As the Start-Up Boom Deflates, Tech Is Humbled

SAN FRANCISCO — Over the past decade, technology start-ups grew so quickly that they couldn’t hire people fast enough.

Now the layoffs have started coming in droves. Last month, the robot pizza start-up Zume and the car-sharing company Getaround slashed more than 500 jobs. Then the DNA testing company 23andMe, the logistics start-up Flexport, the Firefox maker Mozilla and the question-and-answer website Quora did their own cuts.

“It feels like a reckoning is here,” said Josh Wolfe, a venture capitalist at Lux Capital in New York.

It’s a humbling shift for an industry that long saw itself as an engine of job creation and innovation, producing the ride-hailing giant Uber, the hospitality company Airbnb and other now well-known brands that often disrupted entrenched industries.

But in an industry known for irrational optimism, skepticism now abounds. In San Francisco, entrepreneurs are quietly sharing tales of skittish investors and a struggle to adapt to a new reality. Spreadsheets of freshly unemployed workers are circulating on social media.

Start-ups that once touted fast growth are changing their tune. Brad Bao, chief executive of Lime, wrote in a blog post last month that his scooter company was withdrawing from 12 cities and had shifted its “primary focus” to making a profit.

“Firms that were spending money in an un-economic way can’t do it any longer,” said Steven N. Kaplan, a professor of finance and entrepreneurship at the University of Chicago.

More workers are questioning the promises from start-ups, Kate Bratskeir said. She knows — she lost her job at a start-up twice in 12 months. A year ago, Ms. Bratskeir, 30, was laid off from her job as a writer at Mic, a digital media start-up in New York that failed to turn a profit. In November, she was again let go, this time from a marketing job at WeWork.

“People are becoming more critical and skeptical before just joining the party,” said Ms. Bratskeir, who received severance from both companies and is now working on a book about sustainable food shopping.

Some start-ups are even laying off the robots. Last month, Café X, which operates robot coffee shops and raised $14.5 million in venture funding, closed three stores in San Francisco. Henry Hu, its chief executive, said in an email that the company had “learned everything we could” from the shops and now planned to “laser focus” on airports, where it has two stores.

A bounce back does not appear likely soon. When Casper — which raised more than $300 million in venture capital — went public this month, its stock promptly plummeted. That served as a warning to other high-profile start-ups that are expected to go public this year, including Airbnb and DoorDash, the food delivery company. Both companies are losing money.

Airbnb and DoorDash declined to comment.

Perhaps the most drastic turn has happened among cannabis start-ups, which rode a wave of exuberance in recent years as countries like Canada and Uruguay and several U.S. states loosened laws that criminalized the drug. Last year, more than 300 cannabis companies raised $2.6 billion in venture capital, according to PitchBook.

Then in mid-2019, investors started doubting whether the industry could deliver on its lofty promises when some publicly traded cannabis companies were tarred by illegal growing scandals and regulatory crackdowns. Start-ups like Caliva, a cannabis producer; Eaze, a delivery service; and NorCal Cannabis Company, another producer, have together cut hundreds of members of their staffs in recent months.

“A lot of companies are not going to make it through this year,” said Brendan Kennedy, chief executive of Tilray, a cannabis producer that went public in 2018. Mr. Kennedy said he was stopping spending on new projects to survive the shakeout.

He added that he was building a new company. While he declined to specify what it would focus on, he allowed that there would be a major difference this time: The start-up, he said, had to be profitable from the beginning.

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