Reasons behind layoff

Technology companies suffer from a serious issue of being bloated in terms of headcount. Over the last few years, we had the best years in terms of access to funding and financing to start and grow businesses (startups) with favorable valuations. Tech companies were valued with significant premium vs. today and both VC and blue chip investors invested into their companies at such valuations. With easy access to capital at both equity and debt angles, tech companies were able to get capital whenever they wanted. To grow aggressively, they also hired quickly to build up their team. However, they were also forced to increase compensations for their recruits to compete with other tech competitors as well as traditional firms which offered strong compensations (hedge funds, banks, and etc.). This didn’t necessarily cause a problem until 2021-22 as VC funding rounds remained strong and financing was accessible even for companies that didn’t necessarily have positive cashflows. However, everything changed over the last few months as feds stepped in to attempt an end to the on-going inflation by raising the interest rate and effectively putting an end to cheap financing. Uncertainty combined with geopolitical incidents, the stock market suffered, which wiped out billions across public tech companies and slashed valuations across the industry. This scared off VC investors (along with other reasons) and suddenly, unprofitable tech companies were out of options to gain funding to run their business. So what did they do? They started looking at areas where they could save money and realized they can run leaner in terms of headcount, especially when their SG&A expenses were significantly high due to premiums offered to their employees. I would like to also note that recent TikTok trends and well-known facts about WLB worked against the tech workers as well. Tech companies didn’t mind back then as much as their WLB attracted applicants. When things became worse, they realized that they will be okay even if they fire every two out of four product managers since they knew those employees were only working twenty hours a week or less.