150,000 laid-off tech workers are fueling a massive wave of new startups — and they're actually making more

This year didn’t start out great for many tech workers. After tens of thousands of layoffs in 2022, tech companies continued to shed workers in round after round of layoffs. Technology companies out Microsoft Corp. to Information about the company Meta Platforms Inc. announced at the beginning of the year thousands of layoffs.

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A report from placement services firm Challenger, Gray & Christmas Inc. stated that the technology sector led other sectors for the number of jobs that were cut in 2022.

In 2023, technical layoffs will continue in several companies:

Microsoft announced layoffs at 10,000 workers, representing approximately 5% of the company’s workforce.
Amazon.com Inc. announced 18,000 layoffs in many of the company’s business areas, including Amazon Web Services, its healthcare businesses, the robotics unit and many others.
The history of Zoom Video Communications Inc. presented plans to cut 15% of its workforce in early February.
PayPal Inc. warned investors that it planned to cut 2,000 full-time employee jobs.
Googlethe parent company Alphabet Inc. announced 12,000 job cuts in January.
GitHub Inc. announced plans to cut 10% of its workforce before the end of the financial year.

Tech hiring picked up during the pandemic, as the societal shift to digital services meant tech companies needed to innovate and meet demand. Some of these companies overhired during this period because their management overestimated growth targets. Growth slowed as the pandemic eased, interest rates rose, and inflation cut into personal spending and increased many business expenses. Tech companies also need capital to invest in artificial intelligence (AI) or other innovations, and downsizing is one way to generate cash.

Private Tech Company Layoffs and Stock Sales

Private companies are also laying off employees in moves similar to publicly traded companies like Amazon and Microsoft. Fintech company Stripe Inc. laid off 14% of its workforce by the end of 2022. The private company also saw a sharp decline in its internal market value in 2021 and 2022.

Other private tech companies are also experiencing steep declines in valuations. European “buy now, pay later” firm Klarna Bank AB noted in 2022 that its valuation was $6.7 billion after a recent investment, an 85% drop from its valuation the previous year.

Amid these layoffs from private companies are reports of current and recently fired employees selling private equity because they need capital in the face of falling valuations. Another driver for private equity sales is the low number of initial public offerings (IPOs), which reached a 20-year low in 2022. the valuations of their companies fall. Lower ratings affect a company’s ability to raise additional capital and penalize available venture capital funds.

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Laid-Off Tech Workers Driving Startup Creation

One of the many effects of the 2022 job cuts that will continue into 2023 is that it will add many engineers, coders, business development workers and others back into the labor market. Many of these workers will find work at other tech companies, but others will take the opportunity to launch their own startups.

A survey of 1,000 laid-off tech workers conducted by Clarify Capital LLC found that 63% of respondents started their own business after their layoff. And tech workers reported making more money after starting a business.

Accelerator Y Combinator reported a jump in startup applications of 20% in 2022 and noted that the number of applications submitted in January 2023 was five times higher than the previous year. An increase in startups creates new jobs and presents an investment opportunity for venture capitalists and individual investors to take advantage of exciting new startup opportunities.

As venture capital funding dwindles, startups are turning to platforms like StartEngine to raise funds for their startups. StartEngine is a platform that allows retail investors to invest in early-stage and high-growth startups and pre-IPO companies, including investing in StartEngine itself. As many of these new startups turn to retail investors to fund their growth, this could result in a paradigm shift for the next generation of startups.

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This article 150,000 Laid-Off Tech Workers Fuel Massive Wave of New Startups – And They’re Actually Making More originally appeared on Benzinga.com

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