Shopify announced 20 percent cuts across the business in a company letter that CEO Tobi Lütke sent out on May 4.

“I don’t want to bury the lede,” Lütke wrote. “After today Shopify will be smaller by about 20% and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today. I recognize the crushing impact this decision has on some of you, and did not make this decision lightly.”

Lütke wrote that team members would know within five minutes of seeing his letter whether or not they were impacted; and that they would receive a second follow-up letter.

Shopify also announced that Flexport would acquire Shopify Logistics, becoming the preferred logistics partner for Shopify.

“There’s no way to make this good news, but we designed a package that will attempt to make it the best possible version of a bad day,” the CEO wrote.

Laid-off employees will receive a minimum of 16 weeks severance plus a week for every year of tenure at Shopify. Medical benefits and access to Shopify’s employee assistance program (EAP) will be covered through this same period.

The company is offering those laid-off outplacement services if they’re wanted, and said that all office furniture it provided is the employee’s to keep. Shopify noted that legally it required the work laptops back, but said it will help pay for replacements. The company also said that it will keep Slack and internal email open today for everyone so we can share farewells.

Shopify also announced that Flexport would acquire Shopify Logistics, becoming the preferred logistics partner for Shopify. Flexport, led by CEO Dave Clark and founder Ryan Petersen, is the best builder and operator in the world of logistics, Lütke wrote.

“Contributing our work to Flexport, under the leadership of Harish Abbott, allows everything about Shopify Logistics to be more ambitious and global in nature,” the CEO added. “Making the global supply chains efficient and software addressable is Flexport’s main quest and so this is the perfect home for this part of Shopify.”

The transition of Shopify logistics assets to Flexport will be led by Harish Abbott, Co-founder and CEO of Deliverr, under the guidance of Clark. Under the terms of the agreement, Shopify will receive stock representing a 13 percent equity interest in Flexport, on top of its existing equity interest.

With the closing of the sale, Shopify is entitled to name a director to Flexport’s board. The transaction is expected to close in the second quarter of 2023, subject to certain conditions and regulatory approval.

San Francisco-based logistics platform Flexport secured over $900 million USD in funding at an $8 billion valuation in 2022. The startup’s Series E round was led by Andreessen Horowitz and MSD Partners, with a strategic investment from Shopify, and participation from existing investors like DST Global, Founders Fund, and SoftBank Vision Fund 1.

Shopify previously laid off 10 percent of its staff, or about 1,000 employees, in 2022.

The changes came as the e-commerce giant announced its first quarter results, with total revenue increasing 25 percent to $1.5 billion compared to the prior year, up 27 percent on a constant currency basis.

The company also posted an operating loss of $193 million, or 13 percent of revenue, versus $98 million, or eight percent of revenue, for the comparable period a year ago.

“Shopify’s strong first quarter results demonstrate once again that we’re the go-to solution powering businesses of all sizes, on every surface where they sell,” said Shopify’s president, Harley Finkelstein.

“The changes we’re announcing today will ensure we keep pace with the high velocity of change before us, delivering the cutting-edge solutions our customers have come to expect from Shopify,” Finkelstein added.

For the second quarter of 2023, Shopify forecasts revenue to grow at a similar rate to the first quarter’s growth rate on a year-over-year basis.

The company also expects stock-based compensation to be approximately $110 million, excluding one-time charges related to the sale of its logistics businesses.

Just two days before announcing the latest round of cuts, Shopify made an unspecified investment into Nomba, a Nigeria-based FinTech firm that raised $30 million in what it classified a “pre-Series B” funding.

Nomba is one of the latest additions to Shopify’s investment portfolio, which largely focuses on funding companies that support the Shopify merchant ecosystem as well as online retailers more generally.

The post Shopify cuts 20 percent of staff, announces sale of logistics division first appeared on BetaKit.

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