47 billion — a hefty discount from its IPO share price of 338 rupiah. It’s unclear when the company will execute the plan.
Now, searching for her next role, Citra said she will prioritize stability over generous perks this time. “I’ll definitely choose [a company] that is more stable than startups, which are a bit traumatizing.”
“[At the] end of the day the company [is] only about saving their asses … losing competition with [Grab] and demand from downturn is very apparent,” one impacted worker commented in a GoTo thread on Ecommurz. They tried to end on a positive note: “I believe we all can recover, and perhaps this is a wake up call to the entrepreneurial path for some of us!”