US-based prop-tech startup Frontdesk has initiated the first large-scale employee layoff of the year. The company reportedly fired its 200 people on Tuesday through a two-minute virtual call.
The layoff, affecting full-time, part-time workers, and contractors, was communicated through a two-minute Google Meet call, reported TechCrunch.
Frontdesk CEO Jesse DePinto informed employees about the company's financial struggles during the call, disclosing the company's intention to file for state receivership, a bankruptcy alternative, the report added.
“The startup's business model, which is leasing apartments at market rental rates and furnishing them for short-term rentals in more than 30 markets, has struggled largely due to the upfront costs involved, associated capital expenditures and variables in demand and rates,” according to sources cited by TechCrunch.
Despite raising around $26 million from investors like JetBlue Ventures and Veritas Investments, the startup faced challenges in convincing investors of its shift towards full building management.
Frontdesk, which was founded in 2017, specialises in managing over 1,000 furnished apartments across the US, took this drastic measure just seven months after acquiring Zencity, a smaller rival based in Wisconsin. The company faced financial challenges as they struggled with property rental payments, leading to strained relationships with landlords due to communication issues.
In response to these difficulties, the company had to make the tough decision to lay off a significant number of employees, causing distress among the affected workforce.
Frontdesk's recent mass layoffs have raised questions about the viability of similar companies in the short-term rental sector. The incident suggests potential challenges these businesses might face due to industry dynamics and intense competition.
