Tech layoffs are creating a new era of scrappy (and humbled) founders

Meta, Twitter and Amazon lead the list of startup spin-outs

The onramps into Silicon Valley often include access to a smart mentor, a well-connected venture capitalist or even a rocket ship of a startup.

But an emerging class of founders is reminding the ecosystem how collapse can be an activator, as well. Laid-off talent is flocking to build startups within all sectors, from climate to crypto to the creator economy. And they’re hoping to course-correct where their alma maters — both Big Tech companies and small upstarts alike — went wrong.

New data from Day One Ventures, a venture firm backing seed-stage founders, shows how the seedlings are starting to bloom. Founder and GP Masha Bucher, who left her former life in Russia as a politician and TV reporter to become a venture capitalist, spun up a program to help potential founders in the wake of Stripe and Twitter’s recent layoffs.

She said she’s confident that at least 0.1% to 1% of the thousands of tech employees who were laid off this year could become incredible founders.

The firm got over 1,200 applications for its accelerator, announced in November 2022, which backs people who were laid off and are trying to start new companies. Over half the companies had already been incorporated, and a quarter that applied were built by women founders.

Bucher set out to invest in 20 startups with the program. Day One only made seven investments, but that’s actually good. “We’re not going to shrink the quality of the people we’re backing to make it like a social project,” Bucher said. Day One invested in startups that the whole team unanimously voted “yes” on. A third of the startups that Day One ultimately backed were built by women founders.

Around 4% of applications were laid off from Meta, formerly known as Facebook, which cut 11,000 jobs late last year and may have more coming. Around 1.2% of applications, or 14 startups, came from former Twitter employees. There were also applicants from Amazon, Lyft, Stripe and Salesforce.

Ultimately, nearly 260,000 people have lost their jobs over the past two years, according to Layoffs.fyi data.

Laid off, not laid up

For Peter Henry, his career thus far has been a build-up toward starting his own company. He just didn’t know it. The entrepreneur, a former baseball player, got laid off from his job as the vice president of MetaMap in October 2022.

The idea for his startup, Farmer Friends, began before he was laid off. An avid agricultural enthusiast, Henry and his wife bought an abandoned coffee farm in the Dominican Republic for $30,000 during the pandemic. The side hustle helped him understand how the underlying farming business and community worked.

Farmers struggle to access digital banking and different types of financial services because of their seasonal income. Traditional banking systems are either hard to reach or too complex to break into.

“When you work a job, you’re able to prove your income and prove where you live and it’s pretty easy to get access to credit cards and loans,” Henry said. “But when you’re a farmer, no one is judging a farmer and their risk on what they do; they judge them on not having a stable, steady paycheck because it depends on harvest.”

Also part of the Day One accelerator, Farmer Friends aims to help farmers achieve financial security. Being laid off allowed him to focus on Farmer Friends so he could add value to the world he both lives in and learns about on a daily basis — not only in a local sense, but also in a “more global scale to other critical pillars and farming communities.”

“There’s no real guarantee with anything. Today I have these nice coffee plants, and tomorrow this terrible disease comes and wipes out my crops; it’s really how do you hedge those types of things and plan ahead and make sure that you have a stable foundation so you can make those adjustments when those things come,” Henry said. “Whether you’re 10 years or 15 years or five years at a major company or small startup, there’s no real guarantee that there will be a tomorrow, and I think you have to live your life like that.”

Another founder accepted to the Day One accelerator program was legal tech startup Composure, built by Anmol Sahai.

The entrepreneur was laid off by Better.com, which went through several rounds of layoffs over the past year. And he said he’s not the only one who was laid off and went on to start other projects.

“Once the layoff happens, it seems like there’s a greater hunger, a greater willingness to go harder, run faster,” Sahai said. “A lot of people have failures, but bouncing back is what really makes you total, and so it seems like there’s a really big push to show that.”

He thinks that people who were laid off teaming up with others in the same situation will have different motivations than the cohorts “at general accelerators.” He would love to see other VC firms beyond Day One “capitalize on” that group of people.

It’s not philanthropy. It’s proactiveness

Longtime investor and entrepreneur Steve Lehman said he thinks failure is part of the entrepreneurial journey and that the stigma of being laid off should disappear.

Lehman is an investor in CoFoundersLab, which he describes as a “LinkedIn for entrepreneurs” that helps founders find startup partners based on skills, interests and location. The platform also has discussion boards, weekly live master classes and pitch practices. To capitalize on the tech exodus, CoFoundersLab announced a free one-year premium membership for workers who were laid off.

“We’re not doing this just as a philanthropic ‘we feel badly for you,’” Lehman said. “We’re doing this as a win-win [ … ] to bring a lot of really talented people into the community.”

Jen Zhu, the co-founder and CEO of Maida AI, is another member of the Day One accelerator. She was laid off from Carbon Health last year and is now building an AI-assisted tool for care teams to help combat clinical struggles.

She thinks there’s something to be said about a class of founders building after being laid off and starting after being told the market is challenging.

“We have something to prove that we can create something that is maybe better, more sustainable than [ … ] the companies that we came from,” she said.