Tech giants have laid off thousands of workers. Well-funded startups are shutting down. The industry hasn’t seen an initial public offering in 18 months.
Despite lofty stock prices and eye-popping salaries at the top firms, ominous signs abound for much of the Bay Area’s dominant sector. After a flood of easy money during the pandemic, the venture capital firms that pump cash into Silicon Valley’s tech startups have grown thriftier — leaving a plethora of pre-profit startups with few lifelines and dwindling coffers.
In 2021, the tech industry grew quickly and sometimes unsustainably. Meta and Alphabet added tens of thousands of employees as digital ad spending, each firm’s main revenue source, soared. Venture capital-backed companies almost doubled the previous record for investment funding, raising $330 billion across more than 17,000 deals, according to PitchBook.
But companies rarely get all that money at once — it’s typical to raise progressively larger rounds at progressively larger valuations, until an “exit” like an initial public offering or company sale. These used to be common: Bumble, Roblox, Coinbase, Robinhood, Squarespace and Rivian went public in 2021, like a plethora of big tech names before them. Now, companies want to go public — Reddit and Instacart filed initial paperwork — but are holding off in an uncertain market.
Fewer exit opportunities mean less investor faith in pricey funding rounds. As interest rates rise, there are safer places to grow money than a late-stage startup: PitchBook found that venture capital deals have declined every quarter since the end of 2021.
Jennifer Neundorfer, a general partner at January Ventures, told Insider that this might be “a Darwinian moment for startups,” and PitchBook analyst Vincent Harrison told the outlet that the funding rounds in 2021 likely only gave startups a year or two of runway cash. Insider also reported that in a survey, more than four-fifths of early-stage startups reported having less than 12 months of funding available.
High-flying startups have already started to fail, taking their employees with them. Zume, a Bay Area pizza delivery startup, raised a whopping $445 million but just shut down. Fuzzy Pet Health, based in San Francisco, abruptly shuttered in June after weeks of payroll problems brought about by Silicon Valley Bank’s collapse. It had raised $80 million since 2016.
Meanwhile, the job cuts haven’t ceased. While the biggest firms often characterized their layoff rounds as corrections to overhiring during the pandemic, smaller companies are paring back workforces in apparent attempts to stay afloat. Rapid, which got a $150 million cash infusion in 2022, recently laid off three-fourths of its workforce in a two week-span. Synapse cited “current macroeconomic conditions” as the startup cut almost a fifth of its staff in June.
Tech startups and their funders in Silicon Valley have thrived for years but under a specific economic model: Federal interest rates have been near zero for most of the past decade. Now, as the industry acclimates to a new normal, corporate casualties emerge.
Hear of anything happening at a Bay Area tech company? Contact tech reporter Stephen Council securely at stephen.council@sfgate.com or on Signal at 628-204-5452.
BEST OF SFGATE
Wave of Bay Area tech layoffs may foreshadow something worse - SFGATE
Read More
Bagikan Berita Ini
0 Response to "Wave of Bay Area tech layoffs may foreshadow something worse - SFGATE"
Post a Comment