Tech Startups Have Laid Off Nearly 70,000 Employees Since March
According to The Wall Street Journal, technology startups “have been laying off tens of thousands of workers to cope with the economic fallout of the coronavirus pandemic, potentially blunting a key innovation pipeline for the enterprise information-technology market.”
“Startups are a great source of innovation in the IT industry, but are now especially cash constrained,” said Max Azaham, a senior research director at research and consulting firm Gartner Inc.
Azaham explained that the pandemic has resulted “in a sharp downturn in investment capital for IT companies looking to raise less than $100 million,” The Journal reported.
As of last week, “nearly 70,000 tech-startup employees world-wide had lost jobs since March, led by ventures in the transportation, financial and travel sectors,” the report continued.
Startups in the San Francisco region, including Silicon Valley, have cut more than 25,500 jobs, with layoffs at Uber, Groupon, and Airbnb, according to a report by UK-based brokerage BuyShares.co.uk.
“Startups this year have been cutting costs to make up for a loss of outside funding,” The Journal wrote. “Global private-market funding for startups dropped to $67 billion in the first quarter, down 22% from the same period a year earlier, according to CB Insights, a market-intelligence company.”
The Journal reported that “making matters worse, most venture-backed startups in the U.S. are largely unable to tap federal emergency funds under the Paycheck Protection Program due to a rule that counts their venture-capital backers as affiliated businesses.”
“The Covid-19 crisis has accelerated the need for innovation across many parts of the economy,” said Jonathan Simnett, director of technology-advisory firm Hampleton Partners.
“Layoffs at tech startups could spell trouble for companies across the economy seeking innovative digital tools to weather the coronavirus crisis and compete in a post-Covid market,” The Journal concluded.