During a period when the tech industry has cut back on spending, startups have borne the brunt of the impact. While investors were once eager to support the growth of promising young companies at any cost, new funding rounds have all but disappeared, leaving the focus on making cuts.
This year, more than 250,000 workers from tech companies of all sizes lost their jobs, according to job tracker Layoffs.fyi. While this includes major layoffs at companies like Meta Platforms Inc and Google, a significant number came from smaller, privately held companies encountering their first slowdown.
Equity management firm Carta Inc reported that over 500 startups shut down in 2023, and many of those that managed to survive have resorted to laying off employees and seeking alternative sources of funding.
One example of a struggling business is Serve Automation Inc’s Stellar Pizza, which uses robotics technology to make pizza. The company reduced its workforce by half this year and launched a crowdfunding campaign to raise US$1.24 million (RM5.80 million) to continue its operations for five more months. “It’s a weird time in the venture world,” co-founder Benson Tsai said. “I’m fighting the good fight to keep the business alive.”
The industry’s optimistic atmosphere from the recent tech boom has shifted, and now employees are finding it less easy to secure new positions. “Salespeople and recruiters are leaving tech entirely to get new positions,” said Roger Lee, founder of Layoffs.fyi. “Even engineers are compromising – accepting roles with less stability, a tough work environment, or lower pay and benefits.”
Layoffs.fyi reported that 1,150 tech companies have laid off 256,499 employees, following 1,064 companies cutting 164,969 employees the previous year. With job losses concentrated in December and January as companies plan their budgets for the new year, the worst may still be ahead.
Some founders have experienced a dramatic change in their fortunes. Sri Artham, who started plant-based Hooray Foods in 2019, saw his company struggle to grow fast enough to cover costs and eventually announced its closure in September. “It was disappointing that investors pulled back,” Artham said.
Even companies that received huge investments met unfortunate fates. Homebuilder Veev and digital-freight logistics company Convoy both announced their liquidation, despite raising large sums of money.
Other startups sold themselves at reduced prices after previously undergoing layoffs. For example, videoconferencing startup Loom sold to Atlassian Corp for less than its previous valuation. Perimeter 81, a security startup, was sold to Check Point Software Technologies Ltd at a much lower price than its previous valuation after conducting layoffs.
Max Elder, the founder of the plant-based nuggets company Nowadays, who is in the process of filing for Chapter 7 bankruptcy, expressed regret at not stopping the fight to survive sooner. “Is this a question of living or dying?” Elder asked. “Or is this a question of building something at scale?” The latter still requires a lot of cash. – Bloomberg
