Startups rise from the ashes of the Big Tech purge

  • Massive tech layoffs are spawning a new wave of startups
  • Early-stage VC funding at nearly record levels
  • Echoes of the dotcom crash that fueled Facebook et al

Jan 3 (Reuters) – Nic Szerman at Meta Platforms ( META.O ) fell victim to a 13% workforce cut in November, just two months after joining full-time, due to the collapse of the advertising market.

A few days later, he was back at work seeking investment for Nulink, a blockchain-based payments company, and pitched to startup accelerator Y Combinator and Andreessen Horowitz’s cryptocurrency fund.

“As counterintuitive as it sounds, this layoff has put me in a really good position,” the 24-year-old said. “Because I don’t have to pay back the sign-up bonus, I get four months’ salary and now I have time to focus on my project.”

Szerman is part of a wave of future entrepreneurs emerging from the ashes of Silicon Valley’s massive job losses in the second half of 2022, according to venture capitalists.

U.S. tech giants including Meta, Microsoft ( MSFT.O ), Twitter and Snap ( SNAP.N ) have shed more than 150,000 jobs, according to, which tracks technology job losses.

While total venture capital (VC) funding fell 33% globally to an estimated $483 billion in 2022, early-stage funding was raised in so-called angel or seed rounds, matching the record level seen in 2021 of $37.4 billion. According to research firm PitchBook.

San Francisco-based early-stage venture fund Day One Ventures launched a new initiative in November to fund startups founded by people fired from their tech jobs, with the slogan “Funded, not fired.”

The program aims to cut 20 checks worth $100,000 by the end of 2022. First Day said it received more than 1,000 applications, most of them from people cut off by Meta, Stripe and Twitter.

“We’re investing $2 million in 20 companies – if we find just one unicorn, it will almost certainly return the fund, which I think is a really unique opportunity for us as fund managers,” said Masha Bucher, co-founder of Day One Ventures.

“If we look at the last economic cycle, companies like Stripe, Airbnb, Dropbox were created in a crisis.”


Also in November, index Ventures, the multi-stage fund that has funded Facebook, Etsy and Skype, launched its second Origins fund, which will invest $300 million in early-stage startups.

Silicon Valley investor US Venture Partners and Austrian VC firm Speedinvest have meanwhile committed a similar amount to start-ups.

Investors highlighted gaming and artificial intelligence as areas of interest.

“With advancements in game design, new innovations like cloud gaming, and the emergence of social networks in the field, gaming has really transcended mainstream culture,” said Sofia Dolfe, partner at Index Ventures.

“In every period of economic uncertainty, there is opportunity – to rebuild, re-prioritize and re-focus energy and resources.”


Szerman said his project was rejected by Y Combinator, and he has yet to hear from Andreessen Horowitz, although he said other early-stage venture capitalists are interested.

“I told the investors we’ll talk in two or three months,” he said. “I will now turn my attention to the scale of the system.”

Some investors have compared the 2022 recession to the dotcom crash of the early 2000s, when dozens of overvalued startups failed, flooding the market with talent and helping to spawn new companies like Facebook and YouTube.

“A lot of great companies have been created in relatively dark times,” said Harry Nelis, managing partner at investment firm Accel, who has seen a new generation of risk-takers emerge among the unemployed.

Some industry players say former Big Tech employees are uniquely placed to start their own companies, seeing firsthand how some of the world’s biggest firms operate and having continued access to networks of highly skilled colleagues.

One former Google employee tried to help others like him who were looking for a life after the tech giants. In 2015, Christopher Fong, who worked for the California tech titan for almost a decade, launched Xoogler, a project designed to help former employees hoping to start their own companies. Since then, the group’s membership has grown to over 11,000.

Fong told Reuters that the experience at the Big Tech firm gave the founders “a strong brand that can be used to meet with investors, potential customers and recruit team members.”

Reporting by Martin Coulter in London, Supantha Mukherjee in Stockholm and Krystal Hu in New York; Edited by Pravin Char

Our standards: Thomson Reuters Trust Principles.

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