Startups Reduce Employment as Funding Rounds Become Seldom
There have reportedly been a lot of startup layoffs due to a lack of new funding rounds.
More than 250,000 tech workers lost their jobs this year, including broad layoffs at large corporations like Google and Meta, according to a Bloomberg report released on Thursday, December 14. Thousands of those layoffs were also from smaller businesses.
According to the report, which used data from equity management company Carta, more than 500 startups have closed this year, and many of the ones that are still operating are laying off employees and looking for new funding sources.
For instance, this year, Stellar Pizza, which makes pizza using robotics as the name implies, laid off half of its employees. In order to raise the $1.24 million required to sustain operations for an additional five months, it initiated a crowdsourcing campaign.
“It’s a weird time in the venture world,” Stellar Pizza Co-founder Benson Tsai told Bloomberg. “I’m fighting the good fight to keep the business alive.”
According to the report, the industry is in a far less optimistic place than it was three years ago. In 2020, a wave of layoffs rocked the startup industry, but employees felt confident they would find work elsewhere. In 2023, that is far less certain.
“Salespeople and recruiters are leaving tech entirely” to get new jobs, said Roger Lee, founder of Layoffs.fyi, according to the report. “Even engineers are compromising — accepting roles with less stability, a tough work environment, or lower pay and benefits.”
The New York Times Pitchbook data from last week, which indicates that about 3,200 venture-backed firms in the U.S. have gone out of business this year, dwarfs the 500 figure that Bloomberg cited. Given that many companies quietly shuttered, the 3,200 figure was probably low given the $27.2 billion those companies had raised.
Carta was also mentioned in the NYT report. According to Carta, twice as many companies as there were for the entire year 2022 had closed as of October, out of 87 that had raised at least $10 million on the platform.
According to Peter Walker, head of insights at Carta, this has been “the most difficult year for startups in at least a decade” in a post on LinkedIn.
According to PYMNTS Intelligence, consumers have been forced to deplete their savings as a result of this year’s ongoing job losses. Twenty percent of consumers reported that a layoff had forced them to do so.