RIFs are back – let’s get ahead of it.

The year 2023 was a grim year for layoffs in tech, with 264,000 in the U.S. alone, according to Layoffs.fyi.

Disconcertingly, 2025 is off to a similar start to 2023, with 64,000 tech jobs lost through April. Economic uncertainty remains. Recession fears have abated but not disappeared.

This, combined with a strained funding environment and stubbornly high interest rates, will prompt the majority of venture-backed firms to reassess their burn rates and growth plans.

Limited Partners (LPs) are telling us they are unwilling to commit fresh capital to venture until they see some liquidity (DPI in the jargon). The IPO window is a distant hope for most tech firms, and the strategic exit corridor is crowded in most verticals. As a result, we’re likely to continue seeing reduction in force (RIF) across the country.

As a senior bank executive, I’ve had to shutter or restructure geographic and product initiatives, reassigning or letting go of most of the staff in some cases. As a founder and CEO, I’ve unfortunately had to close most of my business, which simply didn’t find product-market fit.

In this and two subsequent posts, I’ll lay out the hard-earned lessons of myself and my colleagues at LF Partners, where we have guided over a dozen startups through the RIF process. As former operators ourselves, many of us have had the painful experience of leading a RIF in our own companies.

Lessons in RIFs

Like any major project, a RIF has three phases: planning, execution, and follow-up.

This post focuses on the planning phase, which, in our experience, is the most critical and the one typically conducted under duress and in a hurry.

The most important lesson in planning a RIF: don’t wait until you actually need to execute one to develop the plan. CEOs who conduct RIFs under board pressure and facing a cash crunch can make mistakes they could have avoided with more reflection. Often, they don’t cut deep enough or in the right areas, or they inadvertently lose their best team members.

From Series A forward, every firm should develop contingency plans for the most likely challenges that could necessitate laying off a significant portion of the team.

• Funding that doesn’t come through
• Loss of a key customer
• Failure to gain traction in a major product or market
• Need to fix organizational sprawl across geos, layers and functions
• Upgrading talent across the entire organization
• Regulatory/compliance costs that are steeper than hoped for

The contingency plans don’t have to be overly detailed, but they must estimate the required number of positions and budget cuts by area.

This planning will help leadership with the second critical element in planning a RIF: being crystal clear about why the RIF is needed, why it is needed now, and whether it could have been avoided. Leveling with the team, board, and other stakeholders is critical to maintaining credibility.

The best practice is to plan for a cut that is deeper than you think you will need. Going back for a second round within a year or 18 months of the first RIF can be detrimental to morale and the ability to retain top team members.

A RIF is not the time to wing it in terms of communication. Develop a script and decide who will deliver it, how, and when. Getting the tone right takes work: empathetic but firm about the need for the cuts. Each company has its own culture and “voice.” By all means, get expert communications help, but make sure what emerges is authentically your language.

If you have contingency plans in place, the budgeting and scheduling of the actual RIF will be relatively straightforward; however, risk management remains paramount.

• What are the legal requirements and risks by jurisdiction?
• How will you reassure key staff, customers and other stakeholders that the core business is sound?
• How quickly can you move from announcing to execution?
• Will you conduct the meetings in person or remotely?
• When do you cut off emails, slack etc?
• How will a smaller team manage operations?
• How will you maintain morale and productivity?

If you can afford it, offering severance and outplacement support to those let go will go a long way in bolstering the spirits of the remaining team. They are losing friends as well as colleagues. Similarly, retention bonuses for key staff are worth considering.

Even in the best of times, a RIF may become the best and inevitable course of action. Thinking ahead will reduce the risks, pain, and even possibly some of the heartache.

The next blog will zoom in on the actual execution of the RIF and similar lessons learned.