Why self-funded companies are safe amid tech layoff spree

After months of headlines about crippling staff shortages and the ‘Great Resignation’, we are seeing a stark turn of events.?

According to Layoffs.fyi , a startling +121,000 employees working in the tech industry have lost their jobs in 2022 alone. And with news of even more cuts and hiring freezes on the horizon, it looks like this painful surge of layoffs in the tech industry is here to stay.?

I have – unfortunately – seen a considerable increase in people sharing difficult updates about layoffs while scrolling through my Linkedin, and I’m sure you have too. Some have experienced a roller coaster ride from the excitement of joining a new company, swiftly followed by the fallout of being let go.?

Although tech giants like Meta, Stripe and Twitter are grabbing headline attention, this forced exodus is not limited to Silicon Valley.

In Europe, we are seeing fast-growing companies with record valuations and ambitious expansion plans take significant hits too, making drastic cuts to their teams to cut costs and preserve their cash runway as the global economy takes a downturn.?

You can find plenty of articles that point out reasons behind the cuts – from rising inflation and uncertain economic times to shifts in customer behaviour. However, it seems that overfunded companies with excessive optimism and overzealous hiring are also taking accountability for the staffing cuts.

Interestingly, the layoffs come a year after Silicon Valley was at its peak, with valuations of tech giants reaching into the trillions.?

So how did this happen? The low interest rates over the past decade saw VCs aggressively invest money into start-ups – even if there wasn’t a solid plan in place for profitability. During the pandemic, this dynamic went into overdrive, and the excess capital encouraged companies to pour money into hiring, marketing, acquisition and experimental projects.?

At the same time, bigger tech companies like Meta, Amazon and Twitter, ramped up expansion activities to take advantage of people spending more time online. As a result, tech share prices soared! According to an annual technology report from Bain & Company, growth equity shares grew from 19% in 2017 to 27% in 2021 – that is massive!

But now, with rising interest rates to fight inflation, VCs are adopting a much more cautious approach, particularly around valuation multiples, making funding more challenging to acquire. This has forced funded tech companies to become more cost-efficient by letting good people go to avoid downrounds and crashing equity.?

However, not all tech companies are slashing jobs. Many are thriving by focusing on growing on a healthy cash burn over valuation at all costs.

That’s what we’re doing at RoomRaccoon Hotel Tech .

I strongly believe that employees are assets to be valued and invested in for the long run?rather than liabilities to be quantified in correlation to interest rates.

I believe this focus on our people is the very reason RoomRaccoon continues to be a sustainable business that is still hiring instead of firing despite turbulent economic times.?

Nadja Buckenberger and I are proud to have bootstrapped our way to where we are today. We might have chosen the hard route, but it was worth the extra sweat to operate on an infinite runway.

Currently, we are completely autonomous, which has insulated us from the financial market dynamics that other tech companies are facing today.?

We’re investing in our people! It is with great joy that I can share that we welcomed 71 new employees to our team in 2022, and continue to set ambitious hiring targets for 2023. In fact, we’re aiming to double the team to 200 heads by the end of next year.?

The expansion is necessitated by a year of marked growth across our key source markets and our commitment to delivering the best and most complete Hotel Management System for independent accommodation businesses around the world.??

RoomRaccoon is currently hiring across all functions and source markets. If you’re interested in joining our dynamic team, you can apply here .

#techindustry #techlayoffs