More layoffs likely

As we are closing in on the end of the first quarter of 2023, I’ll do a prediction for the rest of the year. I think we will see many public technology firms follow in the footsteps of Meta and make another round of significant layoffs so the total layoffs are, at least, in the 20 % range.

Sales growth is slowing, the economy that either will have higher interest rates driven by inflation (or same/lower interest rates but combined with a bank crisis), stock markets are valuing profits over revenue growth and most technology companies hired a lot of staff in 2020 and 2021.

Additionally, both Meta (more controlled) and Twitter (less controlled) has made significant layoffs, which gives management teams and board of directors cover (Zuckerberg & Musk are doing it!) and incentive (look at Meta’s short-term share price!) to make additional layoffs.

For private startups the situation is a bit different and more nuanced. The requirements for an early-stage venture funded startup is to reach milestones for the next funding round, rather than becoming profitable. Late-stage and growth-stage startups will, if they’ve reached significant levels of revenue, behave more like public companies and focus on cashflow and profitability.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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