A wave of layoffs at tech companies is flooding the job market with fresh talent. The trend is sparking questions about whether startups will take advantage, and whether there will be a rush of new companies launched by Big Tech alum.
The answer to the first question is yes. While some startups are feeling the effects of the tech downturn, trimming headcount themselves, others are already taking advantage of the larger hiring pool.
“I’m definitely getting 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 technology startup Aigen.
Startups that have resources to hire can also be more competitive on salary offers as big tech companies curb their hiring and cut recruiting budgets.
Working for a startup may feel more risky for an engineer, marketer, designer, or other professional accustomed to the perks and security offered at a large company.
But there are advantages, such as an opportunity to get equity in an early-stage startup, and having more influence on 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, interviewed and hired former 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 if the tech layoffs will spark a new wave of entrepreneurial activity.
Leaders 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 the layoffs.
Part of their blueprint since launching several years ago has been to attract talent from larger tech companies and lower the risk of joining a startup by providing support. That strategy may prove fruitful with the recent layoffs.
“This new generation of workers, they’re feeling more career risks than maybe they felt before,” said Mike Fridgen, CEO at Madrona Venture Labs. “If you’re going to take the career risk, you might as well have the upside.”
“These moments are so rare,” Fridgen said. “Broad-scale tech layoffs, they happen infrequently.”
For laid-off workers who want to scratch an entrepreneurial itch, severance checks can provide enough income and runway to get a new company off the ground.
Startups rising from the ashes
Past downturns have proven fruitful for budding entrepreneurs. After the dot-com bust, Facebook and YouTube came along. Airbnb, Slack, and Uber 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 string of layoffs, given the time it often takes for entrepreneurial ventures to incubate. But people will eventually start building the companies they have been thinking about for the past few years, he said.
“I’m expecting to see many ‘ex-FAANG’ founders soon,” he said, a reference to longstanding tech giants Facebook (Meta), Amazon, Apple, Netflix, and Google (Alphabet).
But starting a business in the current market can be difficult given the scarcity of venture capital.
- Investors deployed $7 billion in Q4 to seed-stage startups, down 35% year-over-year, according to Crunchbase. Early-stage funding dropped 54%.
- With rising interest rates and tumbling tech stock valuations, many VCs are using a more stringent criteria when deciding which startups to back.
“On one hand, you have people that may have more time,” said Greg Gottesman, managing director at Pioneer Square Labs. “On the other hand, you have a more challenging financing climate.”
Some firms are specifically targeting laid off tech workers. San Francisco-based firm Day One Ventures recently launched a new program called “Funded Not Fired” that requires startups to have at least one founder who was laid off.
Startups aren’t the only landing pad for job candidates. Some larger companies are still hiring. Recent surveys show that most laid-off tech workers are finding jobs within three months.
Non-tech companies are also hungry to hire to boost their own engineering operations, in retail, finance, manufacturing and other industries.
And some tech workers are leaving the industry altogether after getting laid off, going in a different direction to build something meaningful.
Kate Hotler, a former user experience designer at Seattle’s Tableau Software, lost her job in March 2020 during the company’s merger with Salesforce.
Rather than pursuing another tech role, she moved to Tieton, a small town in Yakima County, Wash., to launch a “summer camp for grownups.”
She eventually started an after school program for students. Funded by various grants, the program now brings in about 20 students per day, and operates out of a gas station-turned classroom.
Hotler has also stepped into the role as chairperson of the board for the Yakima Valley Libraries Foundation, as well as a member of the Tieton Planning Commission. These civic-minded roles are needed, especially in small towns, Hotler said.
“I felt like a dime a dozen, in some ways, as a UX designer at Tableau,” Hotler said. “But that set of skills is so needed elsewhere.”