Reasons for the tech layoffs
In The Four Horsemen of the Tech Recession, the “tech recession” is attributed to:
- COVID Hangover
- High growth during COVID led to fast hiring
- People’s return to normalcy is driving lower growth rates
- Companies have to adjust to lower growth rates by adjusting costs down.
- Hardware cycle
- COVID lockdowns led to less manufacturing production, leading in turn to delays in hardware being made and sold. Even if there’s demand for hardware now, the hardware may not be available.
- Also something about people not needing that many iPhones.
- The End of Zero Interest Rates
- Many SaaS companies spend upfront to acquire customers and recoup the cost later with recurring revenue.
- When there’s zero interest rates, it’s cheap to borrow or spend upfront to acquire customers, and recoup the money later. When interest rates go up, the cost of investing upfront is higher, which increases the necessary expeected future returns in order to invest.
- Due to inflatory pressures we’ve seen interest rates increase dramatically, this dries up the funds available for upfront acquisition.
- This impacts most dramatically startups and other high-growth companies.
- Apple’s App Tracking Transparency (ATT) impact in Ad-supported businesses
- ATT makes it much harder for ads to be optimized, which reduces their value and thus the spend on advertising.
- Ad-supported businesses are struggling due to this, which includes some of the largest companies in the world right now (Meta, Google, etc.)
More about interest rates in the interest rates section of Personal finances.
2022-2023 Tech Layoffs tracker: layoffs.fyi
From speaking to others that have gone through layoffs, here are some things I’ve heard.
- Communicating to those affected by the layoffs in a more personalized way, not via mass email or group meeting.
- Offering a reasonable compensation package that considers the employee’s total benefits – salary, equity, benefits, transition help.
- Being transparent and clear about the reasons for the layoffs.
- Cutting off system access to employees without any warning of what was going to happen.
- Relying on email communication.
- Unclear rationale (or fully unexplained) of how the decisions were made of who’d be impacted.
- No timezone consideration as to when the communication and system access revokation happened.
Last Updated on March 24, 2023 by Omar Eduardo