But when VCs scale back, it’s more difficult for those large companies to raise money. That means as long as funding is abundant, they can raise money and support capital-intensive activities. Late-stage companies have been hit hard by layoffs, as they’re the ones that grew fast during the funding boom of 2021 and have to wait out an exit as the IPO market is at a standstill.Īlthough today’s large, late-stage companies have more viable business models than they did before, unicorns also tend to have one thing in common: they’re capital-intensive businesses. The moves show that companies are bracing for a recession, and more late-stage or public companies could make a second cut as uncertainty over the economy looms. The layoffs span across industries, from mortgage lending to digital payment processing.
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Moreover, as we spiral in what seems to be a potential financial crisis, investors like to see that companies in which they invested take initiative and are not passive in the face of this potential situation, even if its coffers are full of cash. As a result, many companies grew from dozens of employees to hundreds. Startups hired workers even when there was no immediate need for them, simply because the demand and competition for quality workers was high. The presentation points to sustained inflation and geopolitical conflicts that is bound to limit the ability to slash interest rates or implement other solutions that won’t be more than a ‘quick fix’.Īs tech companies tend to suffer more than other industries when interest rates go up – because they rely more on outside funding – they have been affected by the present circumstances.īesides, many of these tech firms may have had overly ambitious hiring plans coming out of the pandemic. Sequoia Capital, for example, released a 53-page presentation in which it laid out why it will only become more difficult for founders to raise money and operate. The downsizing trend took off and became more and more popular as venture capitals started advising their portfolio founders to plan for the worst. In 2022, fintech startups raised USD 21.5 billion globally, down 39% from the peak in Q4 2021. If the tech industry enjoyed a boom during the pandemic, when people turned to their phones like never before to do everything from shopping to online banking, their popularity lowered over time. In summary, 4,189 fintech employees were let go across 45 events in the first half of 2022, making up 11.2% of the 46,740 startup employees laid off.
Up until now, it’s easy to see that 2022 is shaping up as the year of downsizing, with cuts ranging from dramatic and very public layoffs to unannounced staff winnowing. So far, more than 41,000 workers in the tech sector have been laid off. For months now, tech companies have announced round after round of layoffs as the economy slows down and fears of a recession have grown. After years of money flowing like water and hiring sprees, the tech industry got to the point where it needs to tighten its belt.
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