Last month, more employees were laid off from startups on @cartainc platform than left their jobs by choice.
Rare – only happened twice since 2015 (the other month being April 2020)
But Jan is usually a strong hiring month – fingers crossed that's true. cc: @nmasc_ @alex pic.twitter.com/jqlvniO0bX
— Peter Walker (@PeterJ_Walker) December 19, 2022
So Carta has some great hiring (and firing) data above to give us a sense of what’s really happening. Well, other than perhaps the most important metrics of all IMHO — hiring freezes. For every article you read about layoffs, far more startups are just freezing or way slowing down hiring. And that’s harder to see in the data.
Still, what does the data above show us?
First, layoffs are, in fact, pretty bad. While November didn’t hit the lockdown-fueled peak of April 2020, it was close, and that’s brutal. The 2H’22 are the biggest layoffs of the last decade. And it will continue into 2023.
Second, the Great Resignation has way slowed down. I personally wasn’t sure. Hubris remains near all-time highs. But as you can see above, resignations plunged in 2H’22, and the resignation rate is just about back to where it was pre-lockdown.
Beyond the data, things are going to get worse before they get better. At least a little bit worse, and perhaps more:
- Layoffs are now normalized. They are a part of start-up life today, without a stigma. So watch them accelerate, at least in early 2023. They are now part of startup financial planning when startups are stuck with too high of a burn rate. This doesn’t make layoffs OK, or much less painful. But it does allow startups to much more quickly make the decision to downsize. There is still a human cost. But the stigma is mostly gone. For now, at least.
- Many startups have delayed layoffs until after the holidays. So more layoffs are coming for that reason alone.
- More startups will miss too optimistic plans for 2023. That will lead to another wave.
- Everyone way, way overhired in 2021 and into 1H’22. Almost everyone. And often dramatically increased pay. And we’ll still just have to deal with those consequences for several more quarters at a minimum. Almost everyone still grew, but not enough to fund those increases. And the next VC round likely … isn’t coming anymore.
Net net, layoffs frankly are worse than I personally thought. The reality is, almost everyone overhired in the boom, and we’re going to deal with the overhang from that for quite a while. But with Cloud still growing overall, I thought the overall pain would be real but more muted than it looked on Twitter and the tech press. I was wrong.
A related post here:
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Jason Lemkin, Khareem Sudlow
