What happened: New programs launched in 2023 to help laid-off workers start their own startups amidst the tough fundraising environment, per Crunchbase. Seed-stage startups initially showed resilience to the venture funding pullback that started last year. However, this year even seed-stage startups are witnessing a funding decline, with quarterly totals for Q1 2023 reaching $3.1B, a 45% YoY decline from $5.6B from Q1 2022, per Crunchbase data.
Relevance: While "Ideas are not fundable as they used to be," startups with unique value propositions and tangible products are getting funded, says CoFoundersLab chair Steve Lehman. However, with the rising investor appetite for the generative AI sector, some newly launched startups in the industry are able to fetch funding without a business plan. Former Google AI researchers Niki Parmar and Ashish Vaswani raised funds for their new firm, Essential AI, at a $50M valuation.
Why it matters: Early-stage investment firm Day One Ventures' "Funded Not Fired" program, which aims to invest $100,000 in startups founded by executives laid off from tech companies, secured over 1,200 applications from individuals. CoFoundersLab is helping laid-off workers tap into a network of professionals that can help them find co-founders and provide business training and mentorship through their networking platform.
What the numbers say: Per Crunchbase, U.S.-based tech firms have laid off nearly 140,000 workers so far this year. While the primary reasons for the layoffs are the volatile economic conditions, rising interest rates, and difficulty in sourcing capital, organizations have also been impacted due to changing customer preferences post-pandemic. Several organizations acknowledged being "bloated" due to years of frenzied hiring. A reversal in VC funding trends and layoffs is expected this year.