Termination of employment (layoffs) in startup companies recently, it is said that it has something to do with the bubble burst phenomenon that is happening in startups today.
As the name implies, the bubble burst can be said to be a phenomenon of economic growth which is marked by a very rapid increase in market value, especially in asset values. But also accompanied by a rapid decline.
Startups that keep popping up in the country are experiencing this. As a startup company, startups still face many challenges. Its growth is so fast, but on the one hand it can be said to be fragile. Recently, layoffs of up to hundreds of employees have occurred at several startups.
Collect Investopedia, Thursday (26/5/2022), the bubble burst occurred due to a surge in asset prices driven by high market behavior. Assets are typically traded at prices or in price ranges that far exceed the intrinsic value of the asset. In other words, the price is not aligned with the underlying asset.
A bubble burst occurs whenever the price of an item rises well above the real value of the item. This phenomenon is usually associated with changes in investor behavior.
In equity market and economics this phenomenon causes resources to be transferred to certain areas with rapid growth. However, in the end, the resource was moved again, causing the price to drop.
Meanwhile, Director of the Center of Economic and Law Studies (CELIOS) Bhima Yudhistira explained that the bubble burst occurred due to excessive expectations from investors regarding the startup’s potential to generate short-term income.
“Even though fundamentally, some startups are still losing money and have no competitiveness, so the value of their shares is low.” overvalue. If a startup loses but becomes a winner in the market and has a future is okay” he said to detik.com.
If that’s the case, then get ready for a shock to be felt in the company and have to be laid off. “If the startup branding is big, pitching here and there to attract investors, it turns out that the product is useless then ready to be left by investors,” he explained.
So that the bubble burst does not widen, Bhima advised, there are several things that startups need to do, including by re-evaluating the target market, changing the business model if it does not have competitive market prospects, focusing on service or product innovation, collaborating with potential parties.
“Startups also need to lower their growth targets fairly or organically, prioritizing a solid managerial team rather than just looking for funding but the product doesn’t sell well in the market,” concluded Bhima.