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Wednesday, Feb 28, 2024

Tech Layoffs Fueling Startups

With thousands of tech workers being laid off from companies big and small this year, it is easy to think the industry is going under. The reason for these layoffs varies from cutting costs to reducing salaries, which increased significantly during the pandemic.

However, the mass furloughs are giving startup tech companies the ability to add to their workforces, some analysts and recruiters said.

Bebbington

Rory Bebbington, founder and chief executive of Marina del Rey-based Fabric Staffing, said that during this time of year companies are looking at their results and making decisions on how to become more profitable in the following quarter.

“Companies are looking at their budgets for next year and they’re looking at how profitable they were in certain quarters, especially people,” Bebbington said. “And to be profitable in quarter one and the rest of the following year, they have to make cuts. The biggest line item on anyone’s profit loss sheet is salaries. That’s where cuts always start.”

Layoffs.fyi, a crowdsourced site that has tracked national tech layoffs since 2020, reported that about 160,000 tech workers lost their jobs last year. In January, Glendale-based software company ServiceTitan laid off 8% of its workforce, about 221 employees. In January, Microsoft Corp. announced it will dismiss 10,000 employees, and shortly after, Alphabet, Google’s parent company, announced it was cutting 12,000 jobs.

Fabric Staffing employees, from left Sebastian Rindé, Caigon Cook, Marissa Mata, Rory Bebbington, Geneviève Garcia, Tom Callahan, Siraina Dickens-Cole, and Todd O’Neil at the company’s Marina del Rey headquarters.

As devastating as the layoffs have been, tech workers are still in high demand, especially those experienced in engineering, artificial intelligence and cybersecurity.

Fabric saw a slowdown in its business in December, but activity has heavily increased as more startups are looking to grow their workforces. “Business has definitely dramatically increased,” Bebbington said.

Fabric makes its revenue through a subscription service. By paying a monthly fee, companies gain access to Fabric’s pool of tech talent and can hire without any additional costs. Prospective employees go through a recruiting process in which they are checked for experience before being added to the company’s roster.

Since founding the company in 2016, Bebbington said Fabric Staffing has helped more than 200 tech companies, mainly at the series A or series B level, find employees, including Santa Monica-based social platform Tinder, Encino-based health tech company mPulse Mobile and Santa Monica-based automotive company Edmunds.

Eager to work

Matthew Kahn, an economics professor at the University of Southern California, said now is a great time for startups to find talent.

“Crisis creates opportunity,” Kahn said. “If major firms have downsized, then there are people with skills who are looking for new jobs, and that’s exactly the right time for entrepreneurs to post. If people have recently lost their jobs, they’re going to be eager to find new work. This is just the right time for startups who need special talent to be hunting for that talent because these other folks are sort of amazed that they’ve been displaced.”

Bebbington also said now is a perfect time for companies to find affordable talent, since more tech workers are looking for jobs. Kahn added that while that may be true, employers should be careful of being too stingy with salaries.

“If you hire them at a cut-rate wage, that might be wise in the short run, but they might not be as loyal or hard-working in the medium term,” Kahn explained.

Finding talent

Santa Monica-based e-commerce company Tapcart is among the many tech businesses taking advantage of the burgeoning pool of tech workers looking for work. It has openings in its engineering, sales and marketing departments. Lauren Morgan, director of human resources at Tapcart, said the company is looking to grow, but is being especially cautious about its new hires.

“We never wanted to have any layoffs, and we’ve been really (careful) about who we’re hiring, what positions we are approving, and really kind of putting our hiring managers through the wringer to make sure they’re only bringing adding any new positions that are definitely required,” Morgan said.

She said the salaries that most candidates are asking for have not changed. “A recruiting agency, they may see that a bit more, but for us on our internal recruiting team, whatever salary is in our budget and then whatever salary the candidate is looking for, (we try to) find a happy medium there,” Morgan said.

For companies that are wary of hiring at this time, Morgan recommends they reflect on their current team members. “Is there another (employee) that may not have a full workload? Is there someone that you can promote? You kind of look within the org to see what you can do,” Morgan continued. “We’ve done a lot of internal promotion, and that’s really one of our favorite things to do, because it’s not only helping the company, it’s really helping people’s careers excel as well.”

Morgan added that the current environment is an exciting time to in which to find talent.

“We are in kind of a unique situation here, and it’s really great for us, because we’re also able to find some amazing talent that unfortunately were let go at some of these larger tech companies. And now they can find their forever home with us,” Morgan added.

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