Business software developer Xolo said Monday that it will lay off 24 of its 134 employees.

"The reasons have to do with the state of the global economy. Interest hikes, inflation and budget cuts have affected the entire startup sector, including Xolo. We are laying people off in several departments, but mostly in marketing and software development," Mikko Teerenhovi, executive manager of Xolo, said.

Layoffs at Estonian startups started late last year. Back then, it was mostly support staff, with companies having to lay off software developers constituting a new stage.

The sector is increasingly looking at downsizing.

"I have heard a lot of talk of planned layoffs both in Europe and Estonia. Unfortunately, it has become the reality for many startups," Teerenhovi said.

"There have been more collective layoffs in the ICT sector this year compared to the last, while I wouldn't say it is widespread. Around seven ICT sector companies have laid off a bigger number of people collectively this year. This has concerned some 180 people in all," said Katrin Liivamets, head of the employer services department of the Estonian Unemployment Insurance Fund.

Veriff has laid off the most employees. The company has made over 100 people redundant in two waves. Cryptocurrency platform Change announced 23 layoffs in August.

Sector companies admit that investors have become more practical – while a brilliant idea used to be enough to secure funding, investments are now also tied to tangible results and profit outlook.

"I believe that the investment landscape has caused companies to try and plan turnover and profit over longer periods. Every position is scrutinized in terms of what can be cut for the sake of efficiency. /.../ There is also adoption of AI technologies. There are many ways to boost efficiency," said Eve Peeterson, head of Startup Estonia.

The organization concludes that layoffs at startups have not become wholesale.

"In a situation where our database includes 1,500 companies, we cannot say it's widespread. Looking at the whole year, the total number of startup sector employees has not fallen. This means that some places need to look for efficiency and go down the path of layoffs, while others are still short on staff," Peeterson said.

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