When we hosted Taking your tech company global: People, Culture and Leadership event with 01VC in late October, we used the following graph, taken from layoffs.fyi, to illustrate the layoff situation.
A month later, the situation has evolved. Q4 2022, still one month left, has become the most drastic quarter of announced layoffs since the beginning of the pandemic:
Our colleague Yorlin wrote an excellent commentary on CNA about the factors behind the layoffs, as well as some of the consequences (the real hit is yet to be seen, thanks to the uncertainties as well as the generous packages given by especially tech majors).
The knock on effect of such layoffs, actually, go beyond just companies needing tech talent (tech companies doing layoffs, startups finding a respite in competition for talent, and traditional sectors going for digitisation).
One example of a specific sector to be impacted is Global SaaS companies, many counting tech companies as a loyal subscriber base. The fact that many large accounts are shedding their own headcount is obviously a strong headwind. Similarly, the employee benefits sector will likely be impacted.
These sectors will join the likes of global digital advertising – which count digital sectors (ecommerce and gaming, specifically) amongst their largest clients. That’s partly the reason why TikTok is trying so hard on ecommerce (to avoid the same trap of over-reliance on advertising facing Meta).
Not all is lost. Preparing for the worst does not mean the worst will come for sure. Most big techs exercising layoffs still have very strong cash positions, and capital allocators are still stockpiling dry powder while looking for opportunities to strike.
Structural shift (e.g. when mobile became the default way for internet access, or when generational AI would become commonplace, or Web3?) is, ultimately, the biggest opportunity to leapfrog. Question is, in the new world that emerges from the current crisis, what will shift permanently, and what old habits will die hard?
Entrepreneurs, executives and capital allocators will need a lot of hard thinking in that aspect, such that a good crisis is not wasted.