By CultureBanx Team
- Andela cut 135 staff members across five countries, with senior staff in New York and four African countries poised to take salary cuts of 10% to 30%
- The last funding round reportedly put Andela’s valuation at somewhere between $600M – $700M
African outsourcing startup Andela has been forced to take drastic action as a measure to navigate the negative economic impacts brought on by the coronavirus pandemic. They have cut 135 staff members across five countries, with senior staff in New York and four African countries poised to take salary cuts of 10% to 30%. Now the company wants to go full circle by venturing into remote work, tapping more talent without necessarily having engineers relocate. Does this change in the company’s business model represent a deeper sign of the trouble awaiting Africa’s tech ecosystem, given the saturation of talent in other regions?
Why This Matters: It should be recalled that this is not the first time Andela has laid off some of its staff in recent times, even though no software engineers were affected. After the company raised $100 million in its 2019 Series D funding round, they ended developer training programs in Nigeria, Kenya and Uganda, letting go of up to 400 people as part of the company’s restructuring plan. The last funding round reportedly put Andela’s valuation at somewhere between $600 million and $700 million.
Africa’s tech unicorn receives anywhere from $50,000 to $120,000 per developer from a company
Andela’s new plan is to source engineers from all over the globe, as opposed to just the developers it trains across Africa for contract work. They will still work with tech companies around the world, nearly 90% of which are located in the U.S. Africa’s tech unicorn receives anywhere from $50,000 to $120,000 per developer from a company and passes one-third of that directly to the person doing the work. Now that they’ve unloaded hundreds of skilled developers in some of Africa’s largest tech ecosystems, it’s uncertain if the region can absorb these displaced workers.
Currently, Andela operates in five different countries, but this has proven limited in terms of customer pool. Hence the new remote business strategy, that doesn’t seem as though it should be specifically tied to the pandemic. The new model seeks to tap more talent that would otherwise not be reached via office contact. A remote business strategy would outsource diverse talent that can help clients without having to be in a central place.
Situational Awareness: We also have to look at whether or not this outsourcing or outsourced tech contractors across Africa is sustainable for Andela, it seems like it may not be. Perhaps Andela’s pricing strategy that’s set for servicing U.S. and European clients, is not economically viable to just start placing talent locally across Africa. Andela has grown rapidly with venture capital funding in the last five years, but has yet to attain profitability.
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