Austerity in Silicon Valley
The next garage
The crisis has hit tech’s spiritual home hard, but it is already planning ahead
Firing somebody is hard under any circumstances.But doing it over a video call is brutal.“It’s not the best environment for this, with people at home and kids in the background,” observes Marwan Forzley, the boss of Veem,a startup based in San Francisco which allows firms to transfer money cheaply. He recently had to let go 30 of its employees.
Mr Forzley speaks for many in Silicon Valley. The largest American tech firms may be the winners from a global pandemic. Demand for their online services has exploded among people and businesses in lockdown. But many startups in tech’s heartland are hurting. Hardly a day goes by without news of more lay-offs and firms going out of business. Yet amid the doom and gloom, venture-capital (vc) firms and entrepreneurs are already doing the thing they believe they do best: divining the future in their crystal balls.
Californian tech firms and their financiers were among the first in America to take the threat of coronavirus seriously.Some venture capitalists began refusing to shake hands at the beginning of February (and were ridiculed for it).
The moneymen also moved quickly to “triage” companies in their portfolio, classifying them according to how likely they were to survive and what they should do. Mostly this involved letting people go.“The shocking thing is how fast everything has moved,” says Marco Zappacosta, who runs Thumbtack, a marketplace for local professionals from plumbers to dog trainers, which laid off 250 of its 900 employees.
Definitive figures are hard to come by.When big firms cut back it makes the news.Airbnb and Uber recently announced they would let go 1,900 and 3,700 workers respectively.Layoffs.fyi, a website that tracks dismissals in the tech industry by adding up numbers from press reports, has counted about 17,600 jobs lost since mid-March.But this misses many sackings at smaller startups.Although still well below the national average and the peak during the financial crisis of 2007-09, unemployment in the region is edging up.