Pando

Behind tech layoffs lay systemic cash flow negative companies

By Gonzalo Espinoza Graham , written on June 3, 2020

From The IPOs Desk

Since the pandemic started, there’s been approximately 61,260 tech layoffs [1]. Close to 30% of the layoffs came from public tech companies, 85% of those companies are unprofitable.

All of the US-based publicly traded tech companies that have announced layoffs in 2020, plus their revenues and net operation profits (loss) for Q1 2020 and 2019 [2].

No deep insights here, just the simple fact that the once growth hyper focused startups grew to be publicly traded companies without ever sorting their unit economics, and now their mediocracy has real consequences on real people.

This includes household names such as Uber, Lyft, Casper, and Eventbrite which we’ve all used, and begs the question: why did we allow so many unprofitable companies IPO? When did losing money become acceptable and the new normal for publicly traded companies?

Chamath Palihapitiya’s “VC Ponzi Scheme” monologue comes to mind. It also makes me wonder why we made such a big deal about WeWork’s IPO fiasco yet we don’t talk about the deplorable shape of some of the mature tech companies and their consequences on our community.

Here’s to a new generation of entrepreneurs who prioritize building sustainable businesses.