The most prominent tech titans announced tens of thousands of layoffs this year. With markets down over 30%, what are the business predictions and what’s next in 2023, and how do we prepare for the recession?
Entrepreneur.com | By Mario Peshev | December 28, 2022 | Business Predictions | Business Insurance
At the beginning of the quarter, one share of Meta Platforms Inc, the parent company of Facebook, Instagram, and WhatsApp, was traded at $378. Less than two months in, the technological juggernaut collapsed to under $89 a share — reaching the trading levels of 2015.
But Meta is not alone. The Nasdaq 100 took a 38% hit from its peak.
Layoffs have followed suit across the titans of technology — with tens of thousands of employees losing jobs across Meta, Amazon, Microsoft, and Twitter alone.
Heading into 2023, the future is tumultuous. What geoeconomic changes are about to resurface in the new year?
1. Reassessment of the “Hockey Stick.”
A favorite trend of venture capital funds and investors is the promise of the “hockey stick” growth curve. This translates to a predictable and scalable influx of new users (or revenue) subject to doubling down on sales or paid acquisition channels.
The premise is straightforward — market penetration or even domination. Obtaining unicorn status and acquiring users at all costs. The model works in theory, but in the land of funding, this usually comes at the expense of piles of debt and no profit whatsoever.
It’s easy to scale a business with a freemium model that gets funded by investors. But infrastructure, staff, warehouses, and vendors are entitled to their own funding. And unless this model converts at the same pace as a standard business cost plus a profit margin, companies will face severe consequences.
Prioritizing profitability again will become a reality check of 2023.
2. More Business Predictions: Layoffs
Over 910 tech companies laid off over 143,000 employees in 2022 alone. The tracker relies on public data that doesn’t account for medium and large businesses outside the public purview (whereas the numbers are likely to exceed 200,000 or even 250,000 at the time).
Financial scrutiny, combined with unfavored financing tools thanks to the aggressive interest rate hikes by the Federal Reserve, is limiting access to funding to combat the effects of hyperinflation.
With unlimited resources, it’s easy to get sidetracked and keep pouring more people, money, and servers into a problem. This anecdotally conflicts with Brooks’s law (a known adagio in project and product management), where adding workforce to a software project that’s running late is dragging it even further.
