Business

From Fired to Founder: How Tech Layoffs are Driving a Startup Boom

Dan Nicholson

Once regarded as the most recession-proof industry, tech is witnessing a large amount of layoffs this year. According to Crunchbase, a tech-industry trade publication, more than 186,403 workers in American tech firms were laid off in 2023. No firm is safe from layoffs. They even impacted major players, also known as, FAANG companies of Facebook (now known as Meta), Amazon, Apple, Netflix, and Google, among others. Sadly, more layoffs are anticipated.

However, even during this unsettling trend, a silver lining is emerging. Laid-off tech workers are becoming the driving force behind a significant surge of new “revenge startups.”

Revenge of the Startups 

Tech podcaster, investor, and evangelist Jason Calacanis made the call for revenge startups in a tweet that garnered more than 1.2 million views:

“10,000 laid-off Googlers = 3,000 new startups with three founders each. Now is the time… you’ve got nothing to lose and a huge severance package to underwrite your revenge startup!”

It appears that his instincts are correct.

According to a Clarify Capital survey that interviewed more than 1,000 tech workers laid off during the pandemic, 63% of tech workers started their own company post-layoff.

The survey also found that participants had an average of $13,000 salary increase after starting a company post-layoff. In addition, 58% of those who took the leap into entrepreneurship after starting a new job felt better about job security.

The majority of the revenge startups — 83% — were in the information technology or computer fields. 

 Furthermore, those interested in starting startups, even if it’s not in the tech field, have ample company. “Nearly 1.7 million applications for businesses likely to hire employees were filed in 2022—a 27.8 percent increase over the pre-pandemic baseline—and the second largest total on record,” according to the Census Bureau’s Business Formation Statistics for 2022 data compiled by the Economic Innovation Group.  

Money Matters

While it is good to be optimistic about starting a business, it’s important to realize that venture capital may not be available due to post-pandemic downturns, political turbulence and investors preferring more established companies due to instability and inflation.

According to Crunchbase, “the number of funding rounds in the U.S. decreased from 8,147 in 2022 to an estimated 6,050 in 2023, representing a decline of approximately 26%.

The reduced availability of capital for new startups can hinder start-up formation and growth. However, if new entrepreneurs are able to identify unmet market needs, they can delve into untapped niches and meet emerging demands. Also, bootstrapping a venture in a capital-scarce environment provides autonomy, allowing entrepreneurs to steer toward profitability and sustainable growth. Clarity Capital’s survey participants spent about $20,000 of their own money to fund their startups. They raised capital from family members, friends, and then angel investors, the survey said. 

One way to manage costs is to choose the right technology for the company. Practical examples include project management software and open-source AI tools.

Conclusion

The surge in tech layoffs is not merely a tale of adversity but a narrative of resilience, innovation, and transformation. Some laid-off tech workers are rewriting their professional narratives, defying the constraints of job loss to initiate their own businesses.

As the tech industry undergoes a period of upheaval, the seeds of innovation and change are sown by those who refuse to be defined by job loss but instead see it as an opportunity for a fresh start. The journey from layoffs to entrepreneurship is marked by challenges, triumphs, and a collective response that paves the way for a resilient and innovative future in the tech landscape.

Sources

Forbes

Clarify Capital

Crunchbase

Economic Innovation Group

 

This article was originally published in Certainty News: Article Link

Dan Nicholson is the author of “Rigging the Game: How to Achieve Financial Certainty, Navigate Risk and Make Money on Your Own Terms,” deemed a best-seller by USA Today and The Wall Street Journal. In addition to founding the award-winning accounting and financial consulting firm Nth Degree CPAs, Dan has created and run multiple small businesses, including Certainty U and the Certified Certainty Advisor program.

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