Laid-off tech workers are launching their own ventures and competing with their ex-employers

63% of tech workers report they have started their own company post-layoff, according to a recent survey.
Written by Joe McKendrick, Contributing Writer
Young smiling tech pro
Getty Images/Yana Iskayeva

Could the coming months and years bring about a renewed burst of technology-driven entrepreneurial energy and innovation to the economy? Many technology professionals, hit by layoffs or the fear thereof, are exploring more entrepreneurial options instead of opting for standard full-time jobs. Much of it could be as "solopreneurs" involving gig work or independent contracting, of course, but it's notable to see an uptick in new company creation.  

By one count, 63% of tech workers report they have started their own company post-layoff, according to a recent survey of 1,000 professionals laid off during the pandemic years, published by Clarify Capital. Most of these new ventures, 83%, were in the technology industry.  

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And here's the fun part: 93% report they are now competing with the company that let them go. 

There has been a notable jump in startup activity, with Accelerator Y Combinator, the tech startup incubator, reporting startup applications increasing by 20% in 2022 and five-fold in January 2023 over the previous year, as reported by Aran Richardson in Yahoo Finance.

"Often the most challenging times lead to the most innovative ideas," says Zaven Nahapetyan, co-founder of Niche.club, and a former engineering manager at Facebook. "We are simultaneously witnessing both incredible technological progress, through decentralization, AI, and virtual/augmented reality, as well as profound social and cultural change. This combination creates countless opportunities for new businesses. If you can afford to take the risk and join or start a new venture, my advice to you is do it! There is no better way to learn than by doing, and who knows whether you would have the same possibilities in the future."  

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Of course, starting a company -- or even joining a startup -- is fraught with risk and dashed expectations. And, yes, even some startups reportedly have been cutting back, but overall, tech professionals going this route tend to see greater income and job security. Professionals responding to the Clarify Capital reported an average increase of $13,000 in yearly income and 58% feel better about their new job security.

Technology professionals didn't necessarily launch their ventures the day or week after a layoff -- one-third started within the first six months, while 40% made the move between six and 12 months later. And just about all are bootstrapped, with professionals investing at least $20,000 of their own funds to get started. 

Industry observers agree that technology professionals have the skills and vision to lead the next generation of innovation, but recognize that launching a startup also requires business savvy, "If you have a unique idea or what you perceive as an unmet need in the marketplace, then by all means, go for it," says Mike Jarus, chief architect for Intradiem. "You still need to be reasonable and realistic though; get-rich-quick schemes are way more miss than hit. It will be a lot of work. But if you have a great idea, if you're confident in your abilities, and if you can remain grounded in reality, then you should go ahead and give it a try."

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Industry observers provide the following advice to professionals taking those first steps into entrepreneurship:

Temper expectations. One expectation that needs to be tempered from the start is that there will not be overnight success -- rather, it will be years of building an organization and a following. The majority of professionals in the Clarify Capital survey, 82%, report they did not acquire customers until being in business for at least four months. "Building a successful startup takes many years, and most will live through both upswings and downswings in the labor and financial markets; this is normal and expected," says Nahapetyan. 

Ask yourself what business you want to be in: Still, tech professionals taking the entrepreneurial route need to thoroughly test their plans, as it's a very crowded and noisy market. Ask: "What problem am I here to solve?" "What need does my business fill?" And perhaps the most difficult test of all: "Can I explain my venture to family and friends?"

Recognize that launching a new venture often requires partners with complementary skills. "Running a business is not the same as writing code, managing data, automating deployments, or any of the other things we do as technologists," says Grant Fritchey, DevOps advocate at Redgate. "In addition to considering entrepreneurial opportunities, you need to be considering partners who are going to be able to help you with the business and sales sides of things. No matter how great your tech and your ideas, if you can't manage the people necessary to deliver, and then sell people on the idea, you won't succeed."

Consider how it's going to eventually scale. The ability to scale is what separates the startup entrepreneur from the solopreneur. "While this is a promising time for startups and small to medium businesses, founders and team members need to start prioritizing and planning their most efficient processes early on to grow a company successfully," says Gabe Monroy, chief product officer at DigitalOcean. "Scaling a business invites complexity, and no matter how much funding founders secure or the talented staff they bring on, these ventures can begin to falter if they don't have efficient and scalable practices in place. This includes building infrastructure that is adaptable to changing demand, controlling cash burn early on, and staying focused on the early needs and feedback of your customers."

Whether it's contract gigs or full-fledged startups, many technology professionals recognize they have valuable skills -- and ideas -- to offer to today's digital economy. Standard employment may not always be the best way to bring that talent to market. 

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