Tech Winter: Tech layoffs, the great resignation, and other tells for changing course
What was supposed to be a big year for tech has morphed into a downward spiral, and the question remains: could there be a silver lining?
“Everyone should be laying people off,” explained venture capitalist and previous managing partner at SoftBank Latin America, Shu Nyatta, to online research publisher ‘Rest of World’. SoftBank, the investment giant known for raking the biggest stakes in the highest-valued investments of 2021, announced a loss of almost $20Bn to its Vision Fund earlier this year. The logic followed by Nyatta is that of scarcity, where the apparent funding drought is forcing founders to extend their runway as much as possible without fundamentally affecting the business.
For those who are keeping up with the news- or simply going online and swiping through the many shockwaves of a tech crisis- it seems that the future is looking tragic. While the tech shock is calibrated on a global level, where rising interest and inflation rates and dipping stock and investment valuations have rippled worldwide, researchers claim that emerging markets will be taking the hardest hit.
In times of uncertainty, investors tend to play it “closer to home”- this means avoiding investments in “risky,” “uncertain,” or “uncharted” markets. While funding slows down worldwide and founders are forced towards recruitment halts and bulk layoffs in MENA and across the globe, we ask the question: could this crisis be the return of true innovation?
The employment world has been observing unprecedented fluctuations since the pandemic’s start. In 2020, the pandemic induced a wave of resignations, primarily in developed markets like the U.S. and Europe. Many researchers have been conducted to locate the biggest motivators for that wave, where 3 factors remained atop survey reports. Employees who joined the wave of resignations, or ‘The Great Resignation,’ commonly attributed their move to being underpaid, undervalued, or overworked.
Fast-forward to the beginning of this year, when the domino of layoffs in the technology sector tumbled its first pieces. Since then, and according to layoffs.fyi, 863 tech companies laid off a massive 138K employees worldwide. These companies include Microsoft, Salesforce, Meta, Stripe, Twitter (for several reasons…), and rising stars from emerging markets, including Kitopi, Swvl, and Careem.
To attribute the striking wave of layoffs solely to higher cost of operation along with the disruptions in global supply chains, although valid, wouldn’t suffice for full justification. On one end, as reported by the Financial Times, a major element was the “growth at all cost” mentality embraced by VC investors and tech founders. Reaching a peak of investment in 2021, investors were backing money-churning companies that burnt through mounds of cash for the sake of fast scalability, i.e., investors were used to software companies that turned triple revenue growth in exceptionally short periods.
On another, the stark implosion of what was sought after as gold rushes, including Web 3.0, Cryptocurrency, and instant delivery, showed great disappointment in facing adversity for investors and founders alike. The result was the ceasing of operations in large markets, such as Airlift and Swvl shutting down in Pakistan or European on-demand delivery startup Glovo shutting operations in Egypt. The result: a plethora of unemployed tech talent and an insurmountable level of payables.
Innovation as an opportunity:
Over the past year, Twitter and LinkedIn feeds have been filled with heartfelt posts by founders, directors, and team leaders vouching for some of their top talents who are now out of a job. While this notion is admirable, it is telling of a much bigger opportunity. Operations have been shut down, and great talent laid off, but the technology and expertise remain; two factors many corporates need for their transformation.
Many corporates have taken the plunge, while others have doubled down.
As recently reported by MAGNiTT, the number of corporate venture arms and investors has doubled YoY, accounting for 17% of investors who deployed capital across MEAPT this year. Of the most active investors mentioned in the news briefing were Wa’ed Ventures (Saudi Aramco Entrepreneurship Center (Wa’ed), EQ2 Ventures (Choueiri Group), and EdVentures (Nahdet Misr Publishing Group).
From our work with key enterprises in MENA, designing and running innovation programs, the direct impact of these initiatives has never been more promising as we see new players join the innovation race. Earlier this year, we graduated our first batch of startups under the Majid Al Futtaim Launchpad Accelerator Program, which we deemed a vital step toward scalable innovation. This month, Majid Al Futtaim announced the launch of its digital transformation program, XSight Future Solutions, set to elevate business across all markets.
Investment in Skills for Future-proofing Growth:
Crunchbase reported a staggering increase in traffic on upskilling programs during the great resignation. This wave was inspired by talent who were looking to not only acquire new skills but also to adapt and elevate their existing skills to fit a sharper technology-driven market. The latter remains a great leverage to finding a job, more importantly, a promising opportunity for future-proofing growth in the long run.
The ‘Upskilling for Shared Prosperity’ Report, released last year by the World Economic Forum, reported that boosted investment in talent upskilling and reskilling is projected to contribute almost $6.5 trillion to global GDP and create 5.3 million new jobs by 2030. The upskilling of the talent force has a promising impact on the future, but can it also solve the founder challenges of today?
As our Talent Manager, Nazam Akram, shared in a panel discussion with Microsoft on elevating recruitment strategies in modern times, “Take a chance at juniors, invest and build their knowledge. That’s always a win, win.” While juniors provide fresh talent and young approaches to the job, their compensation weight remains easier to bare, and the return on investment is even higher when considering the individual growth and brand/employee loyalty that will brew in the process.
The challenge ahead for global tech is stifling, and the costs are hefty, yet true innovation is always spurred in situations of need. Corporate/startup collaboration and tech talent upskilling remain turnkey opportunities for emerging markets to turn around, yet planning, designing, and execution of such initiatives remain of utmost importance.