Primer, a U.K. startup founded by alums of Braintree and PayPal that provides a drag-and-drop framework for merchants to build online payment stacks, last year raised $50 million at a $425 million valuation from investors like ICONIQ, Accel, Balderton Capital and Seedcamp — a round the came amid a bullish period for e-commerce, with record-levels of buying activity in the midst of the COVID-19 pandemic. This year, that activity has cooled down, and so have things at this e-commerce startup. TechCrunch has learned and confirmed that Primer has cut a big swathe of its staff as part of a restructuring, as it looks to adjust to current market conditions and extend its runway amid what many believe will be a tough year ahead.
Sources tell us that some 85 staff have been let go — around one-third of the company, we understand.
“We can confirm that we did have a reduction in staff,” a spokesperson said. “Like many other firms right now, we have course-corrected heading into the new year given the economic environment and we have taken what we think are appropriate steps to account for the uncertain times ahead.”
The story of what is going on here bears spelling out because the same thing is likely hitting a number of startups (and bigger companies) in the industry.
The long and short of it 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 involved masking, social distancing and staying away from crowded physical spaces — has subsided. That activity was not what many had predicted: Many had presumed that after large numbers of people had shifted to buying online, they would “never go back” to the old way of doing things.
That hasn’t played out: People are going back to shopping in stores, but more importantly, the global economy has cooled down, inflation has gone up and people are spending less. So companies that expanded to meet demand are now retrenching.
That has led to layoffs and restructuring even at some of the very biggest companies in the space that you might have thought would be best equipped to handle economic ups and downs. Amazon, for example, warned in its last quarterly earnings that sales would be lower than originally expected in the critical holiday period. It has been cutting thousands of employees and rationalizing some of its most costly product areas.
You may have recently seen that some of the gloomiest predictions were not borne out during the bellwether Black Friday and subsequent first weekend of holiday sales. But a good part of that activity has been attributed to retailers offering large discounts to spur buying, so margins will be hit longer term.
This is not just playing out at the larger end of the retail market — smaller sellers and the many providers of tech to the industry will also be feeling the drop.
Primer’s unique selling point is that it has built a very simple, no-code interface that reduces what is usually a very complicated, fragmented process — building a payments stack and flow around online purchasing, which includes not just the basic transaction but potentially different payment options, adding loyalty or discount codes, upselling to other products, managing customer information, verifying against fraud and much more — into a set of drag and drop boxes for its customers both to call in more features and visualize how they would work together. It offers integrations for dozens of different services, underscoring just how fragmented the space is.
“We are building out a whole suite in the next year to aid merchants with operations and the observability of the payment stack,” said Paul Anthony, Prime’s co-founder and CEO, in an interview with TechCrunch last year.
However, a source tells us that while the process was seamless to order up, implementing it was not quite as automatic and quick.
“They are signing merchants but getting them live is a long process,” they said. “They do not generate revenue until they are live. Hence, they reduced teams until they solve this bottleneck.”
Given the pressures many startups are seeing with fundraising right now, the first thing to do is not to raise more money to extend runway, but to cut costs to extend what you already have in the bank, and that’s what Primer has done here. Sources tell us that Primer’s aim with this restructuring is to extend its runway to more than two years (which it believes it has done). Its plan now is to continue investing in product with expansions on that front planned for next year.
As in any downturn, there is an argument to be made for more automation in any process to cut down costs and — especially in the case of e-commerce — put more efficient tech in place to speed up and close more sales. But that only stands if the tech is up to the challenge, and if target customers are in a position to invest in improvements themselves. That’s the opportunity but also curse of working in any ecosystem.
Primer’s aim is to come out as one of the helpers (and winners) in that process.
“Given the challenging economic environment, we believe Primer is more valuable to merchants and partners than ever before as they look to increase efficiency within their organisations, lower costs, build greater customer loyalty, and launch in new markets — and do this in a no-code/automated fashion,” the spokesperson said. “While these are always difficult decisions to make, we feel confident this recalibration will not affect the level of service we offer to our current and prospective merchants and partners.”