Investors are seeing many of the skilled workers leaving big tech companies in the recent waves of layoffs take a brave and potentially world-changing decision: to launch companies of their own.
These former employees will be taking their experiences, on-the-ground learnings and, at times, sense that things can be done better, and create what may become some of the most disruptive businesses of our generation.
Some early examples saw Twitter’s former global head of social & editorial launch their own social media app “Spill” as an alternative to Twitter. One former Google manager banded together with other laid off team members to set up a design company with people he already had experience working with.
More will come, as laid off employees seize this moment of change to plant seeds that will solve problems they know all too well, or take us on a completely new path.
Let’s talk about why it’s so important that laid off workers are bringing their experiences into launching this new wave of startups.
1. They’re gonna build on what they’ve learnt
These data scientists, product geniuses and engineers are taking the lessons they’ve gleaned from the world’s biggest companies and refining them to create their own unique solutions, on their own terms.
Compounding knowledge is a gift. These emerging founders will be building on a cumulative base of knowledge that not many people in the world have.
They have unique experience playing a part in the inner workings of some of the world’s most bleeding edge companies, they’ve had a front row seat in big tech’s exploration of new frontiers in business, consumer relations, and technology.
Having that foundational experience can catalyze people’s problem solving and critical thinking skills in different settings – like when setting up their own company.
Like the potential Twitter rival Spill, these new companies will not be “copy-paste,” but will attempt to compensate for whatever shortcomings they perceived working on the inside of big tech. For example, Spill aims to use its own large language model AI to develop fairer content moderation. Twitter’s model, studies show, disproportionately mislabels tweets using AAVE (African American vernacular English) as offensive.
Creating solutions to improve on the original solution – that’s what compounding knowledge is in the tech world, and that’s what will make these founders so disruptive.
2. They’ll have more knowledge on business fundamentals
Big tech employees-turned entrepreneurs have other advantages over other young founders. Working in big tech has given them solid foundations for how a company should be run. This is especially true if they come from data, business development, or product teams.
These huge companies have spent years locking down their business fundamentals, and new founders will be taking those tenets into setting up their companies from day one. Which may mean far less avoidable missteps along the way.
Much of that experience will reflect what’s top of mind for forward-looking tech companies:
- Self service and automation. These former employees will know how to build for scale and the importance of scale. Which typically means they know how to build for customer self service, and automation across the company’s internal processes and external touchpoints.
- Data-based decision making. Working in big tech teaches you how to think about data, how to analyze data, and how data affects your spending and allocation.
- Demonstrating deep product-market fit before scaling. These people know the importance of finding depth before they find breadth. 35% of startups fail at least in part because there’s no market need.
- Prioritization. Experience at big tech companies allows you to think about prioritization. Not just how to prioritize customers, but balancing your multiple stakeholders.
For investors, this level of experience de-risks the investment. Some funds seem to be playing into this already: Day One Ventures has a set up a fund specifically for laid off workers.
3. They’ve learnt a few things from being laid off
We’ve all seen how turbulent the startup world has been over the past year. Many of the surprises were because there was discrepancy in how different people understood value. Essentially, public markets place value in a company based on revenue. However private markets, including venture capital, often place value in a company based on growth.
There was a correction to that discrepancy, with market conditions bringing down the availability of capital across the board – hitting big tech and startups alike. Which means that now, private markets are yearning for startups that prioritize revenue, instead of just growth without the promise of future profits.
Well, laid off workers lived that moment from within the public market. That will likely have left them with a highly ingrained appreciation that working towards profitability is a necessity, not something to be kicked down the road.
Ideally, these new entrepreneurs will set out a very clear path to how they monetize within the first few years. This doesn’t mean having an exact path to profitability, but a clear path to monetization immediately post finding product-market fit. That will require a deep understanding of which metrics are good indicators for product-market fit.
This is an exciting time for the new startups bursting onto the scene. These eager entrepreneurs come armed with the knowledge of what it takes to be successful.
For investors, more companies will start at a valuation that people can get on board with. And they won’t just appreciate the name behind laid off workers, but what they do with the unique experience and learnings they are bringing into the world of innovation.
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