Despite some late-week respite in the stock market on Friday, many tech firms are facing an increasingly tough reality: Interest rates are going up, as are prices, and the economy may be heading for a serious slowdown.
We may be seeing the initial signs of a weakened economy manifest in the once-frothy tech sector, too, as companies start to lay off employees. Among them are online used car retailer Carvana, which cut 2,500 employees last week, roughly 12% of its staff, according to data sourced from Layoffs.fyi, an online tool created by entrepreneur Roger Lee after the onset of the pandemic two years ago. Carvana wasn’t alone—one of its key competitors, Vroom, likewise laid off 270 employees, around 14% of its workforce.
But those are just two of many tech companies that have started laying off employees since early May—showing that the tech sector, as a whole, appears to be scaling back as the economy enters a turbulent stretch. Here are some other tech companies that are cutting jobs, per Layoffs.fyi’s data:
- Doma: The San Francisco-based digital title insurer was unable to turn a profit this quarter, and as such, laid off 15% of its staff.
- Zwift: The company, which makes at-home devices for indoor cycling training (similar to Peloton), announced 150 layoffs as part of a restructuring move.
- DataRobot: The Boston-based AI startup laid off 7% of its workers in a cost-cutting move.
- Reef: A Miami-based tech company specializing in ghost kitchens, among other things, is similarly laying off 750 employees, or roughly 5% of its workforce.
- Cameo: The app that allows celebrities to sell personalized videos to fans, laid off 87 staff members, or 25% of its workforce, earlier this month.
- Also worth noting: Digital trading platform Robinhood cut 340 jobs in late April, Netflix eliminated 25 positions, and digital weight loss platform Noom let go of nearly 500.
The layoffs from across the tech industry are occurring for a variety of reasons, but it’s clear that the sector—which experienced explosive growth over the past two decades, leading to the creation of hundreds of tech “unicorns” born of deep-pocketed venture capitalists and private equity firms—may be running out of froth. In fact, VCs may be becoming more tight fisted as the economy itself tightens; venture funding fell 13% quarter-over-quarter during the first three months of 2022, according to data from Crunchbase.
Further, investors appear to be reassessing their overall strategies, which may impact high-growth tech companies.
“The increase in discount rates corresponding with market volatility has led to a fundamental repricing of valuations and a sharp rotation away from stocks with relatively high implied growth rates toward stocks with relatively low growth rates,” writes Andrew Akers, an analyst on the quantitative research team at PitchBook.
Correction: An earlier version of this story misstated the percentage of workers laid off at DataRobot. It’s 7%, not 70%.