12/8/2022: Layoffs are Hitting Tech Decacorns
Both Plaid and Airtable laid off 20+% of Employees
It’s a very cold winter in Silicon Valley. Layoffs are happening across the board in the tech startup world and it’s now impacting high flying decacorns like Airtable and Plaid. Both companies just laid off 20% of their workers in the past couple of days. The pendulum has swung. The boardroom conversations have gone from how to grow faster to how to become profitable for the pre-IPO tech companies.
If we look at the companies that have laid off people in the past couple of months like Meta, Asana, Stripe, Plaid, and AirTable, they all acknowledged that they had become undisciplined in hiring and the exploding headcount didn’t necessarily translate to exploding growth or profits. Actually, the main characteristic of software business should be that the marginal cost of revenue is negligible as the software development cost is fixed and the cost difference of serving 10 clients vs. serving 10,000 vs. serving 1,000,000 clients should be about the same as these clients are using the same piece of software. But what we were seeing before the tech awakening is that companies were scaling up hiring based on revenue rather than actual needs. Most tech companies are making adjustments right now to do what tech companies should be doing and get back to being high gross margin businesses that don’t require a huge headcount to succeed. It will be interesting to see how deep the companies will cut but chances are many more tech workers will lose their jobs in 2023 and they should prepare for the lean times like what we were seeing back in 2001-2003.