Why are technology companies so vulnerable to failure?

The last two months have been difficult for public and private technology companies.

More than 28,000 American technology companies have been fired this year, and the strike was called off in late June. And while early starters have been hit hardest by the layoffs, according to Crunchbase News, public technology companies appear to be on the mend.

At least 13 public technology companies were fired last month, many of them new. In May, that figure was only eight, according to our information.

So why technology?

We at Crunchbase News mainly cover technology and tech companies, so we may discriminate against you. But there is a more realistic answer to why technology companies have suffered so much in the wake of the market downturn.

Founder and President Patrick Haley said: “What you see is that many companies, especially development companies, are clearing their belts and pursuing their business plans and growth direction because we have a future.” Caliber Financial Partners.

Many technology companies – especially new ones – are considered growth-oriented and do not have as much cash flow as technology companies like Microsoft or Google (which Microsoft is said to be releasing its staff this week).

Those companies are trying to be more careful and protect their fluids until a more favorable macroeconomic environment is created. Inflation and interest rates are currently not being offered to development companies.

“When you have an economic downturn and a downturn, you see more costs incurred. This means more demand for more growth-oriented companies,” he said.

According to Joseph Schuster, founder of IPOX Schoster, which provides financial services related to the latest details, it could go both ways. When interest rates are low, growth stocks may increase. But in these times, “technology stocks are highly risky, highly growth companies and highly uncertain,” he said.

Closer look

Looking at the public technology companies that announced their release in June, most of them have been announced in the last year or two, including Apolvin, Unity and UIP. Those companies have used the macroeconomic environment to make it public, but now they are facing the challenge of fueling growth in an unfavorable environment, Haley said.

According to Schuster, companies tend to hire “to look good on paper” before the IPO.

“You want to show that you are a big operation and you still hire, even if you don’t want a lot of other people,” Schuster said.

So last year, through the traditional IPO, more than 50 VC-supported technology companies may have a larger group than they need, especially in a strong economic environment. Hence the need for reduction.

Not just technology.

Technology companies are now the children of job posters and stockpiles, and they are not alone in risking high interest rates and high inflation.

Additional sectors, such as electric vehicles and biotechnology, face similar risks. Many companies in those sectors may start firing to save capital and reach production levels. Once you get there, you can use debt financing or other options.

“Market realities make a difference, especially a year ago (compared to),” Schuster said. “It also shows the dynamics of companies; they have to live up to the realities of the market.

Example: Dome Guzman.