Inside how the economic downturn is hitting the tech industry, from funding slowdowns to layoffs and vanishing compensation

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• Tech firms saw massive gains over the past two years during the pandemic.
• But an economic downturn could shake out which companies can withstand recession.
• Insider explains how tech giants, startups, and the workforce are responding to the changing market.

Tech firms just experienced years of record highs. But what goes up, must come down. 

Stocks are dipping, startups are flopping, and a possible recession threatens tech giants that once seemed untouchable. An economic slump could have serious consequences for the firms and their workforces. 

"This will be in the top-three corrections of the last 20 years — joining the 2008-2009 Great Recession and the 2000 dot-com crash," David Sacks, a cofounder and partner at Craft Ventures, previously told Insider.  

Workers will have to brace themselves for the upheaval. A recent shortage of tech workers paired with the so-called Great Resignation gave workers endless opportunities and leverage over companies. Now, layoffs and salary cuts could be around the corner. 

Still, not all companies are doomed. Some businesses will prove to be "recession-proof" as their tech becomes mandatory to the infrastructure of other firms. 

The giants made major gains — but now they have a lot to lose

Cloud firms are often considered well-positioned to withstand — and even thrive — amid market turmoil. But tens of billions of dollars have swirled down the drain at some of the biggest companies. 

From crashing stock prices to teetering investments, companies like Snowflake and Salesforce are bracing for slowed growth. And even behemoths like Amazon aren't immune from the effects of inflation. 

Read more: 

• Snowflake lost $70 billion in value in 6 months after seeing explosive growth as a pandemic darling. Here's how 4 Wall Street analysts say the cloud company can survive the market downturn.
• Salesforce benefited big time from its investments in companies like Robinhood and Monday.com, but now its stock holdings could become a liability
• Cloud computing's favorite new business model is starting to look like a huge risk as markets sour
• The inside story of how inflation is roiling Amazon's empire: Shrinking margins, slowing demand, and surging employee attrition

Startups aren't seeing the record levels of investment they had last year

Startups raised a record amount of funds in 2021, to the tune of $621 billion. But that cash flow is drying up. 

Delivery startups like Gopuff are facing a wary future as investors slow funding. Across the market, more firms are being snapped up by bigger companies as they struggle to survive on their own. 

Read more: 

• Gopuff puts 22 warehouses on the chopping block as the fast-delivery sector suffers a post-pandemic slump
• Investors and VCs predict which ultrafast-delivery startups will survive and share which look shaky as layoffs hit, funding dries up, and a recession looms
• 'There's blood in the water.' Venture investors see a wave of startup acquisitions as funding dries up and dealmakers hunt for bargains.
• 'Avoid the Death Spiral': Multiple VCs have blasted out warnings to founders on economic doom. Here's what they are advising.

Cloud and Web3 firms are positioning themselves to withstand the downturn

Not every industry is bracing for a slowdown. In fact, some are thriving through the possibility of recession. 

Cloud-software firms with cash can position themselves for growth by investing in new markets, and Web3 startups may still thrive because investors want to make future bets on their technologies.

Read more: 

• 4 cloud-software companies, including Zoom and HubSpot, are best positioned to weather an economic downturn, RBC analysts say
• VCs are still doubling down on the 'picks and shovels' of Web3 despite billions of dollars lost in the plunging crypto market. Here's why.
• These are the most — and least — recession-proof tech companies

Fear of layoffs is impacting job stability in tech

For a while, the balance of power between businesses and the workforce had swapped. Employees gained enough leverage to demand flexibility and higher pay with strong job security. 

But that may be changing again. Layoffs and hiring pauses loom at tech companies of all sizes, leaving workers in a lurch for stability. 

Read more: 

• I'm a recruiter who's placed over 700 people at companies like Microsoft, Google, and Facebook. Here are the 3 questions I tell candidates to ask to make sure they won't be on the wrong side of future layoffs.
• Salesforce hiring pause has Wall Street on edge ahead of the company's quarterly results
• Inside Gorillas' brutal job cuts: In a leaked memo, CEO Kagan Sumer predicts just 1 or 2 rapid delivery firms will survive the economic downturn
• Tech layoffs have topped 20,000 this year. Here are 10 ways companies can ease the burden on affected employees.
• Big Tech hiring is grinding to a halt, but hope isn't lost. Here's what job seekers need to know.

Tech workers' compensation is at risk

All forms of employee compensation are being hit by the economic downturn. 

Tech workers with stock awards are watching equity sink as share prices fall more than 50% at some firms. And at the same time, high paychecks for new employees aren't sustainable for companies bleeding cash. 

Read more: 

• Tech workers at companies like Amazon, Uber, and Block are seeing up to $400,000 vanish from their compensation as stocks continue to plunge
• CHART: Tech industry compensation is 'completely unsustainable.' Here are the companies most at risk as the market plunges.
• CHART: 26 tech companies 'underwater' on employee stock awards. See which ones are in the biggest hole as the market collapses.

Read the original article on Business Insider

Contributer : Business Insider https://ift.tt/Xs6Y5KN

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