- The beauty subscription startup also pausing Canada operations
- Cuts follows others such as e-commerce startup VarageSale
Birchbox Inc., a startup that sells subscriptions for personalized beauty samples, said it’s cutting 15 percent of staff and suspending operations in Canada. The cutbacks, which affect 45 people out of a staff of 300, are the latest sign that technology startups are struggling to create sustainable businesses as venture funding begins to cool.
“The cuts made today will allow us to reinvest in our biggest opportunities and grow even more quickly in the future,” Birchbox co-founder and Chief Executive Officer Katia Beauchamp said in a statement. "Our vision for Birchbox has always been to build a standalone company, and today’s market demands that we reach profitability this year."
A slew of venture-backed tech companies have reduced staff in the past few months, including Evernote, Hootsuite, Jawbone and Snapchat. VarageSale, an online marketplace styled as a garage sale for hyper-local communities, said Thursday it cut 26 employees.
“This decision was incredibly difficult, and we can’t thank these amazing people enough for their contribution,” VarageSale CEO Carl Mercier wrote in an e-mail. “The result is ultimately what we believe we had to do to continue building towards our vision.”
Valuations of tech companies began to shift sideways toward the end of last year, and investors began to push for cost-cutting at some startups. The number of venture funding rounds in the U.S. fell in the fourth quarter for the second straight period to 981, its lowest total since the fourth quarter of 2011, according to research firm CB Insights.
The staff reduction at Birchbox was based more on a view of the broader technology and stock markets slide, not on the future of the company, Beauchamp told PandoDaily, which first reported on the job cuts.
Birchbox expects to double it’s shop sales and is experiencing significant growth in subscriptions this year, Beauchamp said in the statement.
The company’s last round of funding of $60 million closed about two years ago. Given the changes, there’s no immediate need for Birchbox to raise capital in 2016, she told PandoDaily.
In addition to the overall tech market slowdown, Birchbox faced some problems specific to its niche. Over the past five years, hundreds of subscription-based startups have shuttered, as they face competition from established players ranging from Amazon.com Inc. to brick-and-mortar retailers. While New York-based Birchbox started out as just a subscription deliveries services, the company moved into its first brick-and-mortar store in 2014 in Soho and later opened in Washington, D.C. The company also debuted its own makeup line last year.