Tech Workers Are in for a Shock As Layoffs Hit, Bill Gurley Warns

• Bill Gurley said recent high tech valuations are unlikely to be revisited.
• The Benchmark VC experienced the dot-com bust in 2001 and the Great Recession of 2009.
• Gurley said layoffs may be “heresy” for employees, but it’s better for companies to do them quickly.

Silicon Valley tech employees have been spoiled by lavish compensation and workplace perks, and now that a downturn is coming, these workers are in for a shock, says veteran venture capitalist Bill Gurley.

The Benchmark general partner, who has backed companies like Uber, Zillow, and Stitch Fix, wrote a tweetstorm, warning that valuations have collapsed and the highs — created by low interest rates in recent years — are unlikely to be revisited. Having been in venture capital for more than two decades, Gurley has seen his share of market downturns, including the 2001 dot-com bust and the Great

Recession

of 2009.

Companies are adjusting to the current downturn already, but “these adjustments are meeting with shock & surprise when it comes to the employee base, particularly those employees in the Bay Area,” he wrote. “During this rate induced boom, competition for employees created a Disney-esque set of experiences/expectations in high tech companies.”

Ironically, though, the cushy conditions he describes have come in part from the record inflow of venture capital into startups last year from firms such as Benchmark.

But funding has since retreated from those record levels, and startups are now tightening their belts in response. Companies such as BlockFi, Superhuman, and Cameo have reduced their staff in the last couple of months.

Layoffs and other cost-cutting measures may now come across as “straight up heresy” for many once-pampered employees, Gurley wrote. But in his view, it’s better for companies to follow suit sooner rather than later and deal with the reality of not being cash-flow positive versus maintaining the status quo. 

Sharing a list of companies that have laid off workers, he wrote: “The most dangerous move you can make is being a late add to this list.”