Robinhood's announcement on Tuesday that it was laying off 9% of its nearly 3,800 strong workforce shows how investors have lost patience with unprofitable tech businesses, and how the companies now face stark choices.

Why it matters: Reality is setting in for not just Robinhood but other fintechs struggling with the bottom line and now grappling with layoffs as their stocks get walloped and their funding options dry up.

Background: Robinhood hired rapidly through the pandemic, with headcount growing 6x between 2019 to 2021. The company's growth and popularity among retail investors set the stage for its August 2021 IPO.

• But the company has yet to show a profit, and it has disappointed investors due to slowing growth.
• "This rapid headcount growth has led to some duplicate roles and job functions, and more layers and complexity than are optimal," Robinhood CEO Vlad Tenev wrote in a blog post Tuesday.

Of note: Shares of the company are down around 5% in early trading Wednesday, near its all-time low, as investors await first quarter earning results tomorrow.