Startups are pummeled in the ‘great unwinding’

After a crush of travel cancellations in March, WanderJaunt, a short-term home-rental startup in San Francisco, laid off 56 of its 240 employees at the end of the month.

Demand for services from Wonderschool, a startup that helps people find day care and preschool providers, dropped by half, leading it to cut most of its 60-person staff.

And at ClassPass, which offers a membership program for fitness classes, more than 95% of revenue evaporated in just 10 days as studios and gyms around the world shut down. To survive, the startup slashed spending, froze hiring and rushed to build a video-streaming service for virtual workouts.

“This is the great unwinding,” said Martin Pichinson, head of Sherwood Partners, a Santa Clara advisory firm that restructures failed startups. In recent weeks, he said, his firm has fielded a “firestorm” of calls — a volume three or four times the highest he had ever seen.

Startups have always been risky, designed to grow fast or die, but the coronavirus pandemic is turbocharging Silicon Valley’s natural selection and causing a shakeup so sudden it has defied comparison. In just a few weeks, more than 50 startups have cut or furloughed roughly 6,000 employees, according to a tally by the New York Times. Plans for initial public offerings are on hold. And funding is drying up for many young tech companies.

The fallout is hitting the highest-profile startups as well as the smaller ones trying to disrupt them. Airbnb, the San Francisco home-rental startup valued at $31 billion, has stopped hiring and has suspended $800 million of marketing. Bird, an electric scooter startup, laid off 30% of its staff last month; while Everlane, an apparel company, cut or furloughed hundreds of workers.

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