North American tech companies are adjusting to the new economic reality as they emerge from the days of massive pandemic-fuelled growth – and jobs have been the biggest casualty as tech firms pare down their workforces.
A number of factors have rapidly changed in the tech world including a slowdown in ecommerce followed by a softening economy, according to Elaine Kunda, the managing partner at Toronto-based Disruption Ventures, a firm that invests in early-stage tech startups.
“That's a bit of a double whammy. So, there are just behaviours that are going on that are causing a retraction in the market. And then it's the fear of what's to come and the consumer is the one that's being hit the hardest right now with inflation,” she said in a recent phone interview.
The other challenge, she said, has been a major pullback in financing for tech firms across the board, causing companies to re-evaluate their biggest expenses -- which are employees in most cases. The lack of new funding also made some of them rethink their future investment plans.
“The industry as a whole has really retracted as far as capital being invested and access to debt,” she said
“Companies are saying let's either hold off or layoff and, you know, at the earlier stage companies, they don't have as many employees – they’re usually quite tapped out. So what you'll see, perhaps, with the earlier stage companies who have raised money and do have money, they just won't hire as quickly and as aggressively as they might have a year ago.”
For big tech firms though, some have chosen to scale down their workforces after a hiring frenzy during the days of pandemic lockdowns and restrictions.
Shopify Inc., Hootsuite, Wealthsimple, ClearCo and Robinhood Markets Inc. are just a few major North American tech firms that announced layoffs in recent months. Meanwhile, companies such as Alphabet Inc. and Apple Inc. implemented hiring freezes.
GOING TO THE BENCH
Kevin was laid off from Google mere months after being hired.
He worked as a recruiter in the mid-Atlantic for the tech titan under an outsourced contract with recruitment firm Randstad. He said he was hired in May and found himself part of a round of layoffs in mid-August.
“A few weeks ago, they told us that they were going under a hiring freeze that was going to hit the press, and not to worry, everybody's job was fine. They're just going to sort of figure out what they're going to do. So I took them at their word,” he said by phone. Kevin is not his real name. BNN Bloomberg granted him anonymity to speak freely because he fears repercussions.
“I put my faith in them and I didn't think they were going to lay us off.”
On Aug. 18, he found himself without a job and was offered one-week severance.
BNN Bloomberg contacted Google for a statement on the layoffs and is still awaiting a response.
“It was a pre-recorded call, saying due to Google's hiring freeze and the lack of jobs right now, unfortunately, you're going to be going on what they call the bench, which is them trying to find us another job with another company or something,” he said.
“By the time the conversation ended, all of our Google emails and everything were deactivated.”
Kevin said the pre-recorded call was similar to a Zoom meeting. After the pre-recorded message, he said affected employees were allowed to ask two Randstad officials questions in the platform’s chatroom and the hosts chose which questions they wanted to answer.
PANIC RESPONSE
Disruption Ventures’ Kunda said the rapid change in the economy led to “panic” in the tech sector.
“With everything, you have your initial reaction, you have the panic selling, layoffs, panic response, and then, you know, people take a breath. [They] look to see what happens and then slowly start to bring back what they need. And perhaps change their approach,” she said.
However, the contraction in the tech sector was a “necessary reset” to bring company valuations and tech salaries that “got way out of whack” back in line with economic fundamentals, she added.
“I think some of the multiples that we saw didn't make sense. I’ve said that for the last few years. And, you know, the bubble bursts. It has burst before it'll burst again. And then, you know, start and rebuild from there.”
As for Kevin, he said he still works at his side gig, but is actively looking for a full-time, remote job.
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