One of Ottawa’s fastest-growing software companies has laid off more than a quarter of its workforce amid ongoing economic turbulence that has battered the tech sector.
Rewind Software gave 37 of its 135 employees pink slips last week, co-founder and CEO Mike Potter confirmed to Techopia on Monday. The company announced in a blog post last week it was cutting staff, but did not initially disclose the number of affected workers.
Potter said that while Rewind has continued to post “consistent” revenue growth over the past year, sales aren’t rising at the same rate they were earlier in the pandemic.
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“We definitely had customers that we thought we were going to close that decided to push those deals off as the economy turned down,” he said.
Founded in 2015, Rewind makes software that backs up and recovers data for Shopify merchants, QuickBooks customers and users of other cloud-based software platforms. It stores data from customer accounts on encrypted servers, ensuring sensitive information is protected from events such as power outages or cyber-attacks.
Beginning as a Shopify app that Potter and business partner James Ciesielski created in their spare time, Rewind soon blossomed into an Ottawa tech darling.
Two years ago, the firm raised US$80 million in venture capital, landing back-to-back funding rounds just months apart as demand for its services surged amid the pandemic-fuelled e-commerce explosion that turned Shopify – whose merchants are Rewind’s main source of revenue – into Canada’s most valuable publicly traded company for a time.
Rewind’s revenues jumped more than 550 per cent between 2018 and 2021, earning it a coveted spot on last year’s Deloitte Technology Fast 50 list.
Meanwhile, the company’s headcount ballooned from fewer than 60 people at the start of 2021 to 130 employees by last May. When it announced its US$65-million series-B funding round in September 2021, the company said it expected to employ more than 300 people by the end of the following year.
But by last summer, the global economic outlook had changed, prompting many tech firms to scale back their hiring and revenue growth projections.
Rewind was no exception. Shopify’s 2022 swoon – which saw it make big staff cuts of its own amid lower-than-expected revenue growth – hit the young company particularly hard.
“We see a pretty high correlation between how they grow and how we grow,” Potter explained. “As they accelerated their growth in the pandemic, we also accelerated our growth. As their growth has slowed … our growth has also slowed.”
As its sales growth began to level off, Rewind laid off five of its six recruiters last spring and dramatically cut back its expansion plans. While the firm did make a splash with a few big-name recruits – including Nolan Beanlands, the former executive director of the Capital Angel Network, who took on the newly created post of corporate development manager – the company’s total staff count remained relatively steady until last week.
Most of the employees targeted in the layoffs were in research and product development roles, Potter said. Rewind has “invested a lot of money” in honing its technology to the point where it’s now adaptable to a wide range of platforms, he explained, and the company feels it’s time to channel more of its resources into expanding its customer base.
“I think we had expected to see a larger return on that (R&D) investment,” Potter said. “(The software) is clearly working. We’re just not yet marketing it at the level that we need to.”
Nearly 30,000 active users subscribe to Rewind’s products, which serve customers of Shopify competitor BigCommerce, accounting software giant QuickBooks and other software platforms such as Confluence, GitHub, Jira and Trello.
While the majority of the company’s revenue still comes from Shopify merchants, the e-commerce powerhouse’s share of Rewind’s total income is shrinking as more platforms are added to the mix.
The bulk of Rewind’s new sales are from other platforms, and Potter sees huge upside in expanding its non-Shopify client roster. Jira alone has 250,000 customers, he noted – only a few hundred of which currently use Rewind to back up their accounts.
“There’s still a tremendous amount of potential just on the platforms that we’re backing up,” Potter said.
Meanwhile, Rewind’s fundraising plans have also changed significantly.
Earlier in the pandemic, the firm expected it would require a series-C round to help finance its rapid expansion. But Potter said Rewind has reined in spending to the point where it should become self-sufficient this year or some time in 2024 at the latest.
“We don’t anticipate ever needing to raise another round of funding,” he said. “This will get us to cash-flow break-even with the majority of our series-B money still in the bank.”
Rewind is the latest tech firm to slash labour costs amid widespread uncertainty that’s gripping the industry.
According to Layoffs.fyi, 528 tech firms have laid off nearly 154,000 employees around the world since the start of 2023.
Although Shopify president Harley Finkelstein said last month the firm had no plans to make further cuts after laying off roughly 10 per cent of its workforce last summer, at least one former Ottawa-based employee wrote in a LinkedIn post last week that he was let go in “another round of layoffs” at the company.
Shopify officials did not respond to requests for comment.