Startups are exciting places to excel in experience and skill sets. But when the global economy tightens its belt, startups can be among the first to make redundancies. They can also unexpectedly experience growth. We look at which sectors and startup markets are more likely to make job cuts and which are likely to grow so you know which might be best to look into.
Let’s get the bad news over first. A wave of layoffs in the startup scene has swept across the globe as companies struggle with slower business growth and rising labour costs. Thousands of companies have been forced to reduce costs and cut down their staff; startups are no exception, according to data presented by Trading Platforms, which has reported that startups laid off nearly 77,000 employees in the nine months of the year.
“For a start, markets have rebounded,” says Basta.
“The NASDAQ is already back to October 2021 values. It’s just too early to know if we’re at the beginning of a long-term correction or just a dip from the peak. What’s likely is that part of the correction was a reaction to interest rates and record inflation,” he says.
He also says that there was undoubtedly a reaction to recent tech valuations hitting astronomical heights.
“Let’s not forget that last year wasn’t a typical year by any means. 2021 saw M&A records smashed with global deals totalling over $5 trillion for the first time,” says Basta, which indicates startups will have cash to grow their teams and hire freelancers in their next growth phase.
But if you are looking to freelance in the startup space, some market research is a wise idea before you start pitching.
Food and transportation sectors worst hit by redundancies
With nearly 11,000 job losses in this period, the startups in the food industry have taken the hardest hit. The transportation sector ranked second, with almost 8,700 job cuts. The retail, healthcare, and finance industries follow with 7,800, 7,200, and 7,000 layoffs, respectively.
The mass job cuts in 2022 came after startups were still recovering from the Covid-19 hit, which brought the first huge wave of redundancies, said the report.
Data from Layoffs.fyi shows, between January and April, startups reported nearly 13,900 job cuts. However, the number of layoffs exploded in May, the worst month to date, with another 17,000 people losing their jobs. A massive wave of layoffs continued in the next two months.
Statistics show startups let go around 16,660 members of their staff in June and another 16,200 in July, or over 40% of the total job cuts to date. In August, the number of layoffs slightly dropped but still hit 12,800.
US companies made 55% of all reported job cuts
The Layofs.fyi data showed US companies had a huge role in the latest wave of layoffs. European and UK startups are not growing as fast, so they may not have hired such big teams to then scale back.
In fact, more than half of all reported job cuts in 2022 came from the United States. In the nine months of the year, US startups laid off 42,700 employees. The layoff figures for the last three years are much worse. Statistics show that startups in the United States have made over 103,000 job cuts since 2020.
India ranked as the second country on this list, with a total of 25,300 layoffs in this period. In comparison, Chinese startups reported 4,400 layoffs between January 2020 and September 2022. UK companies let go over 3,700 employees in this period, almost 1,400 more than German startups.
The Layoff Tracked data also revealed that Getir made the biggest layoff this year. The Turkish delivery startup made 4,480 job cuts, or 14% of its total workforce.
The US online mortgage provider, Better.com ranked second with 3,000 reported layoffs in 2022. Two other US companies, Peloton and Groupon, follow, with 2,800 job cuts each.
Which startup sectors and markets are hiring and growing?
Many of the economic factors that propelled deal-making last year, namely interest rates, haven’t actually changed yet either. VCs, corporates, and others are still flush with cash, and they need to put their money to work, suggests Basta.
Keep updated on what’s happening in the venture capital space and corporate M&A within the geographic markets and industries you’d like to work in. What’s more, if markets worsen further, growth companies may respond to volatility by looking to raise a new round or exit opportunity via merger or acquisition to steady the ship. Keep on top of this type of news through Crunchbase, CRN or Pitchbook.
But there has been some frothy trading in the public markets this week in energy, pharma and tech, so these are areas to monitor. Climate startups are also still proving strong contenders for growth, according to Sifted.