When the tech company layoffs have hit Europe, several well-known startups have made drastic cuts to their teams in order to cut costs and preserve their cash runway as the global economy takes a downturn. Growth at all costs is being replaced by cost-cutting.
If something goes up, must it come down? Many technology startups saw tremendous growth in 2020, particularly in the real estate, financial, and delivery sectors. But also Covid shut down the world and some companies needed to fire people to stay afloat, while plenty of companies staffed up to support usage spikes caused by remote work and lockdowns. 2021 was the year of hiring and funding boom paired with hyper-digitization. What we have now is the shaky 2022. And at this moment for the industry, the employment landscape may appear a little more precarious. When it comes to investing, following months of unusually huge rounds and valuations, this is a return to a more stable, risk-aware VC space.
Essentially, job-seekers have largely benefited from the tech boom, enjoying fat compensation packages complete with generous bonuses and equity offerings. And according to 42matches’ founder Moritz Drerup, that is not sustainable. “That kind of a market made some people oversell themselves. It was a risk to pay juniors more than seniors in the last months. That is not normal and healthy. There definitely is a salary bubble waiting to burst and the situation we are facing now on the market will regulate the salaries, bringing rationality back into tech. Companies will not pay premium prices at the moment.”
On the other hand, says Drerup, the big employment bubble will not burst. “The big hype that we had in the last year will not stop, because of, for example, generational change and post-Covid hiring effects. Therefore, I fully believe that we will keep the full employment push as we have it right now.”