No sector of the U.S economy has been spared from the economic fallout of COVID-19.
But the ranks of tech startups have been devastated with the layoff of nearly 70,000 workers in the last four months, putting the kibosh on the information technology’s (IT) talent pipeline, according to a report by BuyShares.co.uk., the London-based brokerage, The Wall Street Journal reported Wednesday (July 8).
“Startups are a great source of innovation in the IT industry, but are now especially cash-constrained,” Max Azaham, a senior research director at research and consulting firm Gartner Inc., told the Journal.
He said coronavirus has caused investors to turn their backs on companies seeking less than $100 million.
The San Francisco Bay area, which includes Silicon Valley, has taken among the biggest hits as more than 25,500 jobs were shed at mega-companies including Uber Technologies Inc., Groupon Inc. and Airbnb Inc., the Journal reported.
In April, PYMNTS reported Lyft, the San Francisco-based ridesharing company, laid off 17 percent of its workforce and imposed salary reductions for executives for three months.
At the time, Lyft said 982 employees would be cut and another 288 would be furloughed while employees faced pay pay cuts to ride out the pandemic.
Uber trimmed its workforce by 25 percent in May, sending more than 6,500 employees to file for jobless benefits.
Tim Herbert, executive vice president for research and market intelligence at IT industry trade group CompTIA, told the Journal that startups for artificial intelligence and other emerging digital tools have been cutting jobs for four consecutive months, including a record 112,000 layoffs in April.
It’s not just layoffs that have hurt.
CB Insights, the New York-based market research firm, reported startup funding fell to $67 billion in the first quarter, down 22 percent from the same period a year earlier, the Journal reported.
In addition, most venture-backed startups were unable to tap the Small Business Administration's Payroll Protection Program (PPP) designed to provide a lifeline to struggling companies during the pandemic, the newspaper reported.
The Washington Technology Business Association, an industry trade group, reported less than 40 percent of 140 tech startups in the Seattle area received a forgivable PPP loan.
“The COVID-19 crisis has accelerated the need for innovation across many parts of the economy,” Jonathan Simnett, director of technology-advisory firm Hampleton Partners, told the Journal.