The global technology ecosystem was the talk of the world economy up until 2022. The sector thrived, and tech companies reached record-high valuations, while other industries contracted or experienced a recession.
The value of the global IT sector has decreased by $7.4 trillion since its peak during the COVID-19 epidemic. In response, 1013 tech firms cut 153,160 jobs in 2022, which is 59.57% more than the 95,991 jobs that had been cut since COVID-19’s inception before 2022. 210871 employees were laid off by 800 tech startups in 2023 alone.
These layoffs were led by tech companies including Meta, Twitter, and Amazon. Nigerian startups were not cut off from the global tech industry landscape.
As a result, a large number of formerly employed, competent tech workers who had become accustomed to earning relatively high incomes are simultaneously flooding the labor market. Their predicament is made worse by Nigeria’s struggling economy.
Nigeria has gone through recessions in the last eight years, and this year is expected to see more value decline in the naira, the country’s currency.
According to Crunchbase data, at least 1,702 employees of U.S.-based digital businesses, including Uber, Zulily, and Sonos, were let go during the week ending June 23. Its layoff tracker indicates that at least three startups closed their doors last week. We consider how the Nigerian VC ecosystem would be impacted by these ongoing layoffs.
Still Looking Bad
As of December 2022, the Nigerian startup ecosystem was home to 3,340 startups, about five times as many as Kenya, the continent’s second-largest startup ecosystem. Nigeria is the ideal location for talent development in Africa because it is home to five of the continent’s seven unicorns, which has been essential to the country’s push for a digital economy.
But given the recent rounds of layoffs, investors’ concern about where to put their money is probably going to persist. Due to the reset brought about by rising interest rates and a slowdown in global economic growth, which was followed by ongoing layoffs in the US, the conditions that once drove venture capital firms and equity firms to sign large cheques are no longer sufficient.
There will probably be a few more layoffs among Nigerian startups, similar to what happened in the US. Startups will strive to remain effective and sustainable, and firing employees can be the best solution.
It is true that the bar for funding has increased and that investors are paying more attention to sustainability and profitable growth paths than just pure user or revenue growth.
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