New-economy poster child LivingSocial slashes staff amid another startup collapse

Looks like the tech shakeout is with us

In a sign that the long-anticipated tech shakeout has begun in earnest, poster child for the new economy LivingSocial has announced it is slashing its workforce in half.

At the same time, yet another food-delivery startup, SpoonRocket, has closed its doors and sold itself to competitor Sprig. The result, according to a Wall Street Journal article, is that tech workers are increasingly looking for "safe" jobs with giants like Google and turning down low-wage, high-equity offers from startups.

LivingSocial was once a shining light for new tech startups, using the ubiquity of smartphones and new ideas around a more individualized economy to offer direct discounts and deals to people.

But as the company announced Wednesday, it is getting rid of 160 staff – roughly half its entire workforce – and shutting down its Arizona-based call center. The company has raised nearly a billion dollars in funding, but the reality is that it has yet to make any money.

With funding drying up, it has little choice but to continue cutting costs in an effort to stay afloat. This latest round of layoffs is the third in under two years.

Of course, this being Startup Land, the company has tried to put a positive spin on things and titled its workforce-slashing announcement as no more than completing an "initial phase of turnaround."

Break a leg

CEO Gautam Thakar was quoted in the announcement as saying: "It has been a tougher journey than I would have liked, but we have remained focused over the last year on the initial goal of being break-even in our voucher business. We have aggressively sought operational efficiencies through simplification, automation and outsourcing, culminating in the completion of the initial phase of our turnaround today."

Or in other words: we still haven't found a way to make money.

The company is now trying to become a sort of loyalty card for restaurants, a system that it claims "has shown initial success, with high adoption from merchants in the restaurant category and positive early feedback from consumers, on the move away from vouchers."

Meanwhile, SpoonRocket – which has won several awards for its food delivery business – explained that it has "continued to face intense competition from competitors like Sprig and an ever-tightening funding environment."

Which, again, is code for the fact that it hasn't found a way to make money and the VCs are no longer putting in the cash to keep companies going.

"We explored all strategic options till the very last minute," said a post by the company, "but unfortunately, they all fell through. It has been a great run and a joy to hear the positive feedback we get from our customers about how much they love our service every day."

Love doesn't pay the bills. A lesson that was temporarily put on hold for the past few years but which appears to be reasserting itself in 2016. ®

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