The tech world is feeling COVID’s squeeze as layoffs become reality. But others are in line to prosper.
If you’ve been following tech news over the past week, you’ve no doubt seen the wreckage caused by COVID-19.
In Montreal, the space rental company Sonder was forced to lay off 22 percent of its staff. Fellow hospitality startup Stay22 similarly made tough decisions, parting ways with several key pieces of a small team.
South of the border, the impact has been heavier. Techcrunch notes that we’re beginning to see the ‘second wave’ of unicorn layoffs, after Zume, Oyo and Uber all made cuts. Now its ZipRecruiter, Bird and TripActions all making layoffs.
In fact, more than 7,300 people have lost their jobs across 12 privately-held SoftBank-backed companies in the past four months, according to a CNN Business tally.
Impact felt locally
It hasn’t been easy for companies in the events and hospitality spaces to stave off the effects of the current crisis.
Sonder CEO Francis Davidson had to cut out 400 of his staff at a time when bookings of its 5,000 apartments across the United States are believed to be down by 20 per cent. The company currently operates in over 30 cities worldwide.
Davidson denied reports that Sonder was for sale after Bloomberg touted it as a possible “distressed asset acquisition”. The CEO said that his company was not in a “distressed” financial position, counting Airbnb’s investment in Lyric was an example of the platform evolving along with the industry as a whole.
Both Lyric and The Guild, competing companies in the space, have made similarly-sized layoffs amid the COVID crisis.
“If we pull these levers simultaneously, we have a chance. There isn’t a single line that won’t come under deep scrutiny,” Davidson said on the staff cuts.
Meanwhile, Stay22 went public in a piece by PhocusWire, detailing how the company had to lay off one quarter of its staff, including its marketing director Noemie Turcotte and a key business development manager charged with growing business in Asia.
The company offers a platform that maps out accommodation offerings near events. PhocusWire noted how these effects were felt almost immediately by the travel and hospitality company.
“In startups, the strongest and best managed will make the cut, and maybe the weaker ones will transform and evolve and become something else. It’s something that you have to go through,” Turcotte told the website.
“It’s never easy,” she says, “but at the same time, these were things they had to do for the sake of the business.”
Three types of companies emerging during COVID-19
Things have been rocky as ever for Startupfest founder Phil Telio. Startupfest, one of the country’s largest tech conferences, almost immediately had to cancel its 2020 session once Coronavirus concerns proved to be high.
This week brought in a glimmer of good news. Telio assured startups that the roughly $1 million in prizes and investments up for grabs every summer will still be handed out. This time it will be done through virtual pitches and judges.
However, Telio told MTLinTECH that there are more than just dying startups. As the situation tramples on industries, there will be entrepreneurs hunting out opportunity and prospering.
There are three types of companies that we’re seeing, or three mindsets at the moment, he explained.
The first type of company is in “hibernation mode”. Their business is so dependent on people moving about that there’s nothing they can do.
“All you can do is hibernate. Reduce your burn rate as much as possible and wait out the storm. Eventually everyone’s going to need a haircut again and there’s going to be a flood back into the market,” he said.
The second type of company is in “reinvention mode”. They’re looking at the current context and thinking about how they can change immediately with the future. They can’t survive a hibernation. They must reinvent themselves.
“I put Startupfest in that category,” said Telio. “It’s a great opportunity for us to reinvent what we’re doing and how we do it. We’re going to do our prize competitions virtually without a physical festival.”
The third type of company is in “acceleration mode”. If you’re a videoconferencing company like ZOOM, a manufacturer of healthcare equipment, a company that analyzes healthcare data, right now you’re flying, said Telio. If you’re in the business of producing hand sanitizer, you’re trying to figure out how to grow your business.
Make no mistake about it. There are creators out there searching for opportunity, whether that opportunity pays dividends now or after the conclusion of the current crisis.
2020 will go down as one of the best years in history to start a social app
Why? People are yearning for new ways to come together
– Zoom for X
– HQTrivia for Y
– Slack for Z
– or try something completely new
Pick a use-case and start building
— Greg Isenberg (@gregisenberg) March 19, 2020
It's never been a better time to start a tech company that make the lives of our elderly happier and healthier
– dating services
– tools for creative projects
– making cooking easier
– reinventing the bingo hall
– and so much more…
They need our help more now than ever
— Greg Isenberg (@gregisenberg) March 31, 2020
How will entrepreneurs in the event and hospitality industries – arguably the hardest hit – innovate? What type of game changes will we see emerge out of COVID-19?
For Telio, perhaps the current situation is forcing all of us to consider what our real value proposition is. Call it an opportunity to “clean our house” he said.
“Even though theres a downturn in the economy, all the investors and corporates see that there’s going to be new opportunity in the future. We feel it’s Startupfest’s role to support those companies that will thrive in this new reality. We’re going to change one way or another and this period of time will have a lasting impact on many industries.”