A wave of layoffs at tech companies is flooding the job market with new talent. The trend raises questions about whether startups will take advantage and whether there will be a rush of new ventures launched by the Big Tech alum.
The answer to the first question is yes. While some startups are feeling the effects of the tech slowdown, downsizing themselves, others are already benefiting from a larger pool of hires.
“I definitely have access to a lot of talent that we wouldn’t have had just a year ago,” said Rich Wurden, co-founder of Seattle-based agricultural tech startup Aigen.
Startups that have resources to hire may also be more competitive on salary offers, as large tech companies limit their hires and reduce their recruiting budgets.
Working for a startup may seem more risky for an engineer, marketer, designer, or other professional accustomed to the perks and security offered at a large company.
But there are upsides, like the ability to gain equity in an early-stage startup and more influence over culture, product, and hiring.
Day One Syndicate, a networking channel for former Amazon workers, has seen a “spike in interest,” said co-founder Sean Sternbach.
Seattle startup Spiral, for example, has interviewed and hired ex-Amazon workers through the network, he said.
A boon for startup studios?
Joining a startup is one thing. Starting one is another. And it’s less clear whether the tech layoffs will trigger a new wave of entrepreneurial activity.
Executives at Seattle startup studios Madrona Venture Labs and Pioneer Square Labs say they’ve seen an increase in applications and interest from aspiring founders amid layoffs.
“If you’re going to risk your career, you might as well have the advantage.”
Part of their project since its launch several years ago has been to attract talent from big tech companies and reduce the risk of joining a startup by providing support. This strategy could prove fruitful with the recent layoffs.
“This new generation of workers is feeling more occupational hazards than before,” said Mike Fridgen, CEO of Madrona Venture Labs. “If you’re going to risk your career, you might as well have the advantage.”
“These moments are so rare,” Fridgen said. “Large-scale tech layoffs, they rarely happen.”
For laid-off workers who want to scratch an entrepreneurial itch, severance checks can provide sufficient income and a track to start a new business.
Startups rise from the ashes
Past recessions have proven fruitful for budding entrepreneurs. After the dot-com bust came Facebook and YouTube. Airbnb, Slack and Uber were all launched from the ashes of the 2008 economic crisis.
Ken Horenstein, founder of early-stage venture capital firm Pack Ventures, predicts a delay following the current round of layoffs, given how long it often takes for companies to incubate. But people will eventually start building the businesses they’ve been thinking about for a few years, he said.
“I expect to see many ‘ex-FAANG’ founders soon,” he said, referring to longtime tech giants Facebook (Meta), Amazon, Apple, Netflix and Google (Alphabet) .
But starting a business in today’s market can be difficult given the scarcity of venture capital.
- Investors deployed $7 billion in the fourth quarter into early-stage startups, down 35% year over year, according to Crunchbase. Seed funding dropped 54%.
- With interest rates rising and tech stock valuations falling, many VCs are using tougher criteria to decide which startups to back.
“On the one hand, you have people who may have more time,” said Greg Gottesman, chief executive of Pioneer Square Labs. “On the other hand, you have a tougher funding climate.”
Some companies specifically target laid-off tech workers. San Francisco-based Day One Ventures recently launched a new program called “Funded Not Fired” which requires startups to have at least one founder who has been fired.
Alternative paths
Startups aren’t the only landing pad for job candidates. Some big companies are still hiring. Recent surveys show that most laid-off tech workers find jobs within three months.
Non-tech companies are also eager for hires to boost their own engineering operations, in retail, finance, manufacturing and other sectors.
in front of the Tieton Arts & Humanities building. (Photo by Kate Hotler)
And some tech workers are leaving the industry altogether after being laid off, going in a different direction to build something meaningful.
Kate Hotler, a former user experience designer at Tableau Software in Seattle, lost her job in March 2020 when the company merged with Salesforce.
Rather than pursue another technical role, she moved to Tieton, a small town in Yakima County, Washington, to start an “adult summer camp.”
She eventually started an after-school program for college students. Funded by various grants, the program now attracts around 20 students a day and operates from a classroom-turned-gas station.
Hotler has also served as Chairman of the Board of the Yakima Valley Libraries Foundation, as well as a member of the Tieton Planning Commission. These civic roles are needed, especially in small towns, Hotler said.
“I felt like a dime, in some ways, as a UX designer at Tableau,” Hotler said. “But that skill set is so badly needed elsewhere.”