The ‘Netflix effect’ spreads to Silicon Valley: More layoffs, fewer contracts and problems getting financing

big technology change


The ‘crash’ of technologies listed on the stock market, recession fears and high inflation have spoiled the party in the tech hubs of San Francisco, New York or Seattle.

Netflix logo on a building in Los Angeles
Netflix logo on a building in Los Angeles.Reuters

in the jargon of silicon ValleyAnd unicorn is a technology company that is valued at over $1 billion, and as of mid-2020, approximately 430 companies fall into that category. Today it is estimated that there are over 1,000. A good statistic to explain how 2021 has been a year of absurdly high figures in the technology world, an absurdly high even for a sector accustomed to an excess of zeroes on checks.

Overall, venture capital companies invested in approximately $630,000 million In search of the next technological marvel. Cryptocurrency, Web3, Security, Data in the Cloud, Metaverse… Anything goes if there is even the slightest opportunity to become a shareholder in the next Google or Amazon anytime soon.

Oh fine. It is very likely that this record figure will now live on as the epitome of good times, easy money. In April alone, according to the data of crunchbaseThe amount invested in startups has come down by 12%. crash Fears of a recession and high inflation from publicly traded tech companies have spoiled the party in tech hubs in San Francisco, New York or Seattle.

One direct consequence is that, in an industry where until recently an engineer could jump from one company to another every six months with a significant salary increase, many now think twice about their next career move. Job offers and calls from recruiters start dwindling.

The new policy in big technology companies is to ban hiring. Twitter He announced it soon after Elon Musk’s interest in taking control of the company became known. With few exceptions, no division manager may contract.

meta, the company formerly known as Facebook, is in a similar situation. A few months ago he complained about how difficult it was to find talent due to the huge demand for programmers. Now, by order of his financial manager, he will stop hiring new employees for the rest of the year. It will also do so in its division focused on the so-called metaverse, which is believed to be the future of the company.

is one of the big technology companies not looking for new engineers Uber, “Hiring someone should be considered a privilege,” he said. Dara KhosrowshahiThe company’s president, in an internal statement issued earlier in the month.

For some companies, withholding new contracts is not enough. Stocks are in free fall and there isn’t much room to issue more debt, requiring them to quickly improve cash flow. They have begun to reduce expenses by laying off some of their employees, something that hasn’t happened on a large scale in the sector since the 2008 crisis. This is the case of Netflix, which has eliminated hundreds of jobs in its editorial department, my point of viewwas created just a few months ago to support the launch of streaming,

But there are other examples. CarvanaA well-known startup for sales of vehicles, at the beginning of the month laid off more than 2,500 employees, 12% of its workforce; Robin Hoodan app to work on the stock market at 9%; pelotonWhich sells exercise bikes with an associated interactive class service and has become a mass phenomenon for more than 2,800 employees, 20% of its workforce, during the pandemic.

The website has tracked all these layoffs since the start of the Covid-19 pandemic and the figure is already around 116,000. A good chunk of that happened in the first half of 2020, when confinement measures suggested a complete halt in economic activity. travel and transportation companies such as Booking, Uber or Airbnb Thousands of workers were laid off in fear of the recession.

However, technology companies showed a great potential for customization and their valuations skyrocketed on the stock market and in funding rounds. From September 2020, the number of layoffs in the industry was minimal. The worst, it seemed, was over. But since February this year, the graph of layoffs has increased rapidly. Unemployment figures in the US remain at historic lows, but it is well known that Silicon Valley always likes to go against the tide and this one seems to be no exception.

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