New data indicates that startups are laying off more staff. That said, the pace of layoffs is modest compared with the early-2020 economic correction. As COVID locked down many nations for the first time, the global economy shuddered, and startups were left to deal with an immensely changed world effectively overnight.
Layoffs at companies like Toast, Airbnb, TripActions, and others were symbolic of how some still-private companies found their markets effectively shuttered overnight. (Both Airbnb and Toast recovered and went public; TripActions evolved into a more general corporate spend service.)
The 2022 correction is different. It’s been slower to arrive, giving startups more time to adjust to changing market conditions. And it was presaged by falling public markets that, we presume, allowed some private companies to conserve cash in anticipation of, say, a more conservative funding market. The result is a more mild pace of layoffs.
In a dataset covering the startup labor market from Carta — which sells software to assist companies in managing their capitalization tables — it is clear that while layoffs are accelerating in the private markets, the cuts are simply not occurring as fast as they did in 2020. Nor are they near the same absolute pace when viewed as a percentage of total startup employee exits.
Let’s chat through the data and then quickly peek at other data points regarding the rising prevalence of remote work and what portion of payroll unicorns spend on engineering talent. Cool? Let’s go.
The rising pace of startup layoffs
A few things to ask yourself before you look at the chart below. First: Were involuntary startup layoffs rising or falling ahead of the 2020 snap-correction? Furthermore, when did involuntary startup layoffs reach a local minimum as a portion of total startup staffing reductions?
The answers, as you can see are, respectively, rising and roughly the start of Q4 2021: