Governance and Risk Management , Privacy , Vendor Overview
Company becomes 3rd late-stage startup to downsize in past 3 weeks
Michael Novinson (Michael Novinson) •
June 10, 2022
OneTrust has laid off 25% of its staff – or 950 workers – making it the third late-stage startup to drastically cut its workforce in recent weeks.
Markets want to see a more balanced approach between growth and profitability, OneTrust CEO Kabir Barday told employees in an email that was later posted on the company’s blog. OneTrust was recognized by Inc. magazine as America’s fastest growing company in 2020, and it received a $5.3 billion valuation in April 2021 after raising $210 million.
“It’s one of the toughest decisions I’ve had to make as a leader,” Barday said. said in the blog post. “My responsibility is to ensure that OneTrust thrives and is positioned for sustained growth, and unfortunately, downsizing and adjusting to financial market sentiment is what is needed to keep us in our leadership position.”
Latest cuts follow mass layoffs in 2020
OneTrust did not respond to Information Security Media Group’s request for more information about the departments, roles or geographies most affected by the layoffs. This is the second time OneTrust has laid off employees in the past three years, as the company reduced its workforce of approximately 1,500 people by 10% to 15% in April 2020 due to the economic uncertainty created by the COVID-19 pandemic.
This time around, Barday says, the reorganization is the best course of action to position the company for continued long-term success. Industry watchers expected OneTrust to pursue an initial public offering this year, but IPOs are down 80% from this point a year ago, according to Renaissance Capital. No security company went public in 2022, a far cry from the five IPOs and SPAC in 2021 (see: Cybereason lays off 10% of its staff months after raising $325 million).
“The decision to reduce our workforce is the result of a thorough evaluation process and does not reflect the performance of any individual or team,” Barday’s email to employees said. “When evaluating all the potential scenarios created by these changes, it is essential to be proactive, and reduction is the solution we have chosen to help us meet the new challenges ahead.”
Barday acknowledged the layoffs come just a month after OneTrust told its employees that business was on track, with record quarters and growing customer demand. OneTrust will provide terminated employees with severance, equity, expanded medical coverage and an opt-in network that provides ongoing access to training as well as support in their job searches, according to Barday.
“There is no watering down, this reorganization is painful for all of us – and it is a decision that I own as CEO, and the impact on our team members and their families is something that I don’t take it lightly,” Barday said. .
In April 2021, the company closed a $210 million Series C expansion led by SoftBank and backed by Franklin Templeton. This came just three and a half months after OneTrust closed its first $300 million Series C funding round at a $5.1 billion valuation led by TCV. OneTrust used this money to buy six companies between March and October 2021, recovering data management and automated writing tools.
OneTrust’s April 2020 layoffs were not without controversy. More than 30 of those laid off attempted to sue the company over their dismissals, Wired reported in June 2020. The terminated workers alleged that OneTrust was trying to dodge a collective redundancy consultation by firing them individually. Many people laid off in 2020 were terminated by OneTrust for alleged “poor performance”.
“As with any change, the resilience we’ve built as a business will be tested,” Barday said. “We have proven in the past that we can emerge stronger as a business by adapting quickly, and I am confident that we have the strength to stick together during this difficult time.”
Another Domino Fall
OneTrust is the third security startup to publicly disclose layoffs in the past three weeks. Last week, Cybereason laid off 10% of its employees in response to deteriorating market conditions less than a year after raising $325 million. Like OneTrust, endpoint security provider Cybereason has been backed by Japanese conglomerate SoftBank, which led Cybereason’s funding rounds in 2015, 2017 and 2019.
“It was an extremely difficult decision,” a Cybereason spokesperson told ISMG in an email. “As bullish tech market conditions have transformed and the tech IPO market has essentially closed, companies like ours must now exercise tighter financial discipline and prioritize the profitability rather than revenue growth.”
Lacework, meanwhile, announced on May 25 that it had laid off 20% of its employees to strengthen its balance sheet. The layoffs came just six months after the San Jose, Calif.-based cloud security provider raised $1.3 billion at an $8.3 billion valuation. Like OneTrust and Cybereason, Lacework was set to go public this year before macroeconomic storm clouds made it a nonstarter.
“We have adjusted our plan to increase our cash trail to profitability and significantly strengthened our balance sheet so that we can be more opportunistic in the face of investment opportunities and weather uncertainty in the macro environment,” wrote Lacework co-CEOs David Hatfield and Jay Parikh. email to employees.
Late-stage sellers want to make their money last longer as backers become more careful with their money, angel investor and SentinelOne and CyCognito board member Dan Scheinman told ISMG last month.
“The IPO market tends to be either a feast or a famine. And right now it seems to be more of a famine,” Scheinman told ISMG. “There’s less capital looking for late-stage companies. There’s a lot of pressure on late-stage companies’ valuations and capital.”