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Home›Corporate restructuring›The faltering start-ups, the biggies are back: The 2022 recession reverses the trend of a decade

The faltering start-ups, the biggies are back: The 2022 recession reverses the trend of a decade

By Laura Wirth
June 20, 2022
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Startups have been on a bull run over the past decade with records across the board. However, with COVID-19 and the escalation of oil wars, markets have taken a turn for the worse.

Conventional employers have steadily increased pay and benefits over the past decade to be more competitive

For Indian start-ups, 2022 has not been a good year. The global slowdown is manifesting in the form of layoffs and cost-cutting measures by start-ups, as well as corporate restructuring around growth areas, leading to further downsizing.

Startups have been on a bull run over the past decade with records across the board. However, with COVID-19 and the escalation of oil wars, markets have taken a turn for the worse. Many believe this could mean an impending recession or downturn that was predicted years ago.

Also read: As markets bite, Indian start-up job cuts reach alarming proportions

The situation was reversed after the 2008 recession. Large, well-established companies went out of fashion as they seemed stuck in a cycle of perpetual layoffs and restructuring. Tech start-ups were the perfect place for new generations of workers, according to a Mint report. More than 15,000 tech layoffs were announced in May.

Startups are trading below the listing price

In 2022, the situation is reversed. The prospects for start-ups are becoming more fragile and the time has come to go work for a big company.

After a decade-long boom, most tech-related start-ups that have gone public in the past two years now have stocks trading below their listing price. But in the broader labor market, such weakness is not seen. The U.S. economy added 390,000 jobs in May, boosted by strong industrial sectors, white-collar jobs and improved government hiring, the Mint report said.

While some startups will succeed regardless of the state of the economy, many still need more time and money to grow their business. In a downturn, one of the first things expected is for start-ups to get fewer funding opportunities in the market, especially for start-ups.

Meanwhile, conventional corporate employers have steadily increased pay and benefits over the past decade to be more competitive with Silicon Valley.

Demographic change

The demographics of the workforce that can choose between jobs at start-ups or large corporations has also changed since the early 2010s, the report says. Ten years ago, this wave of young millennial workers in their 20s are now in their 30s. Being paid a higher, stable salary rather than stock options, and having health care plans becomes more attractive as you head into middle age.

Read also: When financing takes precedence over governance, start-ups go wrong

When you associate start-ups and recessions, the first thing you usually assume is a whole bunch of negative stuff due to risk and volatility. But startups that have the trail are realizing that now is the time to focus more on unit economics, sustainable scaling, and business fundamentals.

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