Prime, a UK startup founded by Braintree and PayPal alumni that provides merchants with a drag-and-drop framework to build online payment stacks, raised $50 million last year at a $425 million valuation from investors such as ICONIQ, Accel, Balderton Capital and Seedcamp – a round came amid a bullish period for e-commerce, with record levels of buying activity amid the Covid-19 pandemic. This year, that activity has cooled, and so has this e-commerce startup. londonbusinessblog.com has learned and confirmed that Primer has cut much of its workforce as part of a restructuring.
Sources tell us that some 85 employees have been laid off – about a third of the company, we understand.
“We can confirm that we have indeed had staff reductions,” said a spokesman. “Like many other companies at this time, we have corrected course heading into the new year given the economic environment and have taken what we believe are appropriate steps to account for the uncertain times ahead.”
The story of what’s going on here needs to be detailed, as the same thing is likely affecting a number of startups (and bigger companies) in the industry.
The bottom line is that the wider e-commerce market has seen a major drop in activity this year as the peak of the Covid-19 pandemic – or at least the acute response that has included masking, social distancing and staying away from crowds physical spaces — has disappeared. That activity was not what many had predicted: Many had assumed that after large numbers of people switched to buying online, they would “never go back” to the old way of doing things.
That didn’t work out: people are going back to shopping in stores, but more importantly, the global economy has cooled, inflation has risen and people are spending less. So companies that expanded to meet demand are now cutting back.
That has led to layoffs and restructurings at even some of the very largest companies in the space that you thought would be best equipped to handle economic ups and downs. For example, Amazon warned in its latest quarterly figures that sales during the critical holiday period would be lower than originally expected. It has cut thousands of employees and rationalized some of its most expensive product areas.
You may have recently seen some of the gloomiest forecasts fall short during Black Friday and the ensuing first weekend of holiday sales. But much of that activity is attributed to retailers offering deep discounts to incentivize purchases, putting pressure on margins in the longer term.
This isn’t just playing out to the larger portion of the retail market: smaller vendors and the industry’s many technology providers will also feel the decline.
Primer’s unique selling point is that it built a very simple, codeless interface that reduces the usually very complicated, fragmented process of building a payment stack and flow around online purchases, encompassing not only the basic transaction, but potentially other payments as well . options, adding loyalty or discount codes, upselling to other products, managing customer information, verifying against fraud and much more – in a series of drag-and-drop boxes so that customers can access more features and visualize how they could to collaborate. It offers integrations for dozens of different services, underscoring how fragmented the space is.
“We’re building out a whole suite over the next year to help merchants with operations and payment stack observability,” Paul Anthony, Prime co-founder and CEO, said in an interview with londonbusinessblog.com last year.
However, a source tells us that while the ordering process was seamless, its implementation was not as automatic and fast.
“They sign sellers, but getting them live is a long process,” they said. “They don’t generate revenue until they’re live. That is why they have reduced the teams until they have solved this bottleneck.”
Given the pressure many startups are currently feeling with fundraising, the first thing you need to do is not raise more money to extend the runway, but cut costs to expand what you already have in the bank, which is what Primer did here. Sources tell us that Primer’s goal with this restructuring is to extend the runway beyond two years (which it says it has done). The plan now is to continue to invest in the product with expansions on that front planned for next year.
As with any downturn, there’s a case for more automation in every process to reduce costs and — especially in the case of e-commerce — deploy more efficient technology to accelerate and close more sales. But that only stands if the technology is up to the challenge and if the target customers can invest in improvements themselves. That is the opportunity but also the curse of working in any ecosystem.
Primer’s goal is to emerge as one of the helpers (and winners) in that process.
“Given the challenging economic environment, we believe that Primer is more valuable to merchants and partners than ever before as they look to increase efficiencies across their organizations, reduce costs, build greater customer loyalty and launch new markets – and this do it in a code/automated fashion,” said the spokesperson. “Although these are always difficult decisions, we are confident that this recalibration will not affect the level of service we provide to our current and future vendors and partners.”