Startups have been having a rough time in 2022, and according to reports, the current trends are not going away soon. It is also apparent now that VC funding has been slow across the globe. For instance, the tech sector has reported poor performance, which has in turn limited VC’s ability to raise money. The overall fallout has affected all other startups.
In the last quarter, for instance, tech stocks dropped substantially across multiple stock exchanges. This has forced VC companies to warn their startup co-founders that worse days are coming.
These trends have been attributed to inflation and geopolitical conflicts. Central banks in different parts of the world have been looking everywhere to draw gradually to a close the COVID-19 era stimulus that reportedly accelerated valuations. Some have hiked their interest rates, with notable selloffs in equity markets, even for startups. The development continues to haunt such companies to date.
So, are the boom times seen in the last decade gone now? Will startup CEOs be forced to make decisions that would have been outrageous only a few years or months ago? Likely.
While COVID was still around in 2021, startups at that time received more than USD 600 billion in investments, which was twice as high as what was invested in 2020 at the height of the pandemic.
The slowed investments, as said, are not expected to end anytime soon because the recovery from the economic downturn will take a long time.
Big tech companies are already firing some of their workers, while others are not taking in new employees, including the likes of Facebook, Google, and Uber. More recently, Patreon fired 17 percent of its staff (80 workers) at the start of this week.
Thousands of companies have been forced to reduce costs and cut down their staff; startups are no exception.
According to data presented by TradingPaltforms, startups laid off nearly 77,000 employees in the nine months of the year.
Between January and April, startups reported nearly 13,900 job cuts. However, the number of layoffs exploded in May, the worst month to date, with another 17,000 people losing their jobs. A massive wave of layoffs continued in the next two months.
Statistics show startups let go around 16,660 members of their staff in June and another 16,200 in July or over 40% of the total job cuts to date.
In August, the number of layoffs slightly dropped but still hit 12,800.
With nearly 11,000 job losses in this period, the startups in the food industry have taken the hardest hit.
The transportation sector ranked second, with almost 8,700 job cuts. The retail, healthcare, and finance industries follow with 7,800, 7,200, and 7,000 layoffs, respectively.
US companies had a huge role in the latest wave of layoffs.
In fact, more than half of all reported job cuts in 2022 came from the United States.
In the nine months of the year, US startups laid off 42,700 employees.
The layoff figures for the last three years are much worse. Numbers show that startups in the United States have made over 103,000 job cuts since 2020.
India ranked as the second country on this list, with a total of 25,300 layoffs in this period.
In comparison, Chinese startups reported 4,400 layoffs between January 2020 and September 2022.
UK companies let go over 3,700 employees in this period, almost 1,400 more than German startups.
Lastly, data also revealed that Getir made the biggest layoff this year. The Turkish delivery startup made 4,480 job cuts, or 14% of its total workforce.