Tough economic conditions and the funding slowdown for tech startups is leading to more layoffs among area companies.
Pear Therapeutics, which is developing Food and Drug Administration-approved software treatments for addiction and other ailments, cut 25 people, or 9 percent of its workforce, according to a securities filing this week. The move comes after Pear merged with a special purpose acquisition company to go public in December, and its stock price has dropped by 84 percent. Raising additional funding from investors now is all but impossible, analysts said.
Pear raised $175 million and went public by merging with a SPAC, but had planned to raise as much as $400 million. Now it is making making cuts to “extend the company’s cash runway.” The cost-cutting plan “includes external and internal cost reductions in almost all areas of the company,” Pear said in the filing.
The Boston company had $137 million in cash and short-term investments on its balance sheet at the end of March, down from $175 million three months earlier. Pear is expected to report its second-quarter results in a few weeks.
When it initially filed to merge with a SPAC a year ago, Pear projected that it would have three software treatments in the market, 20 more treatments in development, and revenue of $125 million by 2023.
Now, the company appears to be cutting back on that plan. Layoffs and further cost-cutting will hit “pipeline candidates, discovery programs, business development, and the company’s dual platform in order to prioritize certain of its commercial efforts,” Pear said in its filing.
“Our vision for bringing dozens of [prescription digital therapeutics] to the market ... remains completely unchanged,” chief financial officer Christopher Guiffre told the Globe in an e-mail. “Our commitment to that vision caused us to take significant steps to secure our future in a very difficult period in the capital markets.”
Pear could speed up future product development if the stock market recovers and the company can raise more backing, Credit Suisse analyst Judah Frommer noted in a report on Wednesday.
“The difficult decision was made in the interest of preserving capital so that pipeline projects to build out the broader platform can be revisited once the balance sheet is on better footing,” Frommer wrote.
Companies that could raise large rounds from venture capital investors for the past few years are now finding that backing is much harder to find, leading to belt-tightening across the industry. And the stock market crash among tech companies makes going public all but impossible for now. High inflation and supply chain shortages have also cut into sales at some companies.
The area’s once red-hot cybersecurity industry is also making cutbacks.
Snyk, which focuses on uncovering software vulnerabilities and was valued at $8.5 billion last year, cut 30 people, or 5 percent of the company, in a cost-saving move last month. The startup now plans to become cashflow-positive in 2024, a year earlier than previously targeted, chief executive Peter McKay noted in a blog post.
The Boston company made the layoffs and reorganized itself “in order to fortify Snyk to be a more resilient business moving forward, better able to withstand the uncertainties thrown at us by this or any future macro environment,” McKay wrote. As recently as May, McKay was talking about adding jobs this year.
Aura, which offers a cybersecurity protection service for consumers, cut 70 people, or 9 percent of its workforce in June. The layoffs came after the company cut a deal with MetLife to market its service as an employee benefit, making some of its own efforts redundant. “As a result of this realignment, we made the difficult decision to let go about 70 employees worldwide,” a spokesperson said.