Silicon Valley Startups Waste No Time, Accelerate COVID-19 Crisis Layoffs

Written by Dana Sanchez
Silicon Valley
Silicon Valley startups waste no time, accelerate COVID-19 crisis layoffs. Expect 80 percent of startups to lay off workers in the recession. Photo by NESA by Makers on Unsplash

Layoffs are common among startups. Even in the best of times, funding can be scarce and profitability, uncertain. The coronavirus has frozen economic activity across the country and in Silicon Valley. For many companies, layoffs are the only way to cut costs immediately — even if they’ve got plenty of capital, The Information reported.

Expect 80 percent of startups to lay off employees and workers as a result of the coronavirus, says Keval Desai, a partner at venture firm InterWest Venture Partners.

“When demand disappears it’s not about cutting marketing,” Desai said in an interview in The Information. “It’s about survival.”

So far in 2020, the scooter rental start-up Lime has laid off staff and closed operations in 12 cities. Car-sharing company Getaround and robot pizza start-up Zume slashed more than 500 jobs. DNA testing company 23andMe, logistics start-up Flexport, Firefox maker Mozilla and the question-and-answer website Quora have laid off staff, New York Times reported in February.

Cisco Systems has started job cuts in San Jose and Milpitas, according to filings with the California Employment Development Department, Mercury News reported.

Earlier this month, VC fund Sequoia Capital warned its portfolio companies that they should consider layoffs in response to the pandemic. Many venture capitalists have directed their companies to freeze hiring, cut salaries, reduce hours or slash roles.

“This might be a time to evaluate critically whether you can do more with less and raise productivity,” Team Sequoia wrote in a Medium post.

Four tech companies have cut 20 percent of their workforce — about 75 people in all — to cut spending and increase savings. These include online mattress retailer Eight Sleep, tech-enabled recruiting tool Triplebyte, hospitality startup The Guild, and luxury sleeper-bus service Cabin. “The number of jobs cut was relatively small, ranging across both technical and nontechnical job roles—but they’re a harbinger of what is to come,” Kate Clark wrote for The Information.

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Cannabis startups were cutting back even before coronavirus became a U.S. threat. Cannabis producers Caliva and NorCal Cannabis Company and Eaze, a delivery service have cut hundreds of staff members combined, New York Times reported.

Goldman Sachs economists predicted that a record 2.25 million Americans would claim unemployment benefits last week as coronavirus-driven layoffs hit the labor market.

Goldman Sachs economists predicted that 2.25 million Americans would file for unemployment benefits last week. No one knows how long the coronavirus pandemic will go on but a recession is expected starting in the second quarter, according to IHS Markit, which forecasts economic activity. Unemployment is expected to rise from 3.5 percent in early March to 9 percent in late 2020.