By Christopher Mims | Wall Street Journal
People who have been in the tech industry long enough to remember its previous major downturns have a message for those facing the current one: Decisions made now will determine who survives—and lay the groundwork for the next tech boom.
Surviving this tech winter, and building for the next boom, requires strategies that are often the opposite of those popular only a year ago. It also requires a change in mindset. Tech leaders generally are told to keep their eyes fixed on the horizon. But to navigate the current economic downturn, looking back at what worked and didn’t will be essential.
A winnowing is coming. For many, it’s already here: Startups will fail. Many big companies will be transformed, some may even be disrupted.
The implications of the sudden shift in investor and C-suite sentiment about the future of tech are profound. It has led to what some are calling a “white-collar recession,” with at least 140,000 layoffs at tech companies in recent months. More than $7 trillion has disappeared from the tech-heavy Nasdaq index. Some of the biggest tech companies hit record-high valuations in 2021, and are now down 50% or more. After record investment in startups in 2021, some of them are now taking on debt to avoid having to reset their valuations with a fresh round of venture capital. With interest rates soaring and profitability still unsure, that could backfire.
“Tech startups looking to downsize to survive slowing growth and inflation must carefully plan their layoffs. Without careful planning and legal analysis, layoffs could potentially become expensive mistakes ultimately leading to litigation.”
Shruti Gurudanti, Rose Law Group partner and director of corporate transactions
