More than 100,000 people are reportedly losing their jobs as a result of the 2022 U.S. tech layoffs, but it has also spawned a new wave of startups. These potential entrepreneurs have a unique advantage in terms of operations and connections, and some venture capital has already jumped on board.
Nic Szerman lost his job at Facebook’s parent company Meta last November, just two months after he officially started, and became one of the victims of a 13 percent layoff at Meta.
Days later, Szerman was back at work seeking investment for his company, Nulink, a blockchain-based payments company that has sought funding from startup gas pedal Y Combinator and Andreessen Horowitz’s cryptocurrency fund.
While it may sound counterintuitive, the layoff does put me in a very good position,” said Sherman, 24. I didn’t have to return my signing bonus, I got 4 months of salary, and now I have time to focus on my own projects.”
Venture capitalists say Sherman is one of a group of potential entrepreneurs emerging from the ashes of the Silicon Valley layoffs in late 2022. U.S. tech giants including Meta, Microsoft, Twitter and Snap have laid off more than 150,000 employees, according to Layoff. FYI, a website that tracks unemployment in the tech industry.
While overall global venture capital funding fell 33 percent to $483 billion in 2022, “early-stage funding” performed strongly, raising $37.4 billion in so-called angel or seed rounds, matching the record level of 2021, according to research firm PitchBook.
Venture capital is in place
Day One Ventures, a San Francisco-based early-stage venture fund, launched a new initiative last November to fund startups founded by people laid off from the tech industry, under the slogan “fund, not fire.
Day One Ventures says it has received more than 1,000 applications, mostly from employees who have been laid off from tech companies like Meta, Stripe, and Twitter.
We’re investing $2 million in 20 companies, and even if we can only identify one unicorn company, that will almost pay for itself,” said Masha Bucher, co-founder of Day One Ventures. I think this is a very unique opportunity for us as fund managers.”
Bucher added: “Looking back at the last economic cycle, companies like Stripe, Airbnb, and Dropbox were born out of the crisis.”
Also in November, Index Ventures, a multi-stage fund that has funded Facebook, Etsy and Skype, launched its Second Origins fund, which plans to invest $300 million in early-stage startups.
Meanwhile, U.S. Venture Partners, a Silicon Valley investment firm, and SpeedInvest, an Austrian venture capital firm, have set aside similar-sized funds for start-ups.
Background working for a large company is an advantage
Currently, investors are focusing on start-ups in areas such as gaming and artificial intelligence, says Index Ventures partner Sofia Dolfe: “At every stage of economic uncertainty, there is an opportunity to reset, reprioritize, refocus efforts and resources.”
Harry Nelis, a partner at investment firm Accel, said, “Many great companies are created in relatively dark times.” In the midst of this major tech layoff, Nelis has seen the emergence of a new generation of risk-takers.
Some industry insiders say former employees of those big tech companies are in a good position when it comes to starting their own companies. They’ve seen firsthand how some of the world’s largest companies operate and have been exposed to a large pool of highly skilled colleagues.
Christopher Fong, who worked at Google for nearly 10 years, left in 2015 to launch Xoogler, a program designed to help people who are ready to start a business after leaving a tech company. Today, the organization has more than 11,000 members. Christopher Fong says the experience of working at a large tech company gives these founders a strong brand that can be used to reach investors, and potential customers and recruit team members.