Home Entrepreneurs Tech layoffs this year offer hiring boon for start-ups that survive

Tech layoffs this year offer hiring boon for start-ups that survive

by Ozva Admin
Tech layoffs this year offer hiring boon for start-ups that survive

TAIPEI – Thousands of layoffs across the tech sector may end up being a boon for startups that struggled to hire talent during the heady days of sky-high valuations.

The big problem: They must first ensure their own survival after VC investors pulled back sharply in 2022.

Silicon Valley history is replete with stories of companies that were founded, or gained ground, on the wreckage of the recession.

Amazon.com and Google, now known as Alphabet, have been among the big winners from past economic downturns. Google rose from the ashes of the dot-com crash in 2000 after it picked up a plethora 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 startups must already have money from previous funding rounds because the main source of funding, venture capitalists, is being more cautious than ever.

Total funding fell 34% in the third quarter from the prior period and 55% from a year earlier, to US$74.5bn (S$100bn), according to market intelligence provider CB Insights. That’s the lowest level in nine quarters.

Funding for mega-rounds, where money invested in a start-up is at least $100 million, fell to just a third of the level seen a year earlier, the company found. A 42 percent drop in the value of new venture capital deals globally through the end of November puts that number on track for the deepest drop in two decades.

Rather than push valuations higher and higher (creating unicorns with a market value of more than US$1 billion), investors are keeping their gunpowder dry and focusing on the bets they already have on young companies.

That has resulted in a reduction in the average deal size for investments in late-stage startups.

“Venture capitalists are prioritizing funds for existing portfolios that are fundamentally strong, but might struggle to raise funds in a very difficult environment, to help extend their run until the fundraising market improves.” said Ms. Tina Cheng, managing partner at Cherubic Ventures in Taipei.

Even young companies with cash on hand remain cautious because they don’t have visibility into when they will be able to raise money next time, he added.

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

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

Cuts on Twitter They are neither the first nor the greatest. Meta Platforms, formerly called Facebook, removed 11,000 people, while Amazon let go of around 10,000.

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

Steep job losses in technology are being offset by a rebound in other sectors, including leisure, hospitality, health care and construction, November data from the Bureau of Labor Statistics shows.

With the eternal spring of money running out, venture capitalists are advising their investee companies to learn to stand on their own.

“In a bear market, everyone has to get their money from customers anyway. So go out there, get your money from clients and don’t look at the venture community,” said venture capitalist Tim Draper. He also recommends that those who may face a cash crunch be more cautious with the number of employees.

“I recommend that companies like this reduce their team quickly and effectively, and move on,” he said. “The other side of the coin is that you see these extraordinary 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, which drives much of the Silicon Valley hype cycle, is never far away. Although times are tough right now, thousands of smart and recently laid off minds will soon be moving on to the next big thing. And those with a lot of cash want to make sure they don’t miss out on the trip. Bloomberg

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