News analysis

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

Meta Platforms cut 11,000 people, among the more than 142,000 jobs lost at 889 tech companies this year alone. PHOTO: REUTERS

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

The big catch: They need to ensure their own survival first after venture capital investors pulled back sharply in 2022.

The history of Silicon Valley is awash with stories of companies that were founded, or gained traction, in the ruins of recession. and Google, now known as Alphabet, are among the big winners from past economic slumps. Google rose from the ashes of the bust of 2000 after it picked up a plethora of engineers laid off elsewhere, professor of history Margaret O’Mara from the University of Washington told Bloomberg’s Odd Lots podcast.

They are now the world’s fourth- and fifth-most valuable firms.

The caveat is that start-ups need to already have money from previous funding rounds because the major source of financing, venture capitalists, is being more cautious than ever.

Total funding dropped 34 per cent in the third quarter from the previous period, and 55 per cent from a year earlier, to US$74.5 billion (S$100 billion), according to market intelligence provider CB Insights. That is the lowest level in nine quarters.

Funding from mega-rounds, where money invested in a start-up is at least US$100 million, fell to just a third of the level seen a year prior, the company found. A 42 per cent drop in the value of new VC deals globally through the end of November puts that figure on track for the deepest plunge in two decades.

Rather than drive valuations ever higher – creating unicorns with a market value of more than US$1 billion – investors are keeping their powder dry and focusing on the stakes they already have in young companies.

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

“VCs are prioritising funds to existing portfolios that are strong fundamentally, but might have a hard time to fund raise in a very tough environment, to help extend their runway until the fund-raising market improves,” said Ms Tina Cheng, managing partner at Cherubic Ventures in Taipei.

Even young companies with cash on hand remain cautious because they have no visibility into when they may be able to next raise money, she added.

A lot of people who lost their jobs are not in a hurry to find new employment either, thanks to generous termination packages and years of heavy workloads that left many burnt out.

Mr Elon Musk’s purchase of Twitter led to the loss of more than 3,700 jobs, making it the most famous of the layoffs in tech. Many were offered three months’ salary as part of their departure package.

Cuts at Twitter are neither the first nor the largest. Meta Platforms, previously called Facebook, cut 11,000 people, while Amazon let go around 10,000.

More than 142,000 jobs have been lost at 889 tech companies in 2022 alone, according to, an open-source listing of redundancies around the world created by San Francisco-based start-up founder Roger Lee.

Heavy job losses in tech are being offset by an uptick in other sectors, including leisure, hospitality, healthcare and construction, November data from the Bureau of Labour Statistics shows.

With the eternal spring of money drying up, 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, get your money from customers and don’t look to the venture community,” said venture capitalist Tim Draper. He also recommends that those that may face a cash crunch be more cautious with headcount.

“I do recommend that companies like this cut their team quickly and effectively, and move on,” he said. “The flip side 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 – fear of missing out – that drives much of the Silicon Valley hype cycle is never far away. Though times are tough now, thousands of smart and recently laid-off minds will soon be plugging away at the next big thing. And those with plenty of cash want to be sure they don’t miss the ride. BLOOMBERG

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.