HACKER Q&A
📣 baron816

Where are all the tech company closures?


The “tech bubble” has finally popped, and we’ve seen a large wave of layoffs in the industry. But unlike the dot com bust of the early 2000s, we haven’t seen very many tech companies fail (or at least I haven’t heard of them). Why is that?


  👤 muzani Accepted Answer ✓
Tech companies usually die quietly. Paul Graham wrote an essay around this: http://www.paulgraham.com/die.html

Startups tend to be 3 or so people, and often die when one does another thing (e.g. consulting) and another does something else (starts a second startup or does a degree).

Larger companies tend to just scale down. Not exactly layoffs, but salaries don't go up. The core members start quitting, and then the other staff see it as a hint that things are bad and quit too. They stop hiring new people. Core seniors are replaced with juniors or external consultants. These later gets replaced with the CTO. CTO eventually decides to try something new and exciting. Eventually there's nobody left.

There are some that just run out of money and declare bankruptcy to avoid paying salaries, but this is rare. Most are gently closed down. Airbnb pivoted to cereals. One place I worked in simply didn't renew contracts for anyone and only paid the CEO who didn't close it or take salary. When my startup ran low on money, we just sold it to someone who could reuse the tech and user base. Some startups IPO, which was a bold move once, but now part of the playbook.


👤 romanhn
The bubbles are entirely different. In dot com days companies were founded, funded and even IPO'ed with no business plans, few/no customers, no product-market fit and mostly grounded in "build it and they will come" notion. Quite a large proportion of dot coms was made up of companies that should never have been companies in the first place.

While there has certainly been some optimistic investment (looking at crypto in particular), the problems are nowhere near as systemic as they were in 2000. By and large, companies have products, products have customers, customers pay money. Clearly valuations have run way too high and are correcting, but it's a different unwinding process vs "umm, turns out there's nothing here."


👤 calculated
The bubble didn’t pop. I would call the situation as a post-covid work force correction.

👤 verdverm
Maybe it isn't as you say and that the layoffs were hyped out of context. Seems most of the layoffs are turning back over hiring. Most tech companies still have more employees than before covid

👤 Ancalagon
Lots of liquidity out there still from the ten year bull market. Depending on how long this downed market lasts we may see companies start to fall when their runway runs out. If interest rates continue to rise because inflation doesn’t come under control I imagine (just from my own startups finances) we will start seeing lots more companies go under in a year or two.

The issue for pre-IPOs is all the VCs are holding their breath.


👤 peruvian
I got laid off in late January and had a job within a month as well as three final interviews scheduled at the time. For now finding employment seems OK?

👤 ozten
Tech companies normally experience 6% - 12% attrition every year. The days of free money (interest rates) is over, so tech companies have been tightening the belt and reaping the PR benefits with wall street, but it isn't an insolvency situation.

SVB is a different thing, let's see how that plays out.


👤 imhoguy
Just wait a few days to see...

👤 jstx1
This is nothing like 2000 so don’t expect things to play out the same way.