Inside startup shutdowns with the creator of Layoffs.FYI | Equity Podcast

14 Sep 2024 (6 days ago)

Startup Shutdowns and Layoffs

Layoffs.fyi, a platform tracking tech layoffs, has reported a 70% increase in company closures from 2022 to 2023.
While company shutdowns are often associated with business failures, a significant portion also occurs due to acquisitions structured as asset purchase sales, requiring the original company to be wound down.

There is an increase in the transparency of startup shutdowns, with founders becoming more open about their experiences and using them to advise others.
Winding down a company doesn't always signify failure; some startups are profitable but not achieving venture-scale growth, leading them to explore options like selling parts of the business or intellectual property.

Sunset, a company specializing in startup wind-downs, chose to raise funds primarily from angel investors instead of venture capitalists to retain control and avoid pressure to meet venture capital growth expectations.
Sunset is a company with an equity incentive program that allows investors to earn more equity by referring companies and customers.
Sunset was created by Roger. Roger has been angel investing in tech companies since 2013-2014.

Layoffs.fyi, a website that tracks tech layoffs and shutdowns, was founded in 2020 to track the first wave of COVID-19-related layoffs.
Layoffs have impacted nearly all tech sub-industries, including consumer retail, hardware, finance, and healthcare.

In 2023, there were 263,000 tech employee layoffs, a 60% increase from 2022 and considerably higher than the 81,000 layoffs in 2020.
Companies have increasingly cited AI as a contributing factor to layoffs, either due to disruptions in their business models or as a means to increase efficiency.

Dropbox and Meta have cited the goal of reallocating resources to focus on AI as a reason for conducting layoffs.
AI has the potential to automate job functions, as illustrated by the example of a fintech company where AI could potentially replace 700 customer support roles.
While overall tech salaries have remained relatively stable in the past two years, salaries in the AI sector have seen approximately 10% quarterly increases due to high demand.