Tech layoffs this year offer a hiring boon for surviving startups

Tech layoffs this year offer a hiring boon for surviving startups

TAIPEI – Thousands of tech layoffs could end up being a boon for start-ups that struggled to hire talent during the heady days of sky-high valuations.

The big catch: They must first ensure their own survival after venture capitalists pull back sharply in 2022.

The history of Silicon Valley is full of stories of companies that were founded or gained ground from the ruins of the recession. and Google, now known as Alphabet, are among the big winners from past economic crises. Google rose from the ashes of the collapse in 2000 after picking up a slew of engineers laid off elsewhere, University of Washington history professor Margaret O’Mara told Bloomberg’s Odd Lots podcast.

They are now the fourth and fifth most valuable companies in the world.

The caveat is that start-ups must already have money from previous funding rounds because the main source of funding, venture capitalists, are more cautious than ever.

Total funding fell 34% in the third quarter from the previous period and 55% from a year earlier, to $74.5 billion (S$100 billion), according to the CB Insights market information provider. This is the lowest level in nine quarters.

Funding for mega-towers, where the money invested in a startup is at least $100 million, has fallen to just a third of the level seen a year ago, the company found. A 42% drop in the value of new venture capital deals globally through the end of November puts that figure on track for the deepest fall in two decades.

Rather than driving valuations ever higher – creating unicorns with a market value of over US$1 billion – investors are keeping their powder dry and focusing on the stakes they already hold in the young companies.

This has led to a reduction in the average deal size for investments in early-stage start-ups.

“VCs are prioritizing funds for existing portfolios that are fundamentally sound, but may struggle to raise funds in a very challenging environment, to help extend their track until the fundraising market is improving,” said Ms. Tina Cheng, managing partner at Cherubic Ventures in Taipei.

Even start-ups with cash remain cautious because they have no visibility on when they will eventually be able to raise funds, she added.

Many people who have lost their jobs are also in no rush to find new employment, thanks to generous severance packages and years of heavy workloads that have left many exhausted.

Mr. Elon Musk’s purchase of Twitter led to the loss of more than 3,700 jobs, making it the most famous of tech layoffs. Many were offered three months’ salary as part of their severance package.

The cuts on Twitter are neither the first nor the most important. The meta platforms, formerly called Facebook, removed 11,000 people, while Amazon dropped around 10,000.

More than 142,000 jobs were lost at 889 tech companies in 2022 alone, according to, an open source list of global layoffs created by San Francisco-based startup founder Roger Lee.

Heavy job losses in tech are being offset by a rise in other sectors, including leisure, hospitality, healthcare and construction, according to November data from the Bureau of Labor Statistics.

With the eternal source of money drying up, venture capitalists are advising their companies in which they invest to learn to fend for themselves.

“In a bear market, everyone has to get their money from customers anyway. So get out there, get your money from customers and don’t go to the venture capital community,” said venture capitalist Tim Draper. He also recommends that those who could face a cash crisis be more careful with staffing.

“I recommend companies like this cut down their team quickly and efficiently and move on,” he said. “The flip side is that you see these amazing companies come out of times like this. As a venture capitalist, I don’t want to miss that.

Such Fomo – the fear of missing out – that drives much of the Silicon Valley hype cycle is never far away. Although times are tough now, thousands of smart, recently laid-off minds will soon be plugging into the next big thing. And those with lots of money want to make sure they don’t miss the ride. BLOOMBERG

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