The global tech industry has lost $7.4tn in one year after peaking during the COVID-19 pandemic.
According to a report by CNBC, as of this time in 2021, the Nasdaq Composite had just peaked, doubling since the early days of the pandemic. The report revealed that the tech sector was in a hiring frenzy, and tech employees were been prized with high-value stock options.
It stated that the landscape is currently different with none of the 15 most valuable U.S. tech companies generating positive returns in 2021.
Microsoft has shed about $700bn in market cap, with Meta’s market cap contracting by over 70 per cent from its highs, shrinking by over $600bn in value this year.
The report stated that investors have lost about $7.4tn so far, with interest rate hikes choking off access to easy capital, and soaring inflation making companies promising future profit a lot less valuable.
This has led to companies cutting costs, freezing new hires, and laying off staff. So far, 861 tech companies have laid off 138,112 employees in 2022 according to Layoffs.
Tech firms like Meta, Twitter, and Amazon have headlined these layoffs. When Meta announced it was going to lay off over 11,000 of its staff, its Chief Executive Officer, Mark Zuckerberg, said, “At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth.
“Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.”
He noted not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused the firm’s revenue to be much lower than he had expected.
Africa has not been isolated from the global tech reality. Reduced funding, high global inflation, and the ongoing Russia-Ukraine war influencing economic responses have led to reduced funding to start-ups. This has led some start-ups like Kuda, Quidax, Swvl, Wave, and others to announce layoffs this year.
Speaking to The PUNCH earlier, the Founder of Lendsqr and a trustee of Open Banking Nigeria, Adedeji Olowe, said, “These are factors that are influencing the movement of money away. This cycle, that is, funding scarcity is not going to last forever.
“It is likely to get worse towards the end of the year, although by next year it will start shaping up again. Between now and when things start getting better, start-ups without solid bases are at risk. A lot of this is already happening in the US. Start-ups are struggling and laying off staff, and when this is happening, it mirrors what might happen here too.”
He explained that because when start-ups here raise funds, they also raise overheads, and this is not sustainable without VC funds, adding start-ups here are likely going to start laying off staff in a bid to cut costs.”
According to ‘Africa: The Big Deal’, tech investments into Nigerian start-ups fell 25 per cent year-on-year from $1.45bn as of October 31 2021 to $1.16bn in the corresponding period of 2022.
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