PALO ALTO, U.S. -- Another SoftBank-backed startup has announced layoffs as the Japanese conglomerate urges portfolio companies to find paths to profitability after WeWork's failed IPO last year.
Flexport, a San Francisco-based logistic startup, laid off 50 staff members, or 3% of its global workforce, on Tuesday. The cut mostly impacted its business divisions including marketing and recruiting departments and some senior management, according to people familiar with the situation.
Founded in 2013, Flexport has experienced rapid growth in past years but management has been prioritizing profitability since late 2019, partly due to SoftBank's strategy shift after the WeWork public market debut went bust, the people added.
Flexport raised $1 billion at a valuation of $3.2 billion in a Series D round led by SoftBank in 2019, bringing its total funding to $1.3 billion. Michael Ronen, who led the Vision Fund's investment in Flexport and sits on the company board, is reportedly leaving SoftBank this week after expressing concerns about "issues" at the technology conglomerate.
Silicon Valley has recently seen a wave of layoffs in SoftBank-backed startups as they struggle with fundraising after accepting large checks from the tech giant at sky-high valuations.
Zume Pizza, a robotic piazza making startup, laid off half of its staff -- 360 employees -- in early January. SoftBank invested $375 million in Zume in 2018, giving the startup a $1 billion valuation. Around the same time, car rental company Getaround laid off about 150 employees, or roughly one-quarter of its staff.
Dog-walking company Wag also went through multiple rounds of layoffs totaling 80% of its workforce since late last year. In October, Fair.com, a startup building a flexible car ownership business that is valued at $1.2 billion -- backed by around $500 million from SoftBank and others, laid off 40% of its staff.
Flexport provides freight forwarding services to help move shipping containers between manufacturers and retailers using its proprietary software platform. Its digital tool also provides data that helps customers analyze costs, container utilization and emissions, and keep track of their supply chain.
A significant part of the company's business was related to China and the Asia-Pacific region, which has been disrupted by the coronavirus outbreak. Flexport has suspended all business travel to China, a source told Nikkei.
"We're restructuring some parts of our organization to move faster and with greater clarity and purpose," a Flexport spokesperson told Nikkei Asian Review.
"Decisions about restructuring were made before coronavirus impacted supply chains," he added.
However, the coronavirus outbreak poses additional challenges for Flexport and its path to profitability as the epidemic disrupts the global supply chain in which China plays a critical part.
The company's business in the region has already been challenged by geopolitical tensions since last year. "In 2019, we saw market conditions worsen and global freight patterns diversify due to US-China trade tensions," the Flexport spokesperson said.
Flexport ceased its own dedicated freighter service between China and U.S. in January due to a slowdown in demand.
An analysis provided by Flexport shows year-over-year airfreight volumes from China increased by less than 9%, while airfreight from the Philippines and Vietnam increased by 146% and 47% respectively last year.
To match the shifting needs from clients, Flexport switched from providing chartered private air service to partnering up with another logistic company to provide multiple flights per week from five cities in Asia to six destinations in the U.S. and Europe.
"This network will let our clients ship from more origins to more destinations on a more frequent basis, and adapt to new market demands," the spokesperson said.