Mass job losses as carnage rips through Aussie tech sector

Startups are bracing for prolonged pain as many layoff staff - but here's why it's not all doom and gloom.

Startups are bracing for prolonged pain as many layoff staff - but here's why it's not all doom and gloom.

Australian tech startups are hemorrhaging staff following a high-growth, cash-burning boom. But in true startup spirit - even that carnage presents an enterprising opportunity.

Tech startups including instant groceries delivery business Voly, renewable energy companies Brighte and 5B Solar and online creative assets community Envato, have laid off hundreds of staff in recent months. Others are making changes to the business to cut costs. Milk Run has reportedly let go of its 10-minute delivery promise.

As global stockmarkets plummet and the time and money spent at home adding to cart during the pandemic dissipates, investors like venture capitalists are ditching risky investments like tech startups in the face of a recession.

Tech startup Earlywork, who built a successful careers community for young tech talent on Slack, has seen an opportunity to help laid-off tech workers get re-hired. They, and venture capitalist fund AfterWork, are launching "a database of laid off talent" on Thursday on their website called BetweenWork.

The free database will include information about which startups and big tech companies are hiring and how many roles they have. Those who have been laid off can then submit an application which states what company they are being laid off from, what role they are in, and what jobs they are looking for. Hirers can also see the list of laid off talent and reach out directly to them.

"It's all hands on deck to get this out because it's something that's really, really time sensitive. Every day we're waking up and hearing about new lay-offs," Earlywork cofounder Daniel Brockwell said.

He said companies were still hiring but they "don’t have visibility of the talent being laid off" and added there were also lots of resources available for founders and investors but not for those hit hardest - the employees. 

"It's important for young talent to know there are still opportunities out there, it's not like there are no new jobs."

He said within the Earlywork community, people were already helping each other find new jobs, and said young people were "still excited" to work in the space.

HealthMatch, a start-up which matches patients to clinical trials, laid off 18 roles this week, which accounts for around 50% of its staff, but founder Manuri Gunawardena is determined to mine the startup community to land new jobs for her former team.

"Making a significant portion of the team redundant was an incredibly hard decision to make that we worked tirelessly to avoid" but added she was in conversation with Canva founder Cliff Obrecht about "how they may be able to help some of our people".

"To have mentors and other founders there to help problem solve and importantly help take care of people is a testament to the supportive and growing Australian startup ecosystem which will come out of this market stronger," Gunawardena said.

Why are there lay offs in the tech startup space?

In the US, layoffs started as early as February. Tesla, Netflix and other tech giants all experienced mass redundancies early this year. Australia is now experiencing something similar. 

RMIT Associate Professor of Finance Angel Zhong explained what's happening in Australia. 

Over the past three years, investors were optimistic. Everyone was inside and on their phones and had money to burn. This means company valuations were high and tech companies and start ups received a lot of funding.

Now stock markets around the world are plummeting - tech stocks in Australia (based on the S&P ASX) have fallen around 40% compared to the end of June 2022 - and interest rates are rising. There are also growing fears of a recession. So investors (like venture capitalist companies) are ditching risky investments like tech startups. 

Gunawardena explained: "The result is a significantly longer and riskier fundraising market for companies of our stage as investors have across the board pulled back extensively".