Tech Layoffs Stay High As Extended Runways Reach Their Limit

In the runup to the 2021 market peak, the word most often used in conjunction with the technology job market was 鈥渦p.鈥� Hiring was up. Salaries were up. And optimism was too.

More recently, coverage of tech employment invariably includes much use of the word 鈥渄own.鈥� Openings are down. Job mobility is down. About the only thing stubbornly remaining up is layoff announcements.

Relief is not in sight. After tailing off a bit in December, job cuts picked up again in January 鈥� totaling more than 17,000 鈥� per the SA国际传媒 Tech Layoffs Tracker. February also brought more than 13,000 layoffs, per the tracker, with both large-cap tech companies and startups reducing staff.

鈥淭hings slowed down a little, and then we started to see an uptick,鈥� said , vice president of financial strategy at startup advisory firm .

While venture-backed companies took steps to pare operating costs after market conditions began to cool a couple years ago, there鈥檚 only so far they can extend their runways, Jones observed. Eventually, many must either make more painful cuts or shutter.

Companies cutting or filing for bankruptcy

In recent weeks, we鈥檝e seen a succession of prominent tech companies and startups make deep cuts.

Many are venture-funded companies that went public during the IPO boom of 2020 and 2021. This week, for instance, dating app said it is cutting 350 jobs 鈥� roughly 30% of its workforce. Another big February layoff announcement came from testing and telehealth provider , which will cut 30% of staff.

Additionally, restaurant software provider eliminated 10% of positions, while electric vehicle maker is laying off 10% of its salaried workforce.

Startups are also carrying out sizable layoffs. Among those to make such announcements include plant-based meat maker , luggage brand , and AI writing assistant .

Others are entering bankruptcy. Among the largest of late is , an aggregator of Amazon brands that had raised over $3 billion in debt and equity funding before filing for Chapter 11 protection this week.

Startups shutting down

Kruze鈥檚 Jones also anticipates continued job losses due to venture-backed startups shutting down. Over the course of the quarter, he expects to see around 6% of his firm鈥檚 800-plus startup clients close, which is quite high for a single quarter.

Across the broader startup ecosystem, we鈥檝e seen several closures by companies that raised considerable funding already this year. This includes , a Chicago-based travel startup, and Milwaukee鈥檚 , a provider of short-term accommodations.

Startups often shut down quietly, however, so there鈥檚 not always news or an announcement accompanying a closure. This is particularly true for seed-stage companies that do not yet have a product on the market.

Not a lot of mass hiring

In addition to continued large job cuts, we aren鈥檛 seeing a lot of major hiring initiatives out of either startups or established tech employers. Certainly there are exceptions, in hot areas like generative AI. But for the most part, companies aren鈥檛 scaling up to the degree they did a couple years ago.

It鈥檚 not just tech. U.S. employers announced plans to hire 5,376 workers in January, the lowest January total on record, per a from staffing firm . Job cut announcements, meanwhile, were up 136% in January compared to December, according to Challenger.

The data does not, overall, paint a particularly bright picture for tech and startup employment at the moment. If we were to look for a bright side, however, it might be this: Cycles do eventually turn. The latest difficult stretch is largely a result of the largesse poured into startups and tech stocks a few years ago, leading to overly-optimistic assumptions about growth and hiring.

These days, startups and technology employers have increasingly adopted a leaner-is-better mindset. Eventually, however, it鈥檚 a good bet the ethos will shift to faster scaling and more hiring.