: Venture capital investors see an ‘R’ word coming for tech — and it isn’t just recession

by | Nov 16, 2022 | Stock Market

As tech workers face mass layoffs for the first time in more than a decade, venture capitalists foresee a “period of both pain and opportunity,” and believe it could be a time for the industry to reset.

Tens of thousands of software engineers and other tech employees have lost their jobs so far this year, but VCs see silver linings in economic downturns: the potential for a rise in people starting their own companies. In discussions with MarketWatch after announcements of job cuts at powerhouse tech companies such as Amazon.com Inc.
and Facebook parent Meta Platforms Inc.
some VCs said they expect the downturn to last for the next year or so — as is typical of recessions — as the tech industry, which they believe had become overheated, goes through some adjustments. According to data compiled by Challenger, Gray & Christmas, there have been about 59,000 tech-industry layoffs announced so far this year. Now, a common utterance among the VCs is the “R” word: reset, not just recession. “There is a resetting happening, which is absolutely necessary,” said Chris Cunningham, founding partner at C2 Ventures, which is based in Connecticut. “Companies without a solid business were overvalued way too high, and with too much venture capital.” Venture capital has been instrumental to the tech industry, giving startup founders private capital to build companies and develop industries that have become some of the biggest and most influential in the world, in exchange for a piece of the pre-public pie. VC investment made Silicon Valley what it is — giving rise to early success story Apple Inc.
dot-com boomers like Google

and mobile-focused startups like Uber Technologies Inc.

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