Keeping Up With Layoffs
Hello folks,
Over the last few weeks we have been thinking a lot about the layoffs in tech. It’s been a brutal year for tech companies. Of course, given the center of gravity for tech is the US, the cuts have largely been centered there. According to Crunchbase, ~58K tech jobs have been cut just this year. And January isn’t even over! Add this to ~140K tech job losses last year and you start getting a sense for just how brutal that layoffs have been. At this point its hard to think of a single big tech company that hasn’t cut jobs. Except for Apple, of course, which was even-handed in its recruitment even during the peak of the pandemic (this is a good article on why Apple has avoided this fate). I have seen this particular chart on Twitter a few times now to highlight (1) just how much tech companies hired during the pandemic (2) how the job cuts were a drop in the bucket given this hiring spree, and that none of these companies have really gone back to pre-pandemic headcount levels.
Ben Thompson had a nice article a couple of days ago, digging a bit deeper into this hiring spree. He laid out another chart, showing YoY change in headcount:
The popular narrative right now about these layoffs is that tech companies dramatically over-hired during the pandemic, but while that seems to have happened with Amazon — and for arguably very good reasons given the way that e-commerce shot up during lockdowns in particular — the reality is that the rest of the tech companies largely increased at the same rate they always had. Sure, the number of employees they added was large, but that was a function of keeping the same hiring rate off of an ever increasing base.
Thompson argues that in his view these layoffs are quite opportunistic, since they keep employee count in line with what would be needed to accomplish the companies’ strategic priorities while giving investors a sense that these companies are reining in costs and adjusting to a new economic climate. I think there’s also obviously a bit of a domino effect going on here — no one wants to be left out when the general state of mind across the industry is that of cleaning house. The thing with cuts though is always what is enough, and I think we will need to wait and see if there is another deeper cull. Hopefully not, but let’s see where the economy goes.
Indian tech companies have gone through their own version of headcount cuts. Again this is not surprising given so many are venture-backed, and now have to focus on increasing runway and profitability. And I think in India, these cuts were probably more needed as well. Indian companies have also historically over hired compared to companies in the US. Hyper-funding and growth expectations meant that this proceeded to get significantly worse in 2021 and 2022. There is still a cost arbitrage of building companies in India vs the US, but that slowly disappears given how these startups ended up hiring. Companies hoped they could blitz-scale and the party would never stop but as venture dollars dry up in the latter stages, growth stage companies have hit a reality check. Across 2022 and 2023, 20,000 employees have been laid off across companies large and small and it seems likely that more are to come. If there’s one key takeaway from this downturn, it’s probably the fact that Indian startups need to be more cognizant with hiring and not hire ahead of their growth given the price these companies need to pay if things go south. Only time will tell how companies and founders apply their learnings into the next boom and bust cycle, but I think it’s pretty clear that there's no reason a seed stage SaaS or technology company needs over 50 employees to reach PMF.
Other stories we have been following
Sharechat is apparently going through a leadership crisis: Even as the social media company went through a headcount reduction, its CTO and COO were MIA. Apparently the company’s top and middle management have hollowed out, with implications for the company’s growth and revenue trajectory
Walmart is doubling down on India: Even as Amazon is streamlining its operations in the country, Walmart is pumping cash in to its big bets PhonePe and Flipkart. The company is looking to buy back ~$1.5B of Flipkart shares from Tiger Global and Accel.