May 26, 2024

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How Founders Can Leverage the Silver Lining of Tech’s Dark Cloud

Ritish Reddy, Co-founder, Zluri

Hiring and firing calamities have overwhelmed the tech industry in the last quarter. Mass layoffs from Twitter, Meta and Amazon have employees back on the job hunt, and we likely haven’t seen the end of it yet. The Conference Board predicts the unemployment rate will reach 4.5% in 2023, meaning nearly an additional million people will be laid off.

But it’s not all doom and gloom. Major tech layoffs add new fuel to the hiring cycle fire, leaving  the market rich with talent that companies looking to scale should actively recruit.

Despite the influx of bad news and concern that we have not yet felt the full effects of a bear market, founders have an opportunity for growth if they manage internal and external processes efficiently.

Specifically, there is a unique opportunity for founders to take advantage of the newfound availability of talent coming into the market after leaving big tech companies. In response to Elon Musk’s crackdown at Twitter, employees are opting to leave the tech giant for less-rigid cultures—which seems to be the standard for workplace excellence as we head into 2023. Startup and growth-stage founders with evolving cultures should prioritize building a structured but flexible workplace to attract and retain talent.

To help founders capitalize on the current market environment, we’re breaking down Q4’s biggest headlines and laying out the path for tech founders to find the silver lining and drive growth in early 2023. Here are three pieces of big bad news and how we are looking on the bright side:

1. From NPR: Should we worry about another dot-com bust?

As layoffs happen en masse, many outlets, including National Public Radio, are reporting that the current market conditions are not dissimilar to those at the turn of the millennium when the “dot-com bust” catapulted the U.S. into a two-year recession. Big tech companies and hyper-growth unicorns that were riding high on money borrowed with virtually nonexistent interest rates now have to rein in their growth-at-all-costs strategy. 

But we also know that with the right strategy, companies born during market downturns can pave the way for the next generation of business leaders. Take Salesforce for example. Salesforce was founded in a one-bedroom San Francisco apartment in 1999—right before the end of the dot-com heyday. Despite laying off 20% of its workforce in 2000, the company grew to 70,000 users and $51 million in revenue by 2003.

To rebound and find Salesforce-level success, founders should think about the experience they are fostering for their employees and customers. They can start internally by reevaluating their work policies. In these early days, founders have an opportunity to organically build flexible policies without disrupting years of legacy processes and office norms. To meet employees where they are, they should consider embracing flexible work hours and putting in place a system of measurement that prioritizes output over hours.

Furthermore, founders looking to recruit top-tech talent should be cognizant of the assumption that startups are inherently risky—especially in a vulnerable market. To do so, they can focus on their processes. A solid framework for internal and customer-facing operations can instill confidence in potential employees that they are joining a structured, efficient team.

2. From Tech Crunch: How companies can slash ballooning SaaS costs

The continued shortage of IT talent has CIOs and CTOs feeling the pressure as they manage the technology infrastructure of their companies, spurring conversations around citizen developer-driven Low code/No code tools that are made to enable non-technical teammates to tap into the IT backlog. However, any LCNC tool still requires an investment from the IT department.

According to the State of Business Technology Report by Workato, 57% of IT teams are feeling pressured to reduce SaaS spend. So how can founders have the best of both worlds without making things more difficult for developers?

One critical part of optimizing an organization’s tech stack is for It teams to have full visibility over the tools in their domain. An easy way to do this is to be deliberate about onboarding and offboarding processes. A clear process for on and offboarding can help eliminate shadow IT and redundancies and frees up capital. Even better, by enabling automation of onboarding and offboarding, founders can take this time-consuming task off of IT’s plate.

With tens or even hundreds of SaaS tools in play, founders should implement a strong SaaS governance if they hope to impact the bottom line. A strong SaaS governance involves three key parts: observability (like we talked about in the example above), continuous optimization, and automation. Instead of making the tough decision to eliminate one critical software tool, bring structure to your SaaS management and make cuts based on data, not instinct.

3. Yahoo! Finance: Senator Blumenthal discusses rail strike bill, FTX collapse, Twitter, Ticketmaster.

Both Ticketmaster and FTX are facing public scrutiny after separate instances earlier this quarter caused significant damage to consumer trust. Both FTX’s collapse and Ticketmaster’s mishandling of Taylor Swift’s Eras Tour have prompted regulatory concerns. Such instances can ripple through the entire industry and cast doubt on your business’s integrity by default, so make sure you stay true to your core business model as you scale

As you think about messaging in 2023, consider what is central to your culture. How are you prioritizing your customer or client experience? What things can you restructure internally to prevent your customer or client from feeling the effects of inflation and drive customer loyalty?

A strong brand identity can help mitigate the effects of negative public discourse. But the advantage for startups when talks of federal regulation make the news is the opportunity for startups and founders to lean into the areas where they excel.

Major industry breakups like Ticketmaster or the halting of the proposed merger between Kroger and Albertsons could be on the horizon, which leaves an opportunity for founders to capitalize on their strengths. To navigate this down cycle, founding teams should market those niche value propositions. For example, if your organization nails the 10-minute grocery delivery, make sure your clients know about it. If your product or service is truly disruptive, let it speak for itself.

Industry challenges are forcing tech to regroup, re-strategize how they deploy capital, and realign their value propositions. But the obstacles that big tech are navigating are also creating opportunities for startups to break through and take their space in the market. Founders should focus on curating a culture that attracts and retains talent for the long term, be diligent about their technology management, and drill down into their specific areas of expertise. The magnitude of this market downturn remains to be seen, but founders can make choices now that positively impact their longevity as we head into the new year.

Ritish Reddy is one of the co-founders of Zluri, provider of an enterprise SaaS Management and Orchestration platform, where he heads Marketing and Partnerships. Before Zluri, he was part of the founding team at KNOLSKAPE and Co-Founder at Cranium Media. Ritish is an MBA graduate and is passionate about building and scaling businesses from the ground up. He is an avid reader and loves exploring bookstores and libraries in different parts of the world.

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By I&T Today

Innovation & Tech Today features a wide variety of writers on tech, science, business, sustainability, and culture. Have an idea? Send it to submit@innotechtoday.com

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