A lot of tech companies aren’t actually profitable and don’t have a solid business model. They largely live off VC funding, and their goal is to show growth so that investors keep pouring money into them. This generally translates into hiring a bunch of people to show how quickly the company is growing. The key here is that the goal of hiring is to project an image of rapid expansion as opposed to legitimate need for more workers.
Now that the inflation is rising, VCs are tightening up lending because any companies that don’t grow at least as fast as inflation is rising are now losing money. With VC funding drying up, companies need to cut costs to stay afloat and that means cutting all the people they hired to demonstrate growth. The equation has changed in favor of trying to actually be profitable which means cutting operating costs as much as possible.
A lot of tech companies aren’t actually profitable and don’t have a solid business model. They largely live off VC funding, and their goal is to show growth so that investors keep pouring money into them. This generally translates into hiring a bunch of people to show how quickly the company is growing. The key here is that the goal of hiring is to project an image of rapid expansion as opposed to legitimate need for more workers.
Now that the inflation is rising, VCs are tightening up lending because any companies that don’t grow at least as fast as inflation is rising are now losing money. With VC funding drying up, companies need to cut costs to stay afloat and that means cutting all the people they hired to demonstrate growth. The equation has changed in favor of trying to actually be profitable which means cutting operating costs as much as possible.