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Tech Layoffs Slow As Quarter Ends

tl;dr: Tech layoffs are slowing, but things aren’t that much better.

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Since we last discussed tech layoffs, over 20 high profile layoff announcements — LivingSocial (280 staff), 3D Robotics, and First Data (129 employees), etc. — have occurred. To date, my data suggests that at least 130 tech-related rounds of layoffs that reached the media have occurred in the first quarter of 2016.

That’s up from 109 in our last report in early March. A smaller increase than you expected? I agree.

From the first day of the year to our initial report, tech layoffs averaged 1.55 announcements per day. Since that period, the figure is 1.17. That’s only partially useful, as we are comparing arbitrary units of time, but it does say that things have at least not gotten worse.

In the chart below I plotted the number of announcements across the first 12 weeks of the year, collected using a news-based analysis method. While there is no clear trend to the number of layoff announcements week-to-week, it appears to average around 10 companies every 7 days.

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Weeks 5 and 6 stand out. Their prominence puts the worst of the current layoff cycle before the mid-quarter mark. Perhaps things are getting a bit better.

It will be interesting to see if there is any relationship between layoffs, and quarter-to-quarter activities. Earnings, for example. It may be that companies are currently announcing, or leaking staff reduction figures ahead of earnings to head off potential investor complaint during the current correction. We’ll report again after the coming earnings cycle sees itself through.

Let’s take a look at the aggregate number of layoff announcements that we’ve tracked so far this year. As you can quickly see, the first and last months of the quarter are on rough parity. It seems that the market has set a pace for public, news-worthy technology layoffs at around 40 a month, February aside.

Screen Shot 2016-03-28 at 2.50.43 PM

Large, public layoffs are a lagging indicator. And not all layoffs make it into the media, so we can’t track every event. Layoffs of a certain minimum size are news, but not every exit merits a byline. So when we discuss layoffs based on notability, we are capturing a moving snapshot of larger reductions in staffing. For now we see through a glass, darkly.

Digging Deeper

Technology companies are not cutting employees for a single reason, and staff reductions are not focused on a single stage of company.

In the public markets companies like Yahoo and HP are fighting for relevance years after preeminence. It is far more difficult to be a company in transition when investor expectations are tightening, as you have less room to maneuver. The public squeeze extends to younger companies, as we have discussed, including Fitbit, Etsy and others. It may be that the real estate market in San Francisco is set for a correction in the negative — which is ironically positive — sense.

In the private market, companies shedding staff are doing so for a variety of reasons. Earlier this week, Kickstarter phenom Pebble laid off 25 percent of its workforce, citing a need to be self-sufficient. The wearables market has proven volatile with shares of Fitbit falling 50 percent so far this year. Investors being skittish about less-mature companies in the space are hardly overreacting.

And companies like Spoonrocket, which recently shut down, are dealing with the potentially thorny fact that simply being on-demand, and using cheap contract labor does not delete all the difficulties that have always made local and now hard challenges to crack.

Continuing the ‘it’s harder now to raise theme,’ an essay went out today from John Sheehan, part of the Runscope team. He is laying off most of his staff, and leaving the Bay Area. Cause of death?

Over the past year everything at the company was going according to plan. We were growing and meeting all our goals. However, the fundraising market was not favorable and deteriorating quickly. We just couldn’t get our progress aligned with the stage the investors bucketed us in. By December it was apparent no new funding was going to be available. We were a long way from self-sustaining. The best option was to pursue an acquisition.

All this goes to say that the current damage is from the top down and the bottom up. Don’t forget how not to die.

Originally posted on Mattermark

Tech Layoffs: How Bad Is It?

tl;dr: Despite flood of layoff news on, the situation isn’t that bad (yet!).

http://images.inc.com/uploaded_files/image/1940x900/layoffs-downsizing-1940x900_34144.jpg

2016 is off to a rocky start here in peppy, optimistic, techland – at least according to the media.

News of Down rounds, Layoffs, and Shut Downs consistently bubble to the top of Twitter feeds – the Hangover is beginning. As The Wall Street Journal points out adeptly, “with valuations falling, the other side of the equation is reappearing: Failure is often just around the corner.” Analysts, such as Global Equities Research’s Trip Chowdhry, go a step further and have forecasted 330,000 layoffs in the coming months. For fun, here’s a small appetizer of the sensational headlines.

  • “Who Lives And Dies In A Down Economy” – Connie Loizos (TechCrunch)
  • “For Silicon Valley, the Hangover Begins” – Rolfe Winkler (WSJ)
  • “Yahoo to lay off 15% of its workforce as part of ‘aggressive strategic plan’” – Ken Yeung (VentureBeat)
  • “It’s been a bad month for tech layoffs” – Biz Carson (Business Insider)
  • “Troubled Unicorn Zenefits Lays Off 17% Of Staff” – Brian Solomon (Forbes)

Even if you don’t buy into the media fanfare, (Google News ~ 661,000 results!), what we all seem to agree is that ‘something’ is happening. Investors, both big and small, have tightened up their wallets, and startup operators are moving mountains to slow the burn and adopt the Watney Rule – the next shipment of potatoes might not come. Despite the optimistic job growth numbers from the US BLS, the market for tech jobs seems to be slowing down.

What Says the Data?
Snapshot_Layoffs_2016For the full list, check out the 2016 Tech Layoffs

Unsatisfied with the news, I dug into some data. The results, after plowing through hundreds of news articles, is surprising –  I anticipated more layoffs announcements.

  • There were 112 layoffs, company shut downs, and completed bankruptcies in the first 60 days of 2016 (that’s all I could find, if you know of more, add it to the spreadsheet!).
  • Most were public, PE-owned, or subsidiary companies of larger corporations. These were not too surprising – Yahoo (laying off 15%), and GoPro (7%) have been in a downward spiral for months, EMC/VMware (~ 900 employees) is dealing with the Dell deal, and IBM is always laying off people.
  • Only 30 were private, venture-backed companies. Almost half of these were late stage companies, often a few years from going public, that couldn’t raise more money or are suffering from slower growth. Notably: SurveyMonkey (13%), Tango (28%), Kabam (8%).
  • The other half of this cohort are mostly Series B/C companies that are at the inflection point – transitioning from solely chasing after audience to generating real revenue numbers. Notably: Birchbox (20%), Mixpanel (8%), VarageSale (33%).
  • Regulatory risk is real for tech companies. FanDuel, a daily fantasy sports company that’s come under fire from state policymakers, let go of 55 employees early February. Over in insurance world, Zenefits said goodbye to 17% of its staff (mostly in sales).

So How Bad Is It?

Anecdotes always have the uncanny ability to make things seem worse than they might actually be. However, from what we’re seeing thus far in 2016, the effect of this slowdown has yet to signal catastrophic disaster. Additionally, effects of layoffs could take months or years to take to materialize – it’s cheaper to stagger out those exits.

The bottom line is that companies that have great execution and appropriate risk management measures will continue to raise money and create jobs even in uncertain times – for comparison, in the same time those layoffs happened, we saw about 800 companies get checks. Evidently, there is still optimism for the coming days.

What’s Next?

In the coming weeks, I’d like to compare the first 60 days of 2016 with 2015, and so forth. Additionally, I’ll dig into some data to see which companies might be next. Stay tuned.

Acknowledgement

Thanks to those who were gracious enough to proofread this. Also, shout out to Mattermark research analyst, Ho Yeung, for helping me sift through the data.

A modified version of this appeared on Mattermark.