Startups Emerge from the Ashes of Big Tech Purge, According to Reuters

By Supantha Mukherjee, Martin Coulter, and Krystal Hu

Nic Szerman lost his job at Meta Platforms in November, just two months after starting full-time, as part of a significant 13% workforce reduction due to a declining advertising market.

Shortly after his layoff, he turned his attention to his own venture, Nulink, a blockchain-based payment company, sending proposals to startup accelerator Y Combinator and the Andreessen Horowitz cryptocurrency fund.

“As counterintuitive as it may sound, this layoff left me in a really good position,” the 24-year-old indicated. “I don’t have to repay the sign-on bonus, I receive four months of pay, and now I can dedicate time to my project.”

Szerman is among a growing number of aspiring entrepreneurs emerging in the aftermath of widespread job losses in Silicon Valley during the latter half of 2022, according to venture capital insights.

Major U.S. tech companies like Meta, Microsoft, Twitter, and Snap have collectively cut over 150,000 jobs, as reported by a tracking service for technology layoffs.

Though total venture capital financing fell by 33% globally to approximately $483 billion in 2022, funding for early-stage ventures remained strong, with $37.4 billion raised in angel or seed rounds, matching the previous year’s record, according to market research data.

In November, Day One Ventures, a San Francisco-based early-stage investment fund, initiated a program to support startups founded by individuals who were laid off from tech jobs, promoting the slogan “Funded, not Fired.”

The initiative aims to issue 20 grants of $100,000 by the end of the year, receiving more than 1,000 applications, predominantly from individuals affected by layoffs from Meta, Stripe, and Twitter.

“We’re committing $2 million to 20 companies – finding just one successful venture could almost return the fund, marking a unique opportunity for us as fund managers,” stated Masha Bucher, co-founder of Day One Ventures. “Historically, many successful companies were launched during times of crisis.”

In November, Index Ventures, which has previously funded Facebook, Etsy, and Skype, unveiled its second Origins fund, aiming to invest $300 million in early-stage startups.

Both U.S. Venture Partners and Austrian VC firm Speedinvest are similarly allocating substantial resources for new enterprises.

Investors have identified gaming and artificial intelligence as particularly promising sectors.

“Advancements in game design, innovations like cloud gaming, and the rise of social networking within that space have made gaming a significant part of mainstream culture,” remarked Sofia Dolfe, a partner at Index Ventures. “In periods of economic uncertainty, opportunities arise to reset priorities and refocus resources.”

Szerman noted that his proposal was turned down by Y Combinator, and he has yet to hear back from Andreessen Horowitz, although other early-stage investors have shown interest.

“I told the investors that we’ll reconnect in a couple of months. For now, my focus is on scaling the system,” he said.

Some investors have likened the downturn seen in 2022 to the dot-com crash of the early 2000s, which led to the demise of many overvalued startups but ultimately paved the way for new giants like Facebook and YouTube.

“Many exceptional companies have emerged during challenging times,” commented Harry Nelis, a partner at Accel, noting a new wave of risk-takers among those who lost their jobs.

Industry observers assert that former employees of major tech firms are well-equipped to launch their own startups, having gained valuable insights into large-scale operations and maintaining access to a network of talented professionals.

One former Google employee, Christopher Fong, has established a project aimed at assisting fellow ex-employees in their entrepreneurial pursuits. Since its inception in 2015, Xoogler has grown to over 11,000 members.

Fong observed that experience in large tech companies provides founders with a “strong brand that can be leveraged to connect with investors, attract customers, and recruit team members.”