From layoffs to lift-off

Josh Yentob at Miroma Ventures explains why the recent wave of big tech cuts will shape the next era of growth

It’s been a year of tough decisions for big tech.

Google. Amazon. Microsoft. Yahoo. Zoom. Each of these global businesses have announced tens of thousands of job cuts across functions - each citing a challenging macroeconomic outlook and intensifying shareholder pressures.

It isn’t easy news to deliver. And it’s even harder news to hear. Especially when you consider that these businesses have attracted and stockpiled some of the most qualified and skilled talent available on the job market. And are now letting some of these people go.

These are difficult moments. Especially for those who have lost their jobs suddenly. But these cut-backs are the first dominoes to fall in a long chain of changes. And these talented people - though they may feel unlucky now - are now first in-line to shape the next era of the economy.

The mother of invention

Periods of recession and economic uncertainty are fertile ground for good business ideas to take root. Microsoft, Netflix and AirBnb can all trace their lineage back to eras of recession. Some studies argue that half of all Fortune 500 companies were created during times of economic crisis.

And so the door of opportunity opens for this new wave of freshly unemployed talent.

These people have insights and ideas which could challenge their former employers in the long-run. But in the short-term, they can attract significant early-stage investment.

The current economic climate is not ripe for investors. But new startups will be able to frame their value against later-stage startups. Many businesses in the market at a later stage of funding (Series B and beyond) now have inflated, unjustifiably  high valuations - and plenty are a long way from any tangible profitability. And the ROI for many investors will currently seem less certain than ever.

As such, new ideas are welcome. Investors are much more keen to engage with startup propositions which look much more sustainable in the current landscape. There is a growing desire for investors to stake claims in the next era of the economy - supporting early stage ideas with ‘better value and more upside’.

Investors are actively exploring options in a few highly topical categories. AI technology, spurred by the popularity (and capability) of tools such as ChatGPT and Dall-E, is capturing huge amounts of attention. Equally, there is significant growth in more ‘human’ categories, such as environmental sustainability, or products/propositions which have specific community focuses or deliver for underserved audiences.

But it isn’t all just about the plan. It’s about the person.

Who dares wins

Tough times don’t last. Tough people do.

Investors know this. Founders who build businesses in tumultuous times tend to be much more robust and resilient. Both in how they structure their operations - and how they can handle pressure themselves.

It takes real bravery to launch a business in recession. These are the leaders that investors are naturally drawn towards. It’s important that the new wave of entrepreneurs and founders entering the market recognise that, though it is far from easy, it can be an advantage to launch a business in recession.

It can even be a powerful part of the story you tell - either to investors or consumers - through your marketing.

For those impacted by the mass layoffs from tech giants, this is a challenging time. But for some, it is the moment they open a new chapter in their lives and bring their ideas to life. Not as an employee - but as a founder.

Talent and smarts alone isn’t enough. It takes real bravery to build in this climate. And that is exactly why they might succeed - and perhaps even shape a new era of economic innovation in the process. 

Josh Yentob is venture director at Miroma Ventures

Main image courtesy of iStockPhoto.com