Tech Layoffs in 2023 Are Feeding a New Startup Surge
Henry Kirk always thought he would eventually leave his job as an engineering manager at Google and start his own company. But when he became one of the 12,000 employees let go by the tech giant in January, he decided his time had come—albeit in an earlier and unexpected fashion.
Kirk and five others laid off from Google are now working on launching their own software design and development studio. He announced his ejection from Google and the new venture in a LinkedIn post that garnered more than 15,000 reactions. Kirk says he’s received a staggering 1,000 messages since making the post from people looking to work with the new agency or simply wishing him well on his attempt to conjure opportunity from a setback.
The team has given themselves until the end of March to pull the vision together, a tight deadline based on severance payouts and how Kirk and his teammates plan to divide their time and money between the company and home lives.
“My back is against the wall because I have to get back on my feet,” Kirk says. But instead of feeling dispirited, he is energized. “I actually am embracing the fact that this happened.”
Tech companies laid off at least 160,000 workers in 2022, according to Layoffs.fyi, a site that tracks job losses in the industry. The cutting has continued into 2023, with more than 100,000 additional people losing their jobs. In the blink of an eye, the largest and most lucrative tech companies known for high salaries and lavish perks seem like a riskier choice. Kirk is among a cohort of workers trying something new—instead of seeking other positions inside giant companies whose hiring sprees have flipped to a payroll purge, they’re opting to become their own bosses. For many, 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.
“I just kind of felt this weird sense of relief,” says Jen Zhu, who was laid off last summer and is working on a health tech startup, Maida AI. “The golden handcuffs are off, and I can do whatever I want now.”
For investors, a solid startup can prove a better bet than tumbling stocks in harsh economic conditions. They’re agile and have fewer costs. And getting customers to pay for a new product during a recession can send a strong message that the idea has legs. (Airbnb, for one, flourished as it provided cheaper accommodations and extra cash for homeowners during the Great Recession, and its founder is confident it can weather another.)
Some early indicators suggest a surge of new founders. Startup accelerator Y Combinator saw applications increase by 20 percent in 2022, getting a total of more than 38,000, says Lindsay Amos, a company spokesperson. The number of late applications, or those filed in January 2023, increased fivefold.
Venture capital firms are sitting on a record cash pile to invest in startups after years of low interest rates that inspired investors to search harder for returns. However, new founders may find it harder to tap than those who went before them. A spate of founder scandals at unicorns like WeWork and Theranos have caused investors to dig deeper into a company before throwing money at the latest shiny promise. Market uncertainty only adds to that scrutiny. “They’re being a lot more strategic and a lot more careful,” Julia Austin, a senior lecturer at Harvard Business School, angel investor, and founder of Good For Her, a nonprofit community for female founders, says of investors. “It’s a lot more about market possibility and vision and also execution. One of the biggest things I’m seeing is you can’t raise capital on a slide deck anymore.”