More than 5400 employees have been laid off by tech startups in the past two weeks according to data compiled by Layoffs.fyi. The San Francisco Bay Area alone has more than 2237 employees on the list. As per the same site, in May, the number of startup layoffs was 1360, which is a 64% increase in just a month.
Forbes confirms that this lay-off count over a two-week period is a lot more than any cut in any full month, since January 2021. Citing data from Pitchbook, Forbes says, more than $329 billion was poured into US-based startups last year, double the capital deployed in 2020.
Tomasz Tunguz of early-stage VC firm, Redpoint Ventures, tells Forbes, “No one knows where the market is anymore.” Startups were pushed to grow as fast as they could six months ago, he says, and “Today, I think with more companies than not, we’re being conservative in terms of hiring and burn.”
Speaking to Bloomberg, Bilal Zuberi, partner at the VC firm Lux Capital, justifies job cuts, “The world is falling apart and we need to act accordingly.”
As the war in Ukraine is causing unpredictable macroeconomics upheaval, “A decade-long run of low interest rates that enabled investors to take bigger risks on high-growth startups is over,” says a NY Times write-up.
Bill Gurley, a VC investor in Silicon Valley earlier warned startups of “bubbly behavior”, now shares, “The ‘unlearning’ process could be painful, surprising and unsettling to many.”
“Growth at any price is just not enough anymore,” Mathias Schilling, a VC at Headline shares with NYT.
Bitcoin startup Coinbase which went public last year and has approximately 5,000 workers, recently announced 18% lay off of its full-time workforce. Fast Company shares what the CEO (Brian Armstrong) has written in an email to employees, “We appear to be entering a recession after a 10+ year economic boom.”
He writes, “A recession could lead to another crypto winter, and could last for an extended period. While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.”
Other tech startups like OneTrust, StitchFix, Crypto.com, BlockFi have laid off 25%, 15%, 5%, 20% of the workforce respectively. The cuts are likely to grow as the Crypto market has also seen its biggest drop since March 2020, directing U.S. markets to continue to reach rock bottom.
The major difference between lay-offs in 2022 and 2020 is that many companies laying off people now are already capitalized, and were named Unicorns just last year. Cuts of 2020 could easily be cited to the pandemic that complicated growth plans, whereas, in 2022, cuts are coming right after the companies boasted insane growth just months earlier.
The slowing economy could also have a short to medium-term impact on immigrant-led diversity in the Bay Area, which in turn could affect innovation.
Techcrunch documents how international workers face additional problems when laid off as it puts their visa status in a flux. It reads, “Even as companies put together spreadsheets or resume support, the added volatility could mean talented workers are forced to leave the United States altogether, and pursue a better life somewhere else.”