As the global tech downturn persists, laid-off employees and tech newbies find themselves facing a common battle. From navigating job uncertainties to adapting to changing market dynamics, they share a collective journey marked by challenges and resilience.
In an era marked by technological innovation and digital transformation, the tech industry has long been a beacon of opportunity and growth. However, the global tech downturn has cast a shadow of uncertainty, causing a ripple effect that has impacted the job market, and left many individuals grappling with the harsh reality of layoffs and limited prospects.
The global tech downturn characterised by a slowdown in the tech industry, has been fueled by factors like economic shifts, market fluctuations, and widespread changes within the industry. Laid-off employees, once established in their tech careers, find themselves grappling with unexpected job loss and the daunting task of reinventing their professional paths. Simultaneously, tech newbies aiming to penetrate the industry, face an uphill battle as they encounter a more competitive and uncertain job market.
Origins of the global tech downturn
Rising interest rates, driven by high inflation, led to price increases for technology services. This prompted companies to make cuts, including layoffs, to reduce costs during leaner revenue periods. These higher rates directly impact venture capitalists (VC) and other funding of startups.
Furthermore, the surge in online activity during the pandemic resulted in overstaffing and rapid team expansion in tech companies. However, as the world finds its post-pandemic balance and offline activities increase, the demand for tech services has decreased, leading to fewer job openings.
The tech industry encountered another setback in March 2023 when the Silicon Valley Bank (SVB) collapsed due to its lack of diversification and a bank run. SVB played a crucial role in funding tech startups that faced challenges in obtaining support from other banks due to higher risks.
As a result of SVB’s collapse, venture capitalists and banks have become more apprehensive about assuming the risks associated with supporting startups.
Industry implications
After experiencing over a year of bullish performance and reaching record highs, the global tech stock market started to decline in May 2022, and this decline has continued into 2023.
In May 2022, Y Combinator, a startup accelerator, issued a statement with a strong suggestion for founders. “If your plan is to raise money in the next 6-12 months, you might be raising at the peak of the downturn. Remember that your chances of success are extremely low even if your company is doing well. We recommend you change your plan,” the statement read.
Venture capital firm Sequoia also warned startups about the imminent economic recovery, urging founders to “move fast to extend runway and fully examine the business for excess costs.”
African firms began terminating employees in response to the advice. Firms like Egypt-born mobility startup, Swvl, laid-off a third of its staff two months after going public via a special purpose acquisition company (SPAC).
Other tech startups including Kenya’s logistics startup, Sendy, laid-off 10% of its staff. Bolt, an Estonia-based ride-hailing platform, also laid-off 17 of its 70 employees in Nigeria. Egyptian healthtech startup Vezeeta, also laid-off 10% of its 500-strong workforce.
The aforementioned startups represent only a fraction of the layoffs that have occurred during the global tech downturn from its onset until the present. It remains uncertain how long this economic downturn will last and which tech startups and investors will remain standing for the long haul.
The struggles of laid-off employees and tech newbies
In the midst of a global tech downturn, re-entering the tech industry can be a challenging endeavour, particularly for individuals who have been laid-off and newcomers seeking to establish themselves. To delve further into this subject, TechCabal spoke with individuals who fall into both groups.
Uche* was a tech newbie, and when asked about the impact of the layoffs on her perspective, she responded, “I guess it has made me more careful. I imagine that if I join any company, I’ll do thorough research just to make sure that they are not going under three months after.”
A senior software engineer who had been on the job for just eight months also shared his experience with getting laid-off and the duration it took him to secure another job. “I was laid-off because there were no funds and the company was trying to downsize. It was a very long period for me. It took me 4 months before I could get another job and I was so broke,” he said.
Comparing the job market before the tech downturn with the current situation, he said, “Before the downturn I will say getting a job was not as hard as it is now. Then, there were jobs everywhere and companies were just expanding because there was money. The thing with IT is that you are always hiring. Except if there is no money to fund the team. Around February last year, I was being pushed. Literally every week, I get DMs on LinkedIn telling me there’s a role for me and they will like to talk to me about an opportunity. But all of that now has stopped.”
Ruth*, an individual who has been in the tech field for a year, discussed her perspective on the layoffs. She said, “Whenever I hear Meta laid-off 11,000 people, it makes me feel like they didn’t need to have hired all those people, to begin with. Some companies are very very guilty of over-hiring. Maybe they do that because they don’t want to have to make one person do so many things. Managing employees is a lot of work, some companies are not able to find a balance with that and unfortunately, they start letting people go.”
She suggests that one person could be hired to handle multiple roles and be paid well, instead of hiring multiple people to handle related tasks. “Instead of hiring a social media manager and a digital ads manager, if one person can do the job, pay them well. The salaries they would have paid five people differently, just combine it and pay one person and I think everything will work out fine.”
Ahmed, an automation engineer who had two years of experience and was laid off just two weeks ago, shares his feelings after being laid-off and the importance of having a supportive network. “Definitely it’s really hard. I mean, going from having something to do on a daily basis and looking forward to meetings with coworkers to having nothing? Everything happened in a flash. It’s really hard especially when you’re attached to the company. But I am really grateful to have a supportive family and friends. Everyone has been completely supportive in the way they can. So that helped me navigate the hardship.”
Amidst the global tech downturn, interactions with laid-off employees and tech newbies emphasized the importance of cautious decision-making in job searching. They also discussed the challenges of lengthy job search periods, the impact of over-hiring, the ease of finding jobs before the downturn, and the emotional toll of sudden unemployment.
These interactions underscored the significant shift in the job market dynamics. These experiences highlight the need for adaptability, support, and resilience as individuals navigate the challenges presented by the tech industry during these difficult times.
*Names have been changed.
