Canada’s tech sector has grown rapidly in recent years, as local startups and overseas giants have begun hiring hundreds of thousands of educated and talented workers. But that expansion has slowed recently, as high inflation, interest rate hikes, and a cryptocurrency slowdown have taken a lot of optimism out of the sector.
Chris Albinson, CEO of Waterloo incubator Communitech, says the pullback in the United States is more pronounced because there are more of what he calls “go for the moon” companies with questionable fundamentals that suddenly find themselves unable to adapt to the new reality.
Canadian tech companies are doing comparatively better right now because in general they’re much better stewards of capital, he says, but that doesn’t mean there isn’t anxiety.
“Some of the founders were 18 during the last recession,” he told TUSEN News. “There’s going to be stress on the system, but I think they’re going to come out of this a lot stronger eventually.”
Ratings of tech giants like Meta, Amazon, Apple and Netflix have skyrocketed in recent weeks, and where there was once a fierce war for talent, many tech giants are implementing hiring freezes and even staff reductions.
US streaming giant Netflix said on Thursday it was cutting another 300 jobs, the second time in as many months that it has announced layoffs of this magnitude.
Crowdsourced website layoffs.fyi has documented more than 20,000 tech job cuts in the past two months alone, mostly in and around major US tech hubs like Seattle and San Francisco.
Although the cuts in Canada are less dramatic, they are happening.
Canadian fintech unicorn Wealthsimple laid off 13% of its staff last week, citing “unprecedented” levels of volatility as the reason for cutting around 160 positions. “Many of our customers are going through a time of market uncertainty that they have never experienced before,” CEO and Founder Michael Katchen told staff when announcing the news.
Jacqueline Au was among those laid off from the Toronto-based company. She suspected something was wrong when she noticed the company started spending less on its marketing department earlier this year. “When that happens…it’s natural for the team to think, well, what’s going to happen to my job, if we don’t spend money on marketing?”
It was her first time being fired, and although she said it was unpleasant, she takes advantage of the free time to think about what her next career move might be. She loves the tech industry, she said, but she knows more job cuts are coming, so she’ll be selective about who she signs with next.
“I think this is just the beginning, I think the industry is going to have to keep cutting fat to stay afloat,” she told TUSEN News. “I think there will be ups and downs, but winter is here to stay.”
Vancouver-based Thinkific laid off about 20% of its staff in April, and Sumeru Chatterjee was one of about 100 people laid off. Originally from India, Chaterjee came to the United States to attend college and worked in various tech jobs for about a decade before making the jump to come to Canada in 2020.
“Last year, the general feeling in the industry … was that we have to grow, we have to quickly expand our lead in the market to hire a lot of people,” he told TUSEN News. “So the layoff was kind of a dramatic turn of events.”
He says the tech industry has grown so rapidly over the past decade, largely by burning through venture capital funds to gain market share without having to worry about things like profits. “Normal business metrics like profitability and cash flow were … almost frowned upon, and I think a lot of people are realizing that if you want to run a business, you have to have certain fundamentals like a profitable business. and the customers who pay you.”
“Survive to Thrive”
The mood on the Collision conference stage in Toronto, where tens of thousands of tech enthusiasts from more than 100 countries converged in person to discuss all things digital, was decidedly positive this week. But on the fringes, there were whispers of bubbles bursting.
“Right now, everyone innovating and/or investing in technology or startups is trying to figure out what exactly is going on right now,” said Deena Shakir, partner at venture capital firm Lux Capital, based in Silicon Valley. “We are the topic of conversation at every partner meeting, and at every lunch and coffee.”
As she pushes back against the idea that the tech sector is back in a bubble, she adds one thing that is clearly bursting, and that is expectations of endless growth at the expense of profitability – which is a good thing. thing, she said.
“We have advised … our businesses to think long-term to ensure they have sufficient capital reserves to weather this storm,” she said. “Surviving to thrive is an important mindset to think about.”
Survival is key in the cryptocurrency space, which was rocked when a $12 billion trading platform known as Celsius froze withdrawals earlier this month. This has impacted big companies like Crypto.com and Coinbase. Although they have intensified during the pandemic, they are now laying off thousands of workers in the United States and Canada and rescinding job offers.
Many crypto companies were scheduled to attend Collision in person, but Paddy Cosgrave, founder and CEO of the conference, said many pulled out at the last minute. Celsius CEO Alex Mashinsky was one of those scheduled to attend, but did not.
“I can understand why [he] had to step down,” Cosgrave said. “I think he has a major fight to fight to resolve this situation.
Whatever dark cloud hangs over the crypto space, Cosgrave says it had no impact on overall footfall, which topped 35,000 — a zeal that makes perfect sense to him.
WATCH | Cryptocurrencies are in freefall:
“When things get uncertain, everyone is looking for answers,” he said. “And certainly over the last few weeks there have been a lot of big questions about what exactly is going on in tech and in particular in crypto.”
While the layoffs may be short-term, Cosgrave says the future for tech in Canada and abroad still looks bright.
“What happens when you fire really smart software engineers? A lot of them leave and start new companies, and some of those companies are already there,” he said.
WATCH | Tech sector hit by layoffs and cutbacks: