Silicon Valley prepares for layoffs, pay cut, job freeze
WASHINGTON: The Silicon Valley , an Indian entrepreneurship center showcasing the excellence of Indian IT professionals, is gearing up for a post-coronavirus period with layoffs, pay cuts and freezing of new jobs, a top venture capitalist said.
Well-known entrepreneur and venture capitalist M Rangaswami told PTI that while IT giants like Google and Facebook might take a different approach, many of the startups were instituting layoffs or pay cuts or a combination of both.
They are all making sure that they have enough cash in the company for 18 to 24 months. This is a bad time to raise money. Because if they go try to raise money now, they'll get very poor valuation, Rangaswami said reflecting on the mood among startups in the Silicon Valley.
So, I think for the next month, you will hear an increase in unemployment in the Bay Area, which has not happened since 2007, 2008. Even then, not much happened. But this will be the first time you will see it in a long time as after the 2000 bubble. This will be the same as that type of situation, said the
The Silicon Valley is bracing itself for a layoff in the startup community, he said, adding that this is something that the Bay Area has not seen in a long time. It's not like half the Silicon Valley will get laid off. It might impact five per cent of the workforce or 10 per cent of the workforce get laid off. And people might take a 10 per cent salary cut that type of stuff, he said.
It is not that the sky is falling, but the fact is that it has not happened in a long time, Rangaswami said.
Answering a question, he said, he cannot speak for large companies like Google and Facebook.
They may not do anything. But this is among the startup community. Definitely layoffs and lower wages, he said.
Large companies are likely to freeze hiring. That's what they do because they already have big business. They have plenty of cash on hand and can weather the storm. Right. But small companies, startups that are 10-20-50 million in size have to cut costs for sure. And the main cost reduction, of course, in this business is people, Rangaswami said.
Companies that sell to the travel and tourism industries will see a big drop in their commercial fortunes.
Rangaswami said Indian IT professionals with H-1B visas may not see much layoff because they are already saving a lot of money for their businesses.
They are already in jobs where they are saving clients money. Therefore, unless your business declines significantly, these people will continue to be needed. Only if there is a dramatic business downturn. And those H-1B workers are in that line of business and they don't need them anymore, so of course it would, he said.
But if it's just general IT projects, they shouldn't see any of that decline, he said.
It will affect Indian IT companies as if they are selling to travel, tourism, restaurants, hotels. Those who sell to financial services may not see any impact, he added.