What tech layoffs mean for the future of tech startups

Illustrated by Anneliese Caposela/Axios

Tech layoffs continued this morning, with Spotify announcing plans to lay off about 600 employees. This brings his monthly total to over 56,000, according to tracking site Layoffs.fyi. Includes last week’s monster cuts from both Alphabet and Microsoft.

Big question: Could this lead to a surge in tech entrepreneurship? A sort of upside to the recession? The answer is mixed.

Bull case: Today, as the saying goes, there are many would-be founders. If you’ve always wanted to start a company, perhaps because your former employer made an obvious mistake, what better time than when you’re already unemployed?

  • Especially if you can cash retirement checks in the coming months and know potential co-founders who are in exactly the same position?

Bare case: Today’s job market is tighter than it has been seen after past market turmoil such as the dot-com recession and the global financial crisis. Even as tech companies cut headcount, there are plenty of non-tech companies who spit on the prospect of hiring former Google and Facebook engineers.

  • There is a flip side to relative financial stability when it comes to the willingness to start something new. Participating in a 10% layoff will likely be viewed differently by his venture capitalists than going out of business because the entire company went bankrupt.

Speaking of venture capitalists: Those are the main variables. There seem to be a lot of dry powders and willing checkwriters right now, including those in the seed stage, but any drastic change in payout levels (up or down) could be seen as a signal by potential entrepreneurs.

To the point: Layoffs are tragic. Pinkslip still hurts, even when it’s clear the company has overhired.

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