Why job fears are spreading in Silicon Valley

Why job fears are spreading in Silicon Valley
Written by insideindyhomes

Status: 04.06.2022 1:15 p.m

Layoffs, hiring freezes and lost production are worrying workers in the US tech industry. Smaller companies in particular fear running out of money in a recession.

By Marcus Schuler, ARD Studio San Francisco

Last week, Y-Combinator sent out a warning to its founders in Mountain View, where Google is also based. The so-called incubator prepares start-ups for business life. The email said to prepare for the worst.

David Sachs agrees. With his company Craft Ventures he has been financing young tech companies for many years. “It’s the worst thing I’ve seen since the dot-com bubble burst,” he says. “Worse even than the great recession of 2008/2009.”

But not only start-ups are feeling the effects of the worsening business climate. Large tech companies like Meta or Salesforce want to hire significantly fewer staff. At Netflix, even the first employees were fired.

Stocks have lost a lot of value

At Meta, the Facebook parent company, the mood is said to be particularly bad – not just because the stock options for employees are significantly less valuable due to the fall in stock market value. There is also great concern on Twitter about the planned takeover by Tesla boss Elon Musk. Added to this is the loss of value on the stock markets.

“We’re talking about corrections of 70 percent, 80 percent and more,” says investor Sachs. This has led to an enormous change in Silicon Valley: “It started with the listed companies, now it has spread to the growth companies and has basically affected the entire ecosystem.”

Further acquisitions expected

The S&P 500 stock index, dominated by tech stocks, has lost more than 20 percent of its value so far this year. Lars Meyer from the global law firm Freshfields Bruckhaus Deringer says that one cannot speak of a real bubble at the moment. Meyer’s law firm has a large office in Redwood City, in the heart of Silicon Valley. Freshfields organizes acquisitions and mergers in the tech industry.

“Nevertheless, we see a stable market environment. There are still investors who are investing in this area,” says the lawyer. “There are still well-managed companies with very established, proven teams of founders who can safely lead the whole thing through crises.” He therefore does not really believe in a bubble. However, in some cases “a certain correction” has taken place.

The valuations of many companies are now very low. Meyer therefore expects further takeovers in Silicon Valley: “You can also see that there are still big deals in the market.” Examples include the planned $61 billion takeover of cloud specialist VMware by chip company Broadcom Elon Musk’s offer for Twitter.

Disillusionment after the pandemic surge

And what do the employees of the tech companies say? Many are afraid – especially employees of companies like the video conferencing service Zoom or the streaming platform Netflix, which were celebrated during the pandemic. Now they worry about their jobs.

The same happened to financial services provider Robinhood. At the stock market launch last year, the share price was at times over 70 dollars. The paper is now at nine dollars. And almost every tenth employee has received a notice of termination.

Silicon Valley’s tech industry is hitting the brakes

Marcus Schuler, ARD Los Angeles, 6/2/2022 9:38 a.m

#job #fears #spreading #Silicon #Valley

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