Canada’s technology sector has grown rapidly in recent years, as homegrown startups and foreign giants set about hiring hundreds of thousands of well-educated and talented workers. But that expansion has recently slowed to a crawl, as high inflation, interest rate hikes and a downturn for cryptocurrency have taken a lot of optimism out of the sector.
Chris Albinson, CEO of Waterloo-based incubator Communitech, says the pullback in the U.S. is more pronounced because there are more of what he calls “go for the moon” companies with dubious fundamentals suddenly finding themselves unable to adapt to the new reality.
Canadian tech companies are faring comparably better at the moment because generally speaking they are much better stewards of capital, he says, but that doesn’t mean there isn’t anxiety.
“There are some founders that were 18 years old when the last recession happened,” he told CBC News. “There’s going to be stress on the system, but I think they’re ultimately going to come out of that much stronger.”
Valuations for tech giants like Meta, Amazon, Apple and Netflix have cratered in recent weeks, and where once there was a fierce war for talent, many tech giants are implementing hiring freezes and even cutting staff.
U.S. streaming giant Netflix announced Thursday it’s cutting another 300 jobs, the second time in as many months it has announced layoffs of that size.
Crowdsourced website layoffs.fyi has documented more than 20,000 tech job cuts in the past two months alone, mostly in and around major U.S. technology hubs like Seattle and San Francisco.
While cutbacks in Canada are less dramatic, they are happening.
Canadian financial tech unicorn Wealthsimple laid off 13 per cent of its staff last week, citing “unprecedented” levels of volatility in explaining the cut of roughly 160 positions. “Many of our clients are living through a period of market uncertainty they’ve never experienced before,” CEO and founder Michael Katchen told staff in announcing the news.
Silver lining
Jacqueline Au was among those let go from the Toronto-based business. She suspected something might be up when she noticed the company started spending less on her department, marketing, earlier this year. “When that happens … it’s natural for the team to think, well, what’s gonna happen to my job, if we’re not spending any marketing money?”
It was her first time being laid off, and while she said it was unpleasant, she’s enjoying the time off to think about what her next career move may be. She enjoys the technology sector, she said, but she knows that more job cuts are coming so she’ll be choosy about who she signs on with next.
“I think that this is just the beginning, I think the industry is going to have to keep trimming the fat to stay afloat,” she told CBC News. “I think there’s going to be ups and downs, but winter is here to stay.”
Vancouver-based Thinkific laid off about 20 per cent of its staff in April, and Sumeru Chatterjee was one of the 100 or so people let go. Originally from India, Chaterjee came to the U.S. to attend university and worked in various tech jobs for about a decade before making the leap to come to Canada in 2020.
“Last year, the general sentiment across the industry … was we need to grow, we need to rapidly expand our market lead to hire lots of people,” he told CBC News. “So the layoff was sort of a dramatic turn of events.”
He says the technology sector grew so quickly in the past decade largely by burning through venture capital cash to gain market share without having to worry about things like profits. “Normal business metrics like profitability and cash flow were … frowned upon almost, and I think a lot of people are reawakening to the fact that if you if you want to run a business, you need to have some fundamentals like a profitable business and customers that pay you.”
‘Surviving so you can thrive’
The mood from the stage of the Collision Conference in Toronto, where tens of thousands of technology lovers from more than 100 countries converged in person to discuss all things digital, was unabashedly positive this week. But on the sidelines, there were whispers of bursting bubbles.
“Right now everyone who is innovating and/or investing in tech or in startups is trying to understand what exactly is happening in this moment,” said Deena Shakir, a partner at venture capital firm Lux Capital, based in Silicon Valley. “We’re the topic of conversation at every partner meeting, and every lunch and coffee.”
While she pushes back on the notion that the tech sector is back in a bubble, she adds one thing that’s clearly bursting are expectations of endless growth at the expense of profitability — which is a good thing, she says.
“We’ve been advising … our companies to think long term to make sure that they have enough capital reserves to weather this storm,” she said. “Surviving so you can thrive is an important mindset to think about.”
Survival is key in the cryptocurrency space, which was rocked when a $12 billion trading platform known as Celsius froze withdrawals earlier this month. That impacted major companies like Crypto.com and Coinbase. Though they ramped up during the pandemic, they’re now laying off thousands of workers in the U.S. and Canada, and rescinding job offers.
Many crypto companies were scheduled to attend Collision in person, but Paddy Cosgrave, the conference’s founder and CEO, said many of them pulled out at the last minute. Celsius CEO Alex Mashinsky was one of those slated to attend, but didn’t.
“I can understand why [he] had to pull out,” Cosgrave said. “I think he’s got a major fight on his hands to sort this situation.”
Whatever dark cloud may be overhanging the crypto space, Cosgrave says it had no impact on overall attendance, which topped 35,000 — a zeal that makes perfect sense to him.
WATCH | Cryptocurrencies are in a freefall:
Bitcoin and other cryptocurrencies are in freefall as investors flee risky assets amid rising interest rates. The world’s largest cryptocurrency trading platform, Binance, has also temporarily suspended cryptocurrency withdrawals.
“When things become uncertain, everybody goes searching for answers,” he said. “And certainly in the last few weeks, there’s been a lot of big questions about what exactly is going on in technology and in particular in crypto.”
While layoffs may be on the short term outlook, Cosgrave says the future for technology in Canada and abroad still looks bright.
“What happens when you lay off very smart software engineers? Many of them go and start new companies, and some of those companies are already here,” he said.
WATCH | Tech sector hit with layoffs, cutbacks:
After years of steady growth, global tech stocks and cryptocurrency prices are on a downturn, leading to layoffs and hiring freezes at notable companies.
