We are not yet in a recession. Any layoffs that are happening tend to be companies that are the right measure of the massive workforce growth spurt, mainly caused by the pandemic. The sheer number of employees added by some tech companies during the pandemic is almost staggering. As a percentage change of total employees from 2019 to 2022, Amazon doubled its workforce by 106%, Meta also doubled by 103%, Google by 64%, and Microsoft by 53%. Apple was somehow very controlled and efficient with only a 20% increase, so no major sizing or layoffs at Apple. Tens of thousands of people have been laid off in the past six months. What does all this mean?
That it’s a perfect time to start a business. Layoffs almost always provide the potential startup ecosystem with an abundance of talent, some with several years of experience. Past setbacks have proved fruitful for budding entrepreneurs. After the dotcom bust, Facebook and YouTube joined in. Airbnb, Slack and Uber all launched from the ashes of the 2008 economic crisis.
Why is a layoff necessary to create more entrepreneurs? Many people aspire to become entrepreneurs earlier in life, but then the appeal of a cool brand, six-figure salaries, cafeterias, and other perks beckon. So, how to respond to your perfect company firing you? Find other talented people, research a large marketplace and create a company to solve a niche problem. It seems that some entrepreneurs are already doing that.
A new survey of more than 4,000 laid-off tech workers has found that a remarkably high proportion start their own businesses shortly after being laid off. Of the 4,188 respondents on Clarify Capital’s 2022 Survey, 1,007 had started their own business. The company’s new founders reported making an average of about $13,000 more per year than they did in their previous jobs. Millennials saw the biggest change in their wages after starting their own business, with an average wage increase of more than $17,000, while Gen Z entrepreneurs saw an average increase of $6,638.
Clarify Capital’s research also looked at why so many tech workers decided to start their own businesses after being laid off. The main factors cited were ‘professional growth and development’ (58%), ‘money’ (52%) and the desire to ‘create something new’ (49%). 23% admitted that their main motivation was that they struggled to get hired by other companies after being laid off. Interestingly, the study found that the majority of companies founded by recently laid off employees started within a year of leaving their previous job.
So, here are some steps you can take right now to become an entrepreneur.
Refine your brand. This might be the perfect time to take a fresh look at your brand. Review all of your social media, especially LinkedIn, and add relevant keywords related to your skills and experiences.
Stimulate your network. You will be amazed at how robust your network is. Former employees, industry peers, college alumni, reach out to anyone with friendly but focused questions.
Research the startup ecosystem. Most people who work at large companies may not pay attention to the robust startup ecosystem in their local market. Identify the key players in your local startup ecosystem, from universities to events, from networks to investors.
Attend relevant startup events. Where you never had the time or interest to attend the startup events, now is the time. Attend meetups, pitch competitions and networking events.
Reach out to entrepreneurs you admire. Identify local startups that you personally admire or are interested in… not to join, but to learn more. Try to connect with one of the founders and have a cup of coffee or tea. Find out what they did well and what they did less well. Most importantly, entrepreneurs have deep networks that are filled with other entrepreneurs.
Solve your fear. You were not born to work at Google or Microsoft. You have the capabilities to create a startup. Maybe being laid off gives you the struggle and the guts to achieve what you always could have had. The life of being an entrepreneur.