What tech layoffs mean for the future of tech startups
Tech layoffs continued this morning, with Spotify announcing plans to fire around 600 employees. That brings the monthly total to over 56,000, per tracking site Layoffs.fyi. including last week's monster cuts at both Alphabet and Microsoft.
The big question: Could this spark a surge in tech entrepreneurship? A sort of upside to the downturn? The answer is muddled.
Bull case: There are plenty of would-be founders now on the proverbial street. If you've always had the itch to launch a company, perhaps because your ex-employer was making an obvious mistake, what better time than when you're already unemployed?
- Particularly if you get to cash severance checks for the next few months, and know of potential co-founders in the exact same position?
Bear case: Today's job market is much tighter than what we saw after past market messes like the dotcom bust or Great Financial Crisis. Even if tech is shedding headcount, there are plenty of non-tech companies that will salivate over the prospect of hiring former Google or Facebook engineers.
- There also can be a flip side to relative financial security, in terms of the drive to start something new. And perhaps negative perceptions from venture capitalists, since being part of a 10% layoff is viewed differently than being unemployed because the entire company went under.
Speaking of venture capitalists: They are a major variable. There currently seems to be plenty of dry powder and willing check-writers, including at the seed stage, but any significant changes to disbursement levels — up or down — could be viewed as a signal by potential entrepreneurs.
The bottom line: Layoffs are misery. Even if it's clear that a company overhired, the pink slips are still painful. The hope is that, eventually, some creation can come from the destruction.