Displaced Tech Employees Venture into Entrepreneurship
"From Layoffs to Launches: Tech Workers Turn to Entrepreneurship Amidst Uncertain Funding Climate" is the inaugural piece in a three-part series by Christine Kilpatrick for Crunchbase. It focuses on tech workers who, following recent waves of industry layoffs, leveraged the situation to establish their own startups. Santa Cruz Works accelerator - Santa Cruz Accelerates cohort 5 - launched last week with 10 very innovative startups.
The Startup Landscape
Tech industry layoffs: Close to 140,000 workers at U.S.-based tech companies have been laid off so far in 2023 due to falling valuations, rising interest rates, a struggling economy, and banking sector troubles. Changes in consumer behavior post-pandemic and a need to trim bloated employee rosters from years of rapid hiring are also factors.
Opportunities for entrepreneurs: Despite these challenges, some see the layoffs as an opportunity for potential entrepreneurs and the networks and investors willing to support them. They view the high-quality talent being let go from major tech companies as a potential asset.
CoFoundersLab: This entrepreneur networking and skill-building site is offering free premium memberships to laid-off tech employees. Founded in 2016, it serves about 650,000 entrepreneurs looking for co-founders, partners, mentors, and business training.
"Funded Not Fired" program: Investment firm Day One Ventures has received over 1,200 applications for this program, which offers to invest $100,000 in selected startup ideas. Half of the companies applying were already established. The firm will also lead a $1 million seed round for the top companies in the program.
Funding challenges: Entrepreneurs are facing a difficult funding climate. Global funding in the first quarter of 2023 was $76 billion, a 53% decline year over year from the first quarter of 2022. Seed and angel investment to U.S. startups reached $3.1 billion in Q1 2023, a 45% decline year over year from the peak of $5.6 billion in the first quarter of 2022.
Biotech startups: These startups face unique challenges, including high capital intensity, long regulatory approval timelines, and a funding market that favors long-entrenched investors. The case of the Global Genome Center, which shut down after failing to secure funding, is cited as an example.
Intrigue Health: Dereck Tatman and Ron McCullough, founders of the defunct Global Genome Center, have created a new stealth-mode medtech company, Intrigue Health. The company is creating diagnostic testing products for home use.
In conclusion, while layoffs in the tech industry have caused significant upheaval, they have also created opportunities for entrepreneurship, albeit in a challenging funding environment. Various support systems, such as CoFoundersLab and Day One Ventures' "Funded Not Fired" program, are stepping up to help these new entrepreneurs navigate the startup landscape.