Tech layoffs in 2023 fuel new startup surge
Henry Kirk always thought that eventually he would leave his job as a managerial engineer at Google and start his own company. But when he became one of 12,000 employees after letting go of the tech giant in January, he decided his time had come, albeit unexpectedly earlier.
Kirk and five other people fired from Google are now working on creating their own design and software development studio. He announced his resignation from Google and a new venture in Post on LinkedIn which garnered over 15,000 reactions. Kirk says he’s received a staggering 1,000 messages since the post was posted, from people wanting to work for the new agency or simply wishing him luck in his attempt to capitalize on failure.
The team has given itself until the end of March to piece together the vision, tight deadlines based on severance pay and how Kirk and his teammates plan to split their time and money between the company and family life.
“I’m leaning back against the wall because I need to get back on my feet,” Kirk says. But instead of feeling down, he is energized. “I really accept the fact that it happened.”
Tech companies laid off at least 160,000 employees in 2022, according to the data. Layoffs.fyi, a site that tracks industry job losses. The cuts continued until 2023, with over 100,000 more people losing their jobs. In the blink of an eye, the biggest and most profitable tech companies, known for high salaries and generous benefits, seem like the riskier choice. Kirk is part of a cohort of workers trying new things: instead of looking for other positions at giant companies whose hiring wave has been followed by a payroll sweep, they decide to become their own bosses. For many, a healthy severance pay provides enough cover to pursue their own ideas. And layoffs give them the opportunity to finally work on their favorite project.
“I just felt this weird sense of relief,” says Jen Zhu, who was fired last summer and works at a medical technology startup. Maida AI. “The golden handcuffs have been removed and now I can do whatever I want.”
For investors, a solid startup may be a better bet than a stock crash in a tough economic climate. They are flexible and have lower costs. And getting customers to pay for a new product during a recession can send a strong signal that the idea has some merit. (For example, Airbnb prospered by providing cheaper housing and extra money to homeowners during the Great Recession, and its founder confident it can withstand another.)
Some early indicators point to a surge in new founders. Startup accelerator Y Combinator saw a 20 percent increase in applications in 2022, bringing the total to over 38,000, according to Lindsey Amos, a spokesperson for the company. The number of overdue applications or applications filed in January 2023 increased five-fold.
Venture capital firms sit on record pile of money to invest in startups after years of low interest rates that encouraged investors to look harder for profits. However, it can be harder for new founders to connect than those who came before them. A wave of scandals involving the founders of unicorns such as WeWork and Theranos has forced investors to take a deeper look at the company before investing in the latest glittering promises. Market uncertainty only adds to this analysis. “They are much more strategic and much more cautious,” Julia Austin, senior lecturer at Harvard Business School, business angel and founder of Good For Her, a nonprofit community for female founders, says of investors. “It’s much more about market opportunity and vision and execution. One of the biggest things I see is that you can no longer raise capital on slides.”