Startup layoffs are back, and the damage is starting to add up.
Back in early 2020, an online layoff tracker — Layoffs.FYI — was built to collect and tabulate startup layoffs. Cribbing from media reports and other sources, the data source was a hot property during the early-COVID startup downturn.
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As quickly as it rose in prominence, however, it seemed to fade. Startups and their backing investors realized shortly after cuts swept the industry that most upstart tech companies were going to be at least all right during the pandemic, slowing the rate of layoffs. Software companies wound up enjoying record demand, from both customers and investors, eventually fueling the 2021 SaaS bubble.
Now the bad times are back, if in a different form.
Back in 2020, we saw the startup market crumble in what felt like days; the current downturn, in contrast, has been building since late 2021. With that in mind, the gradual rate of layoffs this year is not a huge shock.
Layoffs.FYI data indicates that after reaching a trough between Q4 2020 and Q4 2021, staff cuts at startups have risen off a very low floor. And the same dataset indicates that the second quarter has already matched the first quarter’s cuts; in numerical terms, Layoffs.FYI counted just under 9,300 startup layoffs in Q1 2022 and around 8,700 thus far in Q2.
Neither number is anywhere near the more than 60,000 job cuts that the same source counted up in the second quarter of 2020.
But don’t let those comparisons save you from worry — the trends aren’t looking good.
From hot to not
Looking at the data on a per-month basis makes it clear that the pace of startup layoffs is accelerating. May is already ahead of April and March results by the midpoint of the month, while March 2022 was previously the worst month since the start of 2021.
If the current trend continues, we could see startup layoffs persist throughout the summer.
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