On Thursday, the U.S. Labor Department reported some staggering figures: the number of unemployment claims filed between March 15-April 4 surged to 16.8 million.
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For some context, according to Politico, “the number of jobs lost in a mere three weeks now exceeds the 15 million that it took 18 months for the Great Recession to bulldoze from 2007 to 2009.”
Jobs have been lost all over the country, and across a variety of sectors.
Just how hard startups have been hit is something we’ve been reporting on here at Crunchbase News, with new rounds of layoffs being revealed almost daily.
With that in mind, we were able to visit with Roger Lee, co-founder of Human Interest, a retirement plan provider for small and medium-sized businesses that recently raised $40 million.
As a side project (unrelated to his company), Lee began tracking the number of tech startup layoffs globally (but mostly with an eye on the United States and Canada). He told me he got the inspiration because Human Interest was fortunate to still be hiring during the COVID-19 pandemic, and has been able to find “great candidates” among those laid off.
We thought what Lee found was worth sharing. About 90 percent of the layoffs he’s uncovered have been reported by the media. The remainder he’s uncovered via direct sourcing from folks inside companies. There are most certainly other layoffs that have taken place he has yet to learn about, it’s important to note. He’s only counting verified layoffs. Lee estimates that if you count the rumored ones, the numbers could be double.
According to Lee’s data, as of this morning, a total of 204 startups have laid off 16,229 startup employees since March 11. What’s concerning is the rate by which those numbers are going up. In the past week alone, the number of laid-off startup employees has risen exponentially, according to his data.
“The pace of layoffs has been accelerating,” Lee told Crunchbase News. “I suspect the worst is yet to come.”
As of April 2, 94 startups had laid off 7,793 employees since the coronavirus was declared a pandemic. That compares to 185 startups laying off 15,653 employees as of April 8, which reflects a near doubling of both companies and employees affected.
Not surprisingly, the San Francisco Bay Area accounts for the lion’s share of startup layoffs, or about an estimated one-third, according to his data. Other hard-hit cities include New York City, Los Angeles, Boston and Austin.
Also worth noting, the sectors that have been hardest hit are those impacted by the shelter-in-place orders in most cities. They include food, travel, fitness, real estate, transportation, retail and recruiting. In fact, Lee estimates that about 64 percent, or around two-thirds, of the layoffs can be directly attributed to shelter-in-place such as in the case of Thumbtack and TripActions (both of which we reported here, and here). The remaining one-third, he believes, are due to the funding environment drying up post COVID-19.
“In other words, these startups aren’t directly affected by the coronavirus, but needed to raise money in the next few months,” Lee said. “Instead, they’re laying people off in order to make their cash last longer.”
Looking ahead, Lee expects a second wave of layoffs to come from industries that are not directly in the line of fire but are being indirectly impacted. For example, SaaS companies may be OK in the short term because they have longer term contracts so their revenue won’t dry up as quickly.
“But once those contracts come up for expiration or renewal, their revenue will start to be impacted,” Lee predicts. “It’s not going to be trivial. But for now, they probably can hold off on layoffs.”
Illustration: Dom Guzman
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