Silicon Valley braces for tech pullback after a decade of decadence

After a decade of exuberance, Silicon Valley start-ups, venture capitalists and established tech companies alike are cutting investment and firing workers, prompting some in the tech world to openly predict a U.S. recession is on the way.

Facebook and Amazon have slowed their frantic hiring paces, while highflying newer companies including scooter company Bird and email client Superhuman have laid off workers. Tesla chief executive Elon Musk recently told employees he has a "super bad feeling" about the economy, and venture capital firm Lightspeed Venture Partners warned in a blog post that "the boom times of the last decade are unambiguously over."

The sudden shift is giving many in the sector whiplash. Uncertainty has settled over Silicon Valley as venture capitalists, tech founders and regular employees debate whether the pessimism is overblown or if tech really is the canary in the coal mine, already suggesting a broader downturn in the U.S. economy.

Tech start-ups do serve as a "leading indicator" for the economy, said Till von Wachter, a professor of economics at UCLA. Higher interest rates can mean it's more difficult to raise money to fund new ventures - which typically take a while to turn a profit.

"They are one of the sectors that are the most sensitive to interest rate changes," von Wachter said. "They are very dependent on what we believe the future to be."

The doom and gloom from senior venture capitalists may also be part of an effort to educate the younger generation and encourage them to curtail spending in case of a downturn.

"If you're funding some 28-year-olds, they don't know a roller coaster, all they know is a rocket ship," Wilcox said. "They haven't seen what a financial winter looks like. They haven't even seen a cold spring."

Layoffs are sweeping across American businesses in the first few months of 2022.

Recent startups like Peloton have already laid off thousands of employees this year. Online car dealer Carvana plans to slash 12% of its workforce. Even traditionally layoff-resistant companies like Netflix are making cuts, and now Tesla is reportedly poised to cut thousands of jobs.

The reason, broadly, is twofold: Business growth is slowing, while labor costs are increasing. The combination is causing American companies across a variety of industries to slash headcount. So I believe it is a combination of wage retardation due to their workforce counterparts unable to purchase due to stagnated wages, zooming inflation, and unemployment.

Here are some of the firms that have announced layoffs in recent weeks:

Shared scooter service Bird is laying off 23% of its workforce.
Insurance startup PolicyGenius laid off 25% of staff.
The stock and crypto platform Robinhood, axed about 9% of its employees in April.
Coinbase has frozen hiring and is rescinding job offers.
Supply-chain tech startup Stord is laying off workers.
Marketing software firm Terminus cut 15% of its employees.
Cloud security firm Lacework laid off 20% of its workforce.
Mortgage lending company Tomo announced it let go a third of its staff.
Buzzy brands Carvana, Vroom, and Cameo, along with Fintech unicorns Bolt and Klarna announced layoffs in May biut no numbers.
Project management platform ClickUp let go 7% of its workers.
Amazon brand aggregator Thrasio laid off about 20% of its staff.
Ride sharing startup Swvl laid off 32% of its workforce.
Delivery startups Gorillas and Getir have announced workforce cuts. Tech giants such as Netflix and PayPal are also shedding jobs, while Uber, Lyft, Snap and Meta have slowed hiring to replacing losing employees. A freeze.
Insurance startup PolicyGenius laid off 25% of staff.
Carvana laid off 2500 this last May alone.
Conde Maast, operational since 1909 laid off 90%.
Bluebird Pio laid off 30% of employees in May, also.
J Sainsbury PLC will shut 200 cafes in a shake-up of its in-store dining which is set to impact around 2,000 workers.

There are a number of other companies I could have displayed but didn’t because they wouldn’t produce numbers to their layoffs, all starting last year and going through this year. The information above is over the last 90 days and doesn’t include 2021.

The layoffs and terminations are already going strong since mid 2021. They’ve been hiding it by claiming job increases whether the jobs were a livable wage or not. And the numbers indicate that wage increases are not staying with the inflation rate. So there are a lot of unfilled positions out there that won’t support the people seeing them. Why lose money trying for a job that will syphon you dry while you waste time not trying to find that diamond because of working?

Before, uncle sugar helped out. But that money dried up so the unemployed have to fend for themselves. And it is an uphill effort.

wy69

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