Even some people who weren’t fired have changed course and launched their own ventures in response to the situation.
Henry Kirk had always considered leaving his job as the engineering manager at Google to launch his own company. However, when he was one of employees laid off by the tech companies in January, he realized his time had come—albeit sooner than he had anticipated.
Kirk and five others laid off from Google are launching their own software design and development studio. Kirk announced the venture in a LinkedIn post, which has received over 15,000 reactions. He has received 1,000 messages from people looking to work with the new agency or wishing him well.
A tight deadline based on severance payouts and how Kirk and his teammates intend to split their time and money between the company and their personal lives has been set for the team to complete the vision by the end of March.
Tech companies laid off 160,000 workers in 2022, with more than 100,000 additional people losing their jobs in 2023. Kirk is among a cohort of workers trying something new, opting to become their own bosses instead of seeking other positions.
Healthy severance payments provide ample cover to work up their own ideas, and the layoffs give them space to finally work on a passion project.
Jen Zhu, who was laid off last summer from one of the tech companies and is working on a health technology startup called Maida AI, says, “I just kind of felt this weird sense of relief. I am free to act however I please now that the golden handcuffs have been removed. In difficult economic times, a strong startup may prove to be a better investment than falling stocks. They are more cost-effective and agile.”
Additionally, getting customers to pay for a new product in a down economy can be a powerful indicator that the concept has staying power. Airbnb, for example, thrived as it gave homeowners access to more affordable housing and additional income during the Great Recession, and its founder is confident it can withstand another.
Y Combinator saw a 20% increase in applications in 2022, and late applications in January 2023 increased fivefold.
Venture capital firms are sitting on a record cash pile to invest in startups, but new founders may find it harder to tap due to founder scandals and market uncertainty.
Julia Austin, a senior lecturer at Harvard Business School, angel investor, and founder of Good For Her, a nonprofit community for female founders, says investors are being more strategic and careful, and that it’s now more about market possibility and vision than just a slide deck.
And these new founders are entering a precarious market. Startup valuations have fallen. As interest rates rise and tech stocks languish, venture capitalists are holding on tighter to their funds.
Seed stage funding slumped 35 percent for startups year over year by late 2022, data from Crunchbase shows. And the recent layoffs are sending more startups hunting for those funds.
The US economy is in good shape, and layoffs have been widespread in tech and media companies, but historically, bad-time recessions have bred startups that have changed the world. Four new founders describe the stresses of developing new skills like pitching and fundraising but also feel energised by the push to pursue an idea that has long lingered.
Zhu is a new entrepreneur working on Maida AI, which automates health care administration tasks. She lost her job last summer when virtual care company Carbon Health let go of 250 workers. She decided to follow her own vision and develop her own vision, after noticing problems in health care delivery as a patient and a person working in the industry.
The transition, in the words of Zhu, “is a grind.” “It’s very challenging to switch off. There is constantly more to do. “You are just inextricably linked to the results and the future of your company.” Her startup is one of seven that Day One Ventures funded with $100,000 each as part of a program that encouraged applications from founders who had been fired. Out of 1,200 applicants, those seven were chosen.
Even some people who weren’t fired have changed course and launched their own ventures in response to the situation.
Nish Junankar, a former software engineer for Squarespace and NFT platform OpenSea, claims he left OpenSea after some team members were let go. Junankar turned down a retention package to pursue his idea to start Feasier, a platform that aggregates home furnishings listings from different stores into one place.
He has so far relied on funding from friends and family, but is now pitching investors. The meetings are short and stressful, but the passion he feels for his project offsets the challenges. “It’s incredibly rewarding and fulfilling,” he says.