A dearth of new funding rounds has reportedly triggered a wave of startup layoffs.
This year saw more than 250,000 tech workers lose their jobs, including sweeping cuts at massive companies like Meta and Google, Bloomberg reported Thursday (Dec. 14). Thousands of those cuts also came from smaller firms.
More than 500 startups have closed this year, while many of the ones still open are cutting jobs and seeking new sources of funding, according to the report, which cited data from equity management company Carta.
For example, Stellar Pizza, which uses robotics to, as the name suggests, make pizza, cut half of its staff this year. It launched a crowdfunding effort to raise the $1.24 million it needs to stay in business for another five months.
“It’s a weird time in the venture world,” Stellar Pizza Co-founder Benson Tsai told Bloomberg. “I’m fighting the good fight to keep the business alive.”
The industry is a much less optimistic place than it was three years ago, per the report. When a round of layoffs hit the startup space in 2020, workers were confident in finding another job. That’s much less certain in 2023.
“Salespeople and recruiters are leaving tech entirely” to get new jobs, said Roger Lee, founder of Layoffs.fyi, according to the report. “Even engineers are compromising — accepting roles with less stability, a tough work environment, or lower pay and benefits.”
The 500 figure quoted by Bloomberg is dwarfed by data from The New York Times’ Pitchbook from last week showing that approximately 3,200 venture-backed firms in the U.S. have gone out of business this year. Those companies had raised $27.2 billion, and the 3,200 figure was likely on the low side, as many businesses closed their doors quietly.
The NYT report also cited Carta, which said 87 of the firms on its platform that raised at least $10 million had shut down as of October — double the amount for all of 2022.
This has been “the most difficult year for startups in at least a decade,” Peter Walker, Carta’s head of insights, said in a post on LinkedIn.
Meanwhile, this year’s ongoing job losses have led consumers to deplete their savings, according to PYMNTS Intelligence, with 20% of consumers saying a layoff had forced them to dip into their savings.