DoorDash is laying off 1,250 people in an effort to rein in costs, the company's CEO Tony Xu said in a message to employees on Wednesday. Xu's message notes that the pandemic presented unprecedented opportunities to serve merchants and consumers, and as a result, DoorDash sped up hiring to catch up with growth. Xu says although most of the company's investments are paying off, it did not properly manage team growth.
"Most of our investments are paying off, and while we’ve always been disciplined in how we have managed our business and operational metrics, we were not as rigorous as we should have been in managing our team growth," Xu wrote. "That’s on me. As a result, operating expenses grew quickly."
Xu says that given how quickly DoorDash hired, if the company did not address its operating expenses, they would continue to outgrow sales growth. He went on to note that DoorDash's business is more resilient than other e-commerce companies.
"I did not take this decision lightly," Xu wrote. "We have and will continue to reduce our non-headcount operating expenses, but that alone wouldn’t close the gap. This hard reality ultimately led me to make this painful decision to reduce our team size."
Employees who are laid off will receive 13 weeks of compensation, along with one four-week lump-sum severance payment. Xu's memo also says impacted workers will receive their February 2023 stock vest. For visa-sponsored workers, the termination date will be March 1, 2023. Xu says this decision will give them additional time to find a new job.
DoorDash joins a growing list of companies that have recently reduced their workforce, such as Meta, Amazon, Twitter and Lyft. Hiring in the tech industry significantly increased during the pandemic and has seen a harsh comedown as companies admit they grew expenses too rapidly for the current climate.