On Friday, Patrick and John Collison dispatched an email to all staff members at their payments giant Stripe confirming what many had anticipated: significant redundancies. 

In total, the company is reducing its headcount by 14 per cent, a move that will bring the company’s number of employees to 7,000. The correspondence with staff came across as genuine, and the Irish-born co-founders of Stripe appear to have gone to great lengths to provide additional financial and future support to those affected. 

The brothers also explained the decision in detail, outlying the many factors hurting Stripe – as well as a host of other major technology multinationals – at present. 

Patrick Collison said the company “overhired” during the pandemic and was “too optimistic” about the near-term growth of e-commerce. When the pandemic arrived, Stripe experienced a massive surge in business as consumers gravitated toward e-commerce.

This led to Stripe increasing headcount at a breakneck pace – according to LinkedIn data, Stripe’s employee base more than doubled over the past two years.

The number of staff employed by the Irish-headquartered group of subsidiary companies nearly doubled to 1,048 last year. The fastest growth in headcount was sales, followed by engineering and user operations. It is unclear yet how many Irish jobs will be lost.

Hiring decisions were easy to justify during the pandemic. As Collison outlined on Friday, both revenue and payment volume have since grown more than three-fold since. 

However, the world has again changed, something Collison acknowledged. “We are facing stubborn inflation, energy shocks, higher interest rates, reduced investment budgets, and sparser startup funding,” he wrote, adding that many parts of the world seem to be heading toward recession. 

The layoffs are sad but not surprising. When Stripe was last valued in a funding round in March of 2021, it was valued at $95 billion. This was at a peak of market and valuation exuberance. Things have changed radically since, so much so that Stripe investors, the T. Rowe Price Global Technology Fund, cut the value of its Stripe holdings to $23.04 a share as of June 30, a 64 per cent reduction from the end of last year. In July, Stripe took the step of reducing its internal valuation to $29 per ordinary share. That was a drop of 27 per cent from the peak.

Stripe is a massive success, and a brilliant company. But, like many other technology multinationals over the past two years, it battled extensively in the war for talent, essentially hoarding staff to fuel anticipated growth.

As Nat Friedman, the former chief executive of Github, put it on Twitter last week: “Many tech companies are 2-10x overstaffed and everyone who’s paying attention already knows this.”

This was something Sean wrote about in investing his column last week, when he explained the hiring spree during the pandemic. In 2020 and 2021, during the lockdowns, there was a spike in demand for digital products of many kinds. Valuations surged, and companies, working on the expectation that the pandemic trends would accelerate further, kept on hiring. 

As Sean put it:

“Looking at skyrocketing revenues, and stock prices, technology firms went on a hiring spree. Meta and Alphabet were already huge companies in April 2021. Since then, they’ve grown headcount by 33 and 38 per cent respectively — 47,000 employees for Alphabet, and 24,000 for Meta. Note that headcount has kept growing in recent quarters, long after it was clear that the slowdown was happening.”

And the slowdown has been apparent for a number of months, as evident in the downbeat recent quarterly warnings by the likes of Amazon and Meta. 

There are other reasons for the tech slump – Sean highlighted last week how Apple’s dominance had forced rivals into risky pivots, while in a separate piece he also outlined the fundamental malfunctions within Twitter that Elon Musk has inherited.

Twitter, of course, was another company to announce heavy job cuts last week, along with the likes of Lyft, CloudKitchens, OpenDoor and Dapper Labs.

Not all have operations in Ireland.

However, the ongoing tech slump really matters for Ireland – our industrial model, after all, is based on securing foreign direct investment from big US multinationals. If they are in retreat, the investment will most likely slow down or recede.

We have known about this risk for years, and the recent announcement of the €6 billion National Reserve Fund is an acknowledgment of this. The importance of corporate money was highlighted yet again in the tax returns for October, published last week. 

The state reaped €16.6 billion in corporation tax for the 10 months to the end of October. This was a whopping €6 billion – or 69 per cent – ahead of the same period last year. Receipts for October alone were €2.3 billion, which was €800 million up on the same month last year. The tax is expected to break the €20 billion barrier this year. 

We know that some of this is one-off in nature. The Department of Finance said last week that the increase related to profits in a small number of companies in the multinational sector, “which are unlikely to be repeated next year”.

Instead, the excess corporation tax is likely the result of multinationals onshoring intellectual property to Ireland in a tax optimisation scheme known as the Green Jersey. 

However, many of the companies struggling at present are significant employers here and pay a significant amount of regular, recurring corporation tax. 

This is what makes the current slide so potentially dangerous for Ireland. As of now, the money is rolling in. In the past, it has allowed us to cover overruns in the health service and nurse the economy through the pandemic. 

However, it must now be used strategically to help Ireland expand its industrial model beyond luring and seducing multinationals, something Stephen has written about extensively in the past.

Policymakers and commentators have long talked about the concentration risk in relation to corporation tax. While it has not filtered through to our tax take yet, we saw last week how quickly the tide can turn for tech companies – no matter how big they are. 

*****

Elsewhere last week, Thomas had a major two-part investigation into Orpea, the French-owned private care company that has acquired its way to number one player in Ireland in recent years. In part one, he outlined how it has fallen from grace in France and explained how it is now operating under the protection of a court-sanctioned “conciliation procedure”, a light insolvency regime in France, while it renegotiates a multi-billion-euro debt package with a syndicate of the country’s largest banks.

Part two drew from inside sources and dozens of inspection reports and assessed what the scandal means for its hundreds of residents and its expansion plans here.

Michael Bahar joined the US Navy Seals after 9/11 and served in the White House under President Obama. He now leads Eversheds Sutherland’s global cybersecurity practice. The lawyer talked to Francesca about geopolitics, national security, and cyber warfare.

An inspector is due to report to the High Court on whether Christmas tree business WFS Forestry intended to defraud investors out of around €1.4 million. Those investors set out why they believe they were duped.

Can monitoring your glucose levels help you lose weight without the misery, or is it just another metric for biodata wonks to track? Rurik Bradbury, chief executive of Limbo, explained the science behind Silicon Valley’s next big wearable bet: read or listen to his interview with Rosanna.