The Tech Down Turn

Layoffs.fyi is the new FuckedCompany.com.

It’s a crowdsourced tracker of all the layoffs happening in tech. I remember the site first started with the initial COVID lock down: when seemingly overnight, a number of industries—travel, transportation, hospitality, live events—had demand fall off a cliff, with the tech startups and companies that enabled those spaces overturning their own business models in response. It was not obvious, in the moment, that the pandemic would turn out to be a huge boon for some other sectors in technology, acting as an accelerant for services that enabled online substitutes for in-person activities. For layoffs.fyi then, the charts initially spiked for a quarter, and just as quickly the wave of departures subsided. In fact, there was more hiring with teams expanding in response the abundance of cheap capital and increased demand.

In the summer of 2022, things are looking bad again, but in a different way than what transpired over 2 years ago. Layoffs are starting to pick up again throughout the tech industry, but the pace has been longer and more sustained; news of staff cuts have been occurring with enough regularity that they’re now aggregated and reported weekly, and have been for the past 2–3 months. In addition, the impact this time cuts across most of tech—there’s less of a sense of specific industries disproportionally affected by a once-in-a-century disruption. Everybody is dealing with staffing now.

The factors for this down turn is more multifaceted, although much of it can be traced back to COVID in some way:

• Supply chain disruptions continue to add friction to everything.
• The Ukraine war has spiked energy costs, which has caused pretty much everything to cost more, even just as a function of transportation.
• COVID has seemingly removed a portion of the labor force, which has contributed to persistently low unemployment rates, and in turn has driven up wages, particularly on the low-end.
• All of that has spiked inflation rates, which has the Fed raising interest rates.
• Raising interest rates then impact mortgage rates and lending rates, discouraging consumers from borrowing money.
• Interest rates also affect the stock market negatively, the S&P now down 20% since the start of the year and even more from the peaks of November 2021; the tech-heavy NASDAQ has performed even worse.
• To pile on even more, tech companies that were initially buoyed by COVID restrictions have reversed course, some losing 90% or more of their market caps1 as optimism 6 months ago has quickly turned to pessimism.
• The uncertain public markets have in turn applied pressure to the private markets, and fundraising has gotten much harder as a result.

All of this has resulted in hiring freezes, rescinded offers, and well—layoffs.

Yet, one positive sign is that these layoffs mostly feel measured and controlled, with teams deciding to make painful cuts now as opposed to completely imploding later when the money completely runs out. The dotcom boom and bust brought plenty of stories of companies that went from founding to IPO to bankruptcy in a 3-year whirlwind; this time around, narratives of startups completely shuttering its doors are (so far) rare, and startup employees stuck with bills from exercising underwater options2 are thankfully few-and-far in between as well.

Even if it’s true that some of the all-time best companies started from the ashes of the 2000 dotcom bust and 2008 financial crisis, that doesn’t help folks who now find themselves out of a job; there’s no sugarcoating the crappy environment we’re in right now. For those who work in tech, the vast, vast majority aren’t pining to build the next Google or Uber, and very few are looking to join startups in their chaotic infancies either. We’re in the eye of the maelstrom still, and there’s no telling how much worse things will get in the months—or years—to come.