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.