There have been two distinct waves of tech layoffs amid COVID-19, Layoffs.fyi Creator Roger Lee told Yahoo Finance in an interview.
The current wave of layoffs is being driven by the macroeconomic environment, particularly roiling companies that are vulnerable to rising interest rates — a group that includes Coinbase (COIN), Tesla (TSLA), and Robinhood (HOOD).
This marks a contrast to the previous wave of tech layoffs in 2020, which rattled companies such as Uber (UBER), TripAdvisor (TRIP), Yelp (YELP), and Airbnb (ABNB) that were impacted by shelter-in-place policies at the beginning of the pandemic.
According to data from Layoffs.fyi, at least 22,800 tech employees across 155 different companies have been laid off since the start of 2022.
And according to Lee, the layoffs are not that surprising: “There’s a lot of uncertainty in the market right now… and companies and startups are trying to be proactive about cutting costs."
A recently-laid off Coinbase employee, who received a bachelor’s in computer science from a highly-ranked university and spoke on the condition of anonymity, told Yahoo Finance that they actively sought out a career in blockchain and joined Coinbase pre-pandemic with high hopes.
"I had the best interview experience I'd ever had," they said. "Coinbase really did have a great culture before it went remote."
The company's culture shifted after employees went remote amid the pandemic, this person claimed, and tensions escalated after CEO Brian Armstrong's comments to employees after a 46-year-old Black man, George Floyd, was murdered by a 44-year-old white police officer.
'There are some similarities to the dot-com bust in 2001'
Though some have worried that this moment in tech is a repeat of the turn-of-the-century dot-com bust, there are some key differences.
“There are some similarities to the dot-com bust in 2001, which culled the herd with the exit of Web 1.0 companies that were nothing more than a website with a promise,” Dan Wang, associate professor of business at Columbia Business School, told Yahoo Finance. “Investor expectations were tamed 20 years ago in a way that’s similar to what we’re witnessing now. The big difference, however, was that we were in a pre-digital world 20 years ago. Today, for both consumers and businesses, their livelihoods are fully integrated into digital platforms, which will shorten a potential recovery period.”
The extent of layoffs across the industry remains difficult for those caught in the crossfire, emotionally and practically.
“In a time like this, when there’s uncertainty about the future, employees who are laid off will be less inclined to take the risk of losing their own savings, or simply don’t have the capital to exercise their stock options,” EquityBee Co-Founder and CEO Oren Barzilai told Yahoo Finance, also estimating that there are about 6 million startup employees in the U.S.
Barzilai added that “there are so many stressed out employees who’ve been laid off, and they can’t afford to keep their equity. Eventually they realize that the economy will turn back over into a bull market as the company they helped build goes public or gets acquired. They realize they could have been very wealthy today — it’s happened many times before — and because they couldn’t take the risk or afford to exercise, they lost everything.”
Ultimately, the flood of layoffs hitting the tech space signals a fundamental change across the industry, a shift from focusing on growth towards honing in on profitability.
“Make no mistake — the tech sector is still bustling with innovation and growth opportunities, but I think at least as far as tech start-ups go, there will be less of a focus on growth and scaling as quickly as possible,” Wang said. “With a recession around the corner, investors — both in the public markets and in venture capital — are looking for more reasonable expectations, and this means rather than focus on growth, companies in the tech sector must turn their attention to achieving profitability as quickly as possible and sustaining it for as long as possible. To meet this urgency, layoffs are unfortunately part of the equation.”
Ines Ferre contributed to this report.
Allie Garfinkle is a senior tech reporter at Yahoo Finance. Find her on twitter @agarfinks.