High-flying Fintech Unicorn Socure lays off 13% of employees in the face of declining growth and dissatisfaction among employees

Socure, a startup for fraud prevention and identity verification recently valued at $ 4.5 billion, laid off 69 employees this week, or 13% of the company’s workforce, said co-founder and CEO Johnny Ayers Forbes Today. The layoffs primarily affect the marketing, sales and human resources teams, Ayers said, with “very little impact on engineering, product development and computer science.” Until he confirmed the layoffs to ForbesSocure had not made a formal announcement about the downsizing, but the rumor began to spread earlier this week on Glassdoor, where the company was the target of some unfavorable employees’ comments even before the layoffs.

Ayers insists that Socure has more than two years left in the bank’s cash after raising $ 450 million in November last year, but he now wants to demonstrate that it can be a sustainable business that does not need a constant supply of external capital. “When we look at the public markets … we want to get the right cash flow and profitability,” he said.

Socure was founded in 2012 and uses machine learning algorithms to help other companies verify that their new users are real people using their real identities. It has a significant list of customers ranging from Citibank and digital banking Chime to the gambling site DraftKings. Ayers has claimed “four of the top five banks” in America as customers, as well as the “largest crypto exchange” and major NFT marketplaces. “We have pretty much every major consumer fintech,” he says.

Socure’s roller coaster growth over the past two years is typical of many fintechs. It expanded rapidly during the pandemic, going from 283 customers at the end of 2020 to more than 1,000 at present, with more than half of them as financial services. During 2021, Socure’s valuation tripled in seven months, reaching $ 4.5 billion. The number of employees shot up and went from 120 people at the end of 2019 to more than 500 earlier this year. It moved headquarters from New York City to Nevada and began letting all employees work remotely full time.

But in 2022, as inflation has risen, equities have entered a bear market and crypto has lost 60% of its value, the growth of some fintech companies has slowed sharply. Fintech shares have fallen even more than the S&P 500. Valuations in new financing rounds for private fintechs have begun to fall, and redundancies have begun – especially on the top US cryptocurrency exchange Coinbase and buy-now, pay later company Klarna.

Venture capitalists have begun to advise startups to go down and cut costs, so companies have begun to spend less on marketing. This has led to fewer new users for some Socure customers and less revenue for Socure – significantly about 80% of the revenue is transaction-based, which means they make much more money when customers are in expansion mode and actively use the product to verify new users identities.

«The commitment [capitalists’] appetite for how they view combustion [rates] in relation to growth ”affects Socure’s customers, says Ayers. (Burn rate refers to how much money a company loses each month). He adds that as categories such as digital banking and buying now, pay later have become more competitive, start-up companies’ costs of acquiring new customers have risen sharply, which has also forced them to withdraw from marketing.

“All of these are intensifying pressure across the industry,” he says. He claims that among Socure’s top 100 customers, it has had “zero churn” since 2019. In other words, none of the top 100 customers have stopped using Socure in recent years – it’s just that they attract and screen fewer new users, which means less revenue for Socure.

In addition to slowing growth, another major problem has emerged for Socure in the last three months: it has seen a remarkable increase in critical reviews from anonymous employees at Glassdoor. Five reviews use the word “toxic” to describe the management team or work environment, with one writing: “The attitude sent down from management is very ‘shut up and work’.” Another reads: “Management encourages work to burnout and collapse.” In response to this criticism, Ayers says: “Our culture is a culture of high growth and great impact. We are and strive to be a top 10% company in the world … this requires that we work very hard and very smart. “He says that the company tries hard” to build an inclusive environment where employees can have their say “.

Five of Socure’s total of 58 Glassdoor reviews also criticize the company for either lacking diversity or for not trying to make the workplace more diverse and inclusive. Ayers says Socure is “very aggressive in our commitment to fair employment, compensation, promotion and mentorship for all our employees.” He says that the company’s management team is “40% colored”. The website shows that among the 12 top managers are two women.

“Our culture is one that we really focus on performance versus some people who want their personal needs served by a for-profit company,” says Ayers. “We have people on our team who want us to make public statements and respond to every single celebration. Our message has been that we really need to focus on the mission and the vision for what we are trying to achieve… Not everyone agrees with that. ”

Ayers insists that he has made significant efforts to make Socure’s product inclusive. The company released surveys last fall indicating that Socure’s AI-based identity verification service increased the number of Asian, Latin American and black customers who were automatically approved for a customer’s service by 46%, 36% and 28%, respectively, compared to an “older identity verification provider. ”

Over the past two years, Socure has also faced a few lawsuits. Two were lawsuits for discrimination in the workplace, both of which have been sent (as required in Socure’s employment contract) to binding arbitration. Socure’s co-founder Sunil Madhu is also suing the company, claiming that it has not allowed him to exercise his share options. Ayers declined to comment in detail on any of the ongoing lawsuits, saying: “We dispute all allegations and intend to defend our position.”

With additional reporting by Dylan Sloan.