The Great Tech Correction: What is happening in the tech market right now?
If you’re up to date with the digital and technology news cycle right now, you will have seen the multiple headlines announcing hiring freezes and layoffs across Australia, and overseas as well. As recruiters that are deeply embedded within Australia’s tech ecosystem, we never like to hear of redundancies however we can tell you, there are still companies hiring and candidates are still applying! Let’s take a closer look at what is happening in the tech market right now and what it means for businesses and job hunters in Australia.
A speedy market overview
It’s been a great few years for tech workers in Australia as the high demand for tech talent has presented some very lucrative perks and opportunities. The result, of course, was a shortage of workers across many industries. This trend became largely known as The Great Resignation’ in which 1.3 million people (or 9.5% of employed people) changed jobs during the year ending February 2022 according to the Australia Bureau of Statistics. These figures represented the highest annual job mobility rate since 2012.
Today’s market looks a little different.
Some of the common questions our team is receiving right now are:
- What are you seeing in the market?
- Has there been a shift?
- Are there more candidates out there at the moment?
- Are there still companies hiring?
- Is it safe for me to move jobs right now?
These are the number one questions being asked by savvy (and somewhat concerned) candidates and clients following redundancies from organisations like Meta (13 per cent), Tesla (10 per cent) and Coinbase (18 per cent) in the United States, and more locally at much-loved scale-ups like Envato (30 per cent), Swyftx (40 per cent), Linktree (17 per cent) and Immutable (6 per cent).
As recruiters speaking with organisations and individuals every day, we want to help you understand the underlying reasons for these redundancies and how they, in fact, represent an important change to the way capital is distributed. It seems more likely that the current course corrections we are witnessing, coupled with a handful of poor earning reports and redundancies at tech startups are really just masking what continues to be a strong demand for skilled tech talent.
We’re considering this change as ‘The Great Tech Correction’ and something which may create positive change in the market.
What are we seeing in the market?
We have two things going on at once right now:
- Big Tech Hiring Freeze: This is where your listed organisations (think Microsoft, Amazon, Google) are freezing all hiring. When market conditions change and share prices go down, Big Tech have a fiduciary (and brand integrity) responsibility to ensure that they are seen doing what’s required to reduce costs.
- The Great Tech Correction: This is where high-growth and commonly invested in scaleups are making portions of their team redundant.
Of the companies that have made redundancies, the number one reason that has been cited is the struggle to extend capital runways under tougher funding market conditions.
But what we are seeing is that the companies experiencing a lot of these hiring freezes and layoffs are specific to individual tech companies and their business models, rather than the tech industry as a whole. By nature, the organisations relying on funding are high-growth tech scaleups seeking 10 x returns for their investors in the medium term over sustainable profitability in the short term.
But why is this an issue? Many of the organisations that rely on investment have business models that prioritise gaining market share in a short window of time over profitability in the expectation that at some point the tables will turn and the scale of market share will lead to exponential growth and profitability.
These organisations have identified a boom is coming and they are sprinting as fast as they can to get ahead of the wave so they can be in the pole position to ride said wave (Mr Yum did this very well by getting ahead of other QR-code food ordering apps).
It’s fair to say that many of these high-growth businesses have likely benefited from a volatile market and these redundancies represent an attempt to correct some oversized predictions made or a change in market conditions due to external factors (the collapse of FTX has had wide-sweeping effects on the entire crypto industry). Fintech giant Klarna is just one example of this with their valuation falling a significant 85 per cent. Venture capital firm Blackbird also cut its valuation of privately owned company Canva by 36 per cent earlier this year.
With all that said, we know you’re probably reading this to find out what this all means for businesses and job hunters out there. Let’s fill you in!
A new era for tech companies
Despite the discomfort that comes from these redundancies, and the great uncertainty that clouds the market, we see The Great Tech Correction as the only way the market can recalibrate and ensure that the right types of businesses receive the right type of funding.
For some founders, the idea of investment in their business is THE marker for success as shared on the raw podcast The Unicorn Launcher. But in reality, taking on funding should not be considered lightly given the complexity, compromises and risk in relying on investment – something we’re seeing quite clearly with The Great Tech Correction. For many founders, the more funding you take the more stakeholders you have to appease which ultimately adds noise and *can* pull your focus away from your north star of solving the customer problem. But for the savvy founders with a good read on the market, a great product and saleable skills – opportunities for growth are out there. This goes for job seekers as well.
Job market need-to-know insights
For candidates, despite these course corrections, all signs point to a job market that is still strong.
It’s important to highlight that companies are absolutely still hiring and that many people who have been affected by these redundancies are being inundated with offers. The challenge for many is finding a role that sparks joy just as much (if not more) than it did in their last role.
As further evidence of a strong job market for tech talent, Liam Potter, former Technical Talent Partner at Mr Yum and now Technical Recruiter at Atlassian, had been contacted by 30 people about opportunities within 24 hours of redundancies being announced.
At the time of writing this article, we also found 10,816 results for open jobs for Software Engineers in Australia on LinkedIn. Not only that, Commonwealth Bank recently announced plans to hire another 100 Software Engineers in Queensland alone in 2023. Opportunities are still aplenty. View our Current Opportunities here.
A snappy recap: What are the key takeaways from this?
- The Great Tech Correction is something we should embrace, not fear as the raging hot job market we have witnessed over the past couple of years approaches its equilibrium.
- For candidates nervous about job searching in this market, don’t panic! Employers are still hiring. Many people who have been affected by these redundancies have been inundated with offers. This means opportunities are out there – you just have to find them. View our current opportunities.
- In the words of serial startup employee Nic Scheltema: “If you roll the dice on a high-growth startup then you’re rolling the dice on whether or not you’ll be at that business within six months, especially in this market” (Source: Australian Financial Review). Startups are a high-risk, high-reward environment and disruption is par for the course. If you’re a serial startup employee, keep your ears to the ground on market movements.
- If a company has had astronomical growth in a short period of time, then it’s a fair assumption they’ve benefited from a volatile market. While startups chasing sustainable profit early on aren’t as attractive to VCs as they don’t have the same 10x potential, they are sometimes the tortoise that wins the race. A good example of this is ‘overnight success’ SafetyCulture which was founded in 2004, didn’t do a Seed Round until 2013 and now has a $2b valuation).
- Look beyond the headlines. While we never like to hear about redundancies, there is still a healthy market. Herbert Smith Freehills (HSF) found that 76 per cent of Australian startup founders surveyed expect to raise capital within the next 12 months and 85 per cent believe that their next raise will be higher than their last post-money valuation.
- The Great Tech Correction is seeing investors be more vigilant with their coins… and that is a good thing! Coming out of 2020, investors had been holding cash for too long and were hungry to invest and quickly. Now, heading into a new market they are going to be more selective with where they put their capital which means you can see their investments as big ticks of approval for job hunters. Investors are going to be more heavily focussed on business models with growth plans that lead to profitability in the medium term over placing big bets on unicorns. While this is a more conservative investment approach, it reduces risk.
Want to chat further?
Whether you are exploring new opportunities, are hiring for your team, or just want to chat more about The Great Tech Correction and current market insights, we are here to help! Reach out to the Hunt & Co. team here.