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

Startup Shutdowns and Layoffs

• Layoffs.fyi, a platform tracking tech layoffs, has reported a 70% increase in company closures from 2022 to 2023. (3m50s)
• 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. (5m20s)

Transparency in Startup Shutdowns

• There is an increase in the transparency of startup shutdowns, with founders becoming more open about their experiences and using them to advise others. (6m20s)
• 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. (7m8s)

Sunset: A Company Specializing in Startup Wind-Downs

• 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. (10m48s)
• Sunset is a company with an equity incentive program that allows investors to earn more equity by referring companies and customers. (11m11s)
• Sunset was created by Roger. Roger has been angel investing in tech companies since 2013-2014. (14m10s)

Layoffs.fyi: Tracking Tech Layoffs

• Layoffs.fyi, a website that tracks tech layoffs and shutdowns, was founded in 2020 to track the first wave of COVID-19-related layoffs. (15m44s)
• Layoffs have impacted nearly all tech sub-industries, including consumer retail, hardware, finance, and healthcare. (16m39s)

The Rise of Tech Layoffs

• In 2023, there were 263,000 tech employee layoffs, a 60% increase from 2022 and considerably higher than the 81,000 layoffs in 2020. (18m5s)
• 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. (22m1s)

AI's Impact on Layoffs and Salaries

• Dropbox and Meta have cited the goal of reallocating resources to focus on AI as a reason for conducting layoffs. (22m45s)
• 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. (22m56s)
• 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. (23m57s)