- Massive tech layoffs spawn a new wave of startups
- Early-stage VC funding around record levels
- Echoes of the dotcom collapse that fueled Facebook and others
Jan 3 (Reuters) – Nic Szerman lost his job at Meta Platforms (META.O) in November, just two months after joining full-time, falling victim to a slashing 13% of its workforce as the ad market crashed.
Days later, he was back at work, seeking investments for his own startup Nulink, a blockchain-based payments company, and pitching to startup accelerator Y Combinator and Andreessen Horowitz’s cryptocurrency fund.
“As contradictory as it may seem, this dismissal left me in a very good position,” said the 24-year-old. “Because I don’t have to repay the sign-up bonus, I get four months’ pay and now have time to focus on my own project.”
Szerman is part of a wave of would-be entrepreneurs emerging from the ashes of the massive job losses seen in Silicon Valley in the second half of 2022, according to venture capitalists.
While overall venture capital (VC) funding fell 33% globally to around $483 billion in 2022, seed funding was strong, with $37.4 billion raised in so-called angel or seed rounds, in in line with the record level seen in 2021, according to data from the research firm PitchBook.
Day One Ventures, an early-stage venture fund in San Francisco, launched a new initiative in November to fund startups founded by people who had been laid off from their tech jobs, promoting the slogan “Funded, not laid off.”
The program aims to write 20 checks for $100,000 by the end of 2022. Day One said it received more than 1,000 applications, most of them from people released by Meta, Stripe and Twitter.
“We’re investing $2 million in 20 companies; if we find a unicorn, it almost pays the fund back, which I think is a really unique opportunity for us as fund managers,” said Masha Bucher, co-founder of Day One Ventures.
“Looking at the last economic cycle, companies like Stripe, Airbnb, Dropbox have been created in crisis.”
HOT: GAMES AND AI
Also in November, the multi-stage fund Index Ventures, which has financed Facebook, Etsy and Skype, launched its second background Originswhich will invest $300 million in early-stage startups.
Meanwhile, Silicon Valley investor US Venture Partners and Austrian venture capital firm Speedinvest have earmarked a similar amount for start-ups.
Investors highlighted gaming and artificial intelligence among the top areas of interest.
“With advances in game design, new innovations like cloud gaming, and the rise of social media in this sphere, gaming has truly transcended mainstream culture,” said Sofia Dolfe, partner at Index Ventures.
“In every period of economic uncertainty, there is an opportunity: to reset, reprioritize and refocus energy and resources.”
DOTCOM BUBBLE 2.0
Szerman said his project was rejected by Y Combinator, while he has yet to hear from Andreessen Horowitz, though he added that other early-stage venture capitalists had expressed interest.
“I told investors that we will talk in two or three months,” he added. “I’ll focus on scaling the system now.”
Some investors compared the 2022 recession to the dot-com crash of the early 2000s, when dozens of overvalued startups went bust, flooding the market with talent and helping spawn a wave of startups like Facebook and YouTube.
“A lot of great companies have been built in relatively dark times,” said Harry Nelis, managing partner at investment firm Accel, who sees a new generation of risk-takers emerging from the fringe of people left unemployed.
Some industry players say former Big Tech employees are in a unique position to start their own companies, having seen firsthand how some of the world’s largest companies operate and enjoy continued access to their network of highly qualified colleagues.
A former Googler has tried to help others like him search for life after the tech giants. In 2015, Christopher Fong, who spent nearly a decade working for the California-based tech titan, launched xoogler, a project designed to help former employees who want to start their own companies. Since then, the group’s membership has grown to more than 11,000.
Fong told Reuters that the experience at the Big Tech firm gave the founders a “strong brand that can be leveraged to meet investors, potential clients and recruit team members.”
Reporting by Martin Coulter in London, Supantha Mukherjee in Stockholm, and Krystal Hu in New York; Edited by Pravin Char
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