Home Feature Layoffs happen. What happens next determines a startup’s success.

Layoffs happen. What happens next determines a startup’s success.

by Maija Ehlinger

Q1 2023 was certainly one for the record books. 

More tech companies joined the growing list of firms to lay off talent. 157,000 tech jobs across the country were eliminated over the first three months of the year. 1,500 of those jobs were directly connected to Southeast-founded companies, according to data collected by tracker layoffs.fyi.

The layoffs come after several years of record-setting growth for the tech sector. Venture capital money was easy to come by in 2021 and 2022 and large tech firms found eager customers during the height of the pandemic. “Big Tech” companies like Meta and Amazon grew at a record pace. Startups hit sky-high valuations and went on hiring sprees. 

But with big budgets comes even bigger expectations. As the macroeconomic climate cooled, tech companies had to take steps to curb spending. Recovery mode often meant eliminating positions.

But it isn’t all doom and gloom for the tech world right now. While hiring numbers have cooled recently, there are still more job openings than unemployed workers, according to the latest numbers from the Bureau of Labor Statistics. 

Tara Kimbrough, who runs High-IQ Technology Staffing and Consulting in Atlanta, says that the downturn in “big tech” means big opportunities for startups. 

In fact, she says the current job climate is a perfect opportunity for startups to snag top talent. 

“This is a great opportunity to get optimal talent” while focusing on flexibility, she said. “Startups are very attractive and appealing” to employees looking for flexible, creative job opportunities. At the same time, more startups are looking to hire on a project-to-project basis. This is a way for teams to “control the budget” while still building crucial products, added Kimbrough.

 

How Can Startups Bounce Back? 

Startups haven’t been immune to layoffs, of course. Fast-growing startups, particularly those locally which previously raised Series C rounds or higher, cut staff significantly over the last several months. 

Those layoffs are certainly a gut punch to a growing team. But there are steps startup founders can take to ensure their business can bounce back and grow in a positive direction moving forward.

First, company leaders must make sure layoffs are in compliance with necessary separation agreements and severance options required by each state, says Atlanta founder Sarah Rodehorst from Onwards HR

“Ultimately, each company needs to treat everyone equally, consistently and fairly as part of the exit process.” An important part of that is checking for bias in the layoff process. 

It is also crucial for startup leaders to be upfront about what is going on. 

“Make sure you treat those that were impacted with respect and compassion,” added Rodehorst. “Those that stay [with the company] are watching to see how [the company] is treating people who have invested everything into the organization…Whether an employee leaves on their own accord or through a layoff, [the separation process] is really the last opportunity a company has to make a good impression on that employee.” 

That “last touch” is essential to keep current team members motivated and ready to grow the business moving forward. But, it can also help with hiring efforts down the road. 

In fact, rehiring is a growing trend for many tech companies, meaning former (happy) employees as a potential talent pool when a startup is ready to start hiring again.

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