Primer, a British startup founded by Braintree and PayPal alumni that provides merchants with a drag-and-drop platform to build online payment stacks, last year raised $50 million at a $425 million valuation from investors such as ICONIQ, Accel, Balderton Capital and Seedcamp – The round came amid an e-commerce boom, with record levels of purchasing 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 off a large portion of its workforce as part of its restructuring as it looks to adapt to current market conditions and expand its runway amid what many see as a challenging year.
Sources tell us about 85 employees have been made redundant – we understand about a third of the company.
“We can confirm we’ve had staff reductions,” the spokesman said. “Like many other companies at the moment, we have adjusted our course for the new year taking into account the economic environment and have taken what we believe are appropriate steps to accommodate the uncertain times ahead.”
The story of what’s going on here needs to be told, because the same thing is likely hitting many startups (and larger companies) in the industry.
In short, the broader e-commerce market saw a significant drop in activity this year as the COVID-19 pandemic peaked – or at least a harsh response that included masking, social distancing, and staying away from crowded physical spaces – subsided. This activity was not what many predicted: many assumed that after a large number of people switched to buying online, they would “never go back” to the old way of doing things.
This has not worked: people are returning to shopping in stores, but more importantly, the global economy has cooled, inflation has increased and people are spending less. So companies that have grown to meet demand are now cutting back.
This has led to layoffs and restructuring at even some of the biggest companies in the industry that you might think are best equipped to deal with economic ups and downs. For example, Amazon warned in its recent quarterly earnings that sales would be lower than originally expected during the critical holiday season. It has cut thousands of employees and rationalized some of its most costly product areas.
You may have seen recently that some of the bleakest predictions didn’t come true during Black Friday and the first weekend of Christmas sales that followed. But much of that activity has been attributed to retailers offering big discounts to spur purchases, so margins will be hit in the long run.
This isn’t just happening at the larger end of the retail market – smaller retailers and many technology providers to the industry will also be affected.
The unique thing about Primer is that it has built a very simple no-code interface that cuts down on what is usually a very complicated piecemeal process – building a payment stack and flow around online shopping that includes not only the basic transaction but potentially other payment options, adding loyalty or discount codes, upselling of other products, customer information management, fraud verification and much more – to a set of drag-and-drop fields so customers can both call up more functionality and visualize how they could work together. It offers integrations for dozens of different services, highlighting how fragmented the space is.
“Next year, we’re building a whole package to help merchants with payment stack operations and observability,” Prime co-founder and CEO Paul Anthony told TechCrunch last year.
However, a source tells us that while the ordering process was seamless, implementing it wasn’t as automatic or quick.
“They sign merchants, but getting them started is a long process,” they said. “They don’t generate revenue until they’re launched. So they were downsizing teams until they solved that bottleneck.”
Given the pressure many startups are currently facing with fundraising, the first thing to do is not to raise more money to expand the runway, but to cut costs to expand what you already have in the bank, and that’s what he’s done here primer. Sources tell us that Primera’s goal in this restructuring is to extend the runway for more than two years (which he believes has succeeded). His plan is to continue investing in the product with expansion on this front planned for next year.
As with any economic downturn, there is a case for more automation in every process to reduce costs and, especially with e-commerce, to introduce more efficient technology to speed up and close more sales. But that only happens if the technology is up to the challenge and the target customers are able to invest in improvements themselves. This is an opportunity, but also a curse of working in any ecosystem.
Primer’s goal is to come out as one of the helpers (and winners) in this process.
“Given the challenging economic environment, we believe Primer is more valuable than ever for merchants and partners as they want to increase efficiency in their organizations, reduce costs, build greater customer loyalty and enter new markets – and do so in a way -code/automated fashion,” the spokesman said. “While these are always difficult decisions, we are confident that this recalibration will not impact the level of service we offer to our existing and future merchants and partners.”