More firings in the first two weeks of May than in any full month since January 2021, while more than half the companies in an internal poll of Andreessen Horowitz’s portfolio say they’re pulling back on 2022 hiring.
For the past couple of years, startup founders got used to the love they received from venture investors, who seemed to be climbing over one another to secure deals.
Alas, that was so 2021. The lovefest is over.
“It just dried up overnight,” venture investor Dharmesh Thakker told Forbes. It’s left many founders in a state of shock, said Thakker, a general partner at Battery Ventures in Boston.
It’s also left many startup employees without jobs. So far this month, more than 5,400 workers have been let go, according to data from Layoffs.fyi, a website that tracks tech employment. That’s more people in two weeks than were cut in any full month since January 2021. An internal poll of Andreessen Horowitz’s portfolio companies, shared with Forbes, showed that more than half of them are pulling back on 2022 hiring. Celebrity shout-out app Cameo, which announced it was cutting 87 employees, or one-quarter of its workforce, and consumer-products seller Thrasio were among the companies that blamed their downsizing on decisions to hire too quickly during better times. So was Robinhood, the asset-trading app, which said at the end of April it would let go of 340 employees, or 9% of its staff.
Record investment created a boom that seemed as if it would go on forever.
More than $329 billion was poured into U.S.-based startups last year, nearly double the then-record amount of capital deployed in 2020, according to PitchBook. Startups are learning the hard way that what goes up too fast often comes down even faster. With the world’s economy buffeted by Russia’s unprovoked war in Ukraine playing havoc with stock and energy prices, the worst inflation since the Reagan administration and a worldwide pandemic that doesn’t look like it’s going away, investors have suddenly put the brakes on, with money going to startups in the first quarter of 2022 down to $70.7 billion, 26% less compared to the previous three months. It’s unclear whether this is a bump in the road or a washout, but market participants told Forbes to expect at least a slow summer for VC investment.
“No one knows where the market is anymore,” says Redpoint Ventures managing director Tomasz Tunguz. “Six months ago, the recommendation was for every company to try to grow as fast as you can. Today, I think with more companies than not, we’re being conservative in terms of hiring and burn.” “No one knows where the market is anymore.” A skittishness has wormed its way into the industry. That sentiment is evident among companies in venture firm Andreessen Horowitz’s portfolio. A survey of its companies’ CEOs distributed this month in a private social media group found that more than half were pulling back on hiring plans for the rest of 2022, according to a copy viewed by Forbes . Of the 90 respondents, 39 (43%) said they were slowing down hiring, five (6%) were freezing hiring and two (2%) were letting workers go. On the flip side, only 8% of CEOs said they are planning to accelerate hiring; the remaining 41% said they would make no changes.
Torben Friehe, a founder who participated in startup accelerator Y Combinator this past winter, says he halted plans to build out a sales and marketing team for his seed-stage startup this year, and is instead limiting headcount growth to core engineering hires. His 12-person startup Wingback, which makes tools to help companies price and package their software, currently plans to grow to 16 people instead of the 25 it targeted a couple months ago. “It’s a different way of approaching business because you’re consciously thinking about strategy now,” Friehe says. “Which dollar should I spend and which dollar should I not spend? These things were just not top of mind before because you always wanted to move as quickly as you can.”
Hiring freezes and layoffs are a common way for startups to extend runway, or the amount of time they can stay in business before running out of cash. Tunguz says that even companies with the strongest fundamentals are preparing to have at least 12 months of runway. Startups that haven’t yet found a market for their product, he predicts, will likely have to reduce their team size to a “skeleton crew” until they begin to generate revenue. Ullas Naik, founder […]
source Wave Of Layoffs At Startups Foretell A Slow Summer For Venture Investing
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