Startups spring from ashes of Big Tech purge
Send a link to a friend
[January 03, 2023] By
Supantha Mukherjee, Martin Coulter and Krystal Hu
(Reuters) - Nic Szerman lost his job at Meta Platforms in November, just
two months after joining full-time, falling victim to a sweeping 13%
reduction of its workforce as the advertising market cratered.
Days later he was back working, seeking investment for his own company
Nulink, a blockchain-based payment company, and sent pitches to startup
accelerator Y Combinator and Andreessen Horowitz’s cryptocurrency fund.
"As counterintuitive as it may sound, this layoff left me in a really
good position," the 24-year-old said. "Because I don't have to pay back
the sign-on bonus, I get four months of pay, and now I have time to
focus on my own project."
Szerman is part of a wave of would-be entrepreneurs who are emerging
from the ashes of the mass job losses seen in Silicon Valley in the
second half of 2022, according to venture capitalists.
U.S. tech giants including Meta, Microsoft, Twitter and Snap have purged
more than 150,000 staff, according to Layoff.fyi, which tracks
technology job losses.
While overall venture capital (VC) financing fell 33% globally to about
$483 billion in 2022, early-stage funding was robust, with $37.4 billion
raised in so-called angel or seed rounds, in line with the record level
seen in 2021, according to data from research firm PitchBook.
Day One Ventures, an early stage venture fund in San Francisco, launched
a new initiative in November to fund startups founded by people who had
been laid off from their tech jobs, touting the slogan "Funded, not
Fired".
The program aims to cut 20 checks for $100,000 by the end of 2022. Day
One said it had received over 1,000 applications, most of them from
people who were cut loose by Meta, Stripe and Twitter.
"We're investing $2 million in 20 companies - if we just find one
unicorn it almost returns the fund, which I think is a really unique
opportunity for us as fund managers," said Masha Bucher, co-founder at
Day One Ventures.
"Looking at the last economic cycle, companies like Stripe, Airbnb,
Dropbox have been created in crisis."
HOT: GAMING AND AI
Also in November, multi-stage fund Index Ventures, which has bankrolled
Facebook, Etsy and Skype, launched its second Origins fund, which will
invest $300 million in early-stage startups.
Silicon Valley investor U.S. Venture Partners and Austrian VC firm
Speedinvest have meanwhile earmarked a similar amount for newly founded
companies.
Investors highlighted gaming and artificial intelligence among hot areas
of interest.
[to top of second column] |
A Google employee rides a shared Google
bike past building BV100, during a tour of Google's new Bay View
Campus in Mountain View, California, U.S. May 16, 2022. Picture
taken May 16, 2022. REUTERS/Peter DaSilva
"With advances in game design, new innovations like cloud gaming,
and the emergence of social networking in this sphere, gaming has
really transcended into mainstream culture," said Sofia Dolfe,
partner at Index Ventures.
"In every period of economic uncertainty, there is opportunity - to
reset, re-prioritize and re-focus energy and resources."
DOTCOM BUBBLE 2.0
Szerman said his project was rejected by Y Combinator, while he
hasn't heard back from Andreessen Horowitz yet, though he added that
other early-stage venture capitalists had expressed interest.
"I told the investors we'll chat in two or three months," he added.
"I'll focus on scaling the system now."
Some investors compared the 2022 downturn to the dotcom crash of the
early 2000s, when dozens of overvalued startups went bust, flooding
the market with talent and helping to spark a wave of new companies
such as Facebook and YouTube.
"Many great companies have been created in relatively dark times,"
said Harry Nelis, partner at investment firm Accel, who sees a new
generation of risk takers emerge among the swathe of people left
unemployed.
Some industry players say former Big Tech employees are uniquely
placed to start their own companies, having seen first-hand how some
of the biggest firms in the world operate, and enjoying ongoing
access to their network of highly skilled colleagues.
One former Googler has sought to help others like him looking for
life after technology giants. In 2015, Christopher Fong, who spent
almost a decade working for the tech titan in California, launched
Xoogler, a project designed to help former employees hoping to start
their own companies. Since then, the group's membership has since
swelled to more than 11,000.
Fong told Reuters that experience in Big Tech firm gave founders a
"strong brand that can be leveraged to meet investors, potential
customers, and recruit team members".
(Reporting by Martin Coulter in London, Supantha Mukherjee in
Stockholm and Krystal Hu in New York; Editing by Pravin Char)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |