Technological layoffs show that the high-flying sector is not immune to the slowdown

Canada’s technology sector has grown rapidly in recent years as local startups and foreign giants engaged in hiring hundreds of thousands of well-educated and talented workers. But this expansion has recently slowed to a rise, as high inflation, rising interest rates and the fall in cryptocurrency have drawn a lot of optimism from the sector.

Chris Albinson, general manager of the Waterloo-based incubator Communitech, says the setback in the United States is more pronounced because there are more companies than he calls “going to the moon” with dubious foundations that are suddenly unable to ‘adapt to the new reality.

Canadian tech companies are having a comparatively better time right now because they are generally much better managers of capital, he says, but that doesn’t mean there’s no anxiety.

“There are some founders who were 18 when the last recession passed,” he told CBC News. “There will be stress in the system, but I think they will eventually come out much stronger.”

Valuations from tech giants like Meta, Amazon, Apple and Netflix have skyrocketed in recent weeks, and where once there was a fierce war for talent, many tech giants are implementing hiring freezes and even downsizing.

The American streaming giant Netflix announced on Thursday that it would eliminate 300 more jobs, the second time in so many months that it was announcing layoffs of this size.

The crowdsourced layoffs.fyi website has documented more than 20,000 technology job cuts in the past two months alone, mostly in major U.S. technology centers like Seattle and San Francisco.

While the cuts in Canada are less dramatic, they are occurring.

Canadian financial technology unicorn Wealthsimple laid off 13 percent of its staff last week, citing “unprecedented” levels of volatility to explain the cut of approximately 160 positions. “Many of our customers are experiencing a period of market uncertainty that they have never experienced before,” CEO and founder Michael Katchen told staff when announcing the news.

Payment lining

Jacqueline Au was among those who dropped the Toronto-based business. He suspected something might happen when he realized the company started spending less on his marketing department earlier this year. “When that happens … it’s natural for the team to think, well, what will happen to my job, if we don’t spend money on marketing?”

It was the first time he had been fired and although he said it was nasty, he is enjoying free time to think about what his next professional move might be. He likes the tech sector, he said, but knows there will be more job cuts, so he will be selective with who he will join next.

“I think this is just the beginning, I think the industry will have to keep cutting fat to stay afloat,” he told CBC News. “I think there will be ups and downs, but winter has come to stay.”

Jacqueline Au was one of dozens of people fired from the fintech company Wealthsimple earlier this year, and she believes there will be more layoffs for the tech industry. (Jacqueline Au)

Vancouver-based Thinkific laid off about 20 percent of its staff in April, and Sumeru Chatterjee was one of 100 people released. Originally from India, Chaterjee came to the United States to go to college and worked in various technology jobs for about a decade before making the leap to come to Canada in 2020.

“Last year, the general feeling of the industry … was that we need to grow, we need to quickly expand our market leadership to hire a lot of people,” he told CBC News. “So the dismissal was kind of a dramatic turn of events.”

He says the technology sector has grown so rapidly over the past decade, largely burning venture capital cash to gain market share without having to worry about things like profits. “Normal business metrics like profitability and cash flow were almost frowned upon, and I think a lot of people are reawakening the fact that if you want to run a business, you have to have some fundamentals like a profitable business. they pay you “.

“Survive so you can thrive”

The mood on the stage of the Collision Conference in Toronto, where tens of thousands of technology lovers from more than 100 countries gathered in person to talk about everything digital, was blatantly positive this week. . But on the sidelines, there were whispers of bubbles bursting.

Sumeru Chatterjee recently lost his job at a Vancouver-based technology company and has since focused his attention on helping other tech workers connect with each other. (Dillon Hodgin / CBC)

“Right now, everyone who is innovating and / or investing in technology or startups is trying to understand exactly what’s going on right now,” said Deena Shakir, a partner at Silicon Valley-based venture capital firm Lux Capital. “We’re the topic of conversation at every partner meeting, and every lunch and coffee.”

While he rejects the idea that the tech sector is back in a bubble, he adds something that clearly explodes are the expectations of endless growth at the expense of profitability, which is good, he says.

“We’ve been advising … our companies to think long-term to make sure they have enough capital reserves to withstand this storm,” he said. “Surviving so you can thrive is an important mindset to think about.”

Survival is key in the cryptocurrency space, which was shaken when a $ 12 billion trading platform known as Celsius froze withdrawals earlier this month. This affected large companies such as Crypto.com and Coinbase. Although they increased during the pandemic, they are now laying off thousands of workers in the United States and Canada and canceling job offers.

Deena Shakir is a partner in Lux Venture Capital, which invests in technology companies. (CBC)

Many cryptographic companies were scheduled to attend Collision in person, but Paddy Cosgrave, founder and CEO of the conference, said many of them withdrew at the last minute. Celsius CEO Alex Mashinsky was one of those scheduled to attend, but he didn’t.

“I can understand why [he] he had to retire, “Cosgrave said.” I think he has a major struggle to resolve this situation. “

Whatever dark cloud transcends the cryptographic space, Cosgrave says it had no impact on overall attendance, which topped 35,000, a zeal that makes a lot of sense to him.

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“When things get uncertain, everyone goes looking for answers,” he said. “And certainly in recent weeks, there have been a lot of important questions about what exactly is going on in technology, and in crypto in particular.”

While the layoffs may have a short-term outlook, Cosgrave says the future of technology in Canada and abroad still looks bright.

“What happens when you fire very smart software engineers? A lot of them go and start new businesses, and some of those companies are already here,” he said.

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