Laid-off tech workers start their own businesses and compete with their former employers

Many tech workers affected by or fearing layoffs are exploring entrepreneurial options instead of looking for new jobs, writes ZDNet. Of course, they can work as self-employed individuals with independent contracts, but now there is an increase in the number of new companies.

According to a recent survey, 1,000 professionals laid off during the pandemic published by Clarify Capital, 63% of IT workers reported starting their own company after being laid off. Most of these new enterprises (83%) belong to the tech sector.

And here’s the most interesting thing: 93% report that they are now competing with the company that fired them.

There has been a noticeable jump in startup activity: technology startup incubator Accelerator Y Combinator reported a 20% increase in startup applications in 2022 and a five-fold increase in January 2023 year compared to the previous year, writes Yahoo.

“Often the most challenging times lead to the most innovative ideas,” says Zaven Nahapetyan, co-founder of Niche.club, and a former engineering manager at Facebook. “We are simultaneously witnessing both incredible technological progress, through decentralization, AI, and virtual/augmented reality, as well as profound social and cultural change. This combination creates countless opportunities for new businesses. If you can afford to take the risk and join or start a new venture, my advice to you is do it! There is no better way to learn than by doing, and who knows whether you would have the same possibilities in the future.”

Of course, starting a company, or even joining a startup, involves risk and vain expectations. And yes, even some startups are downsizing, but in general IT specialists who go this route tend to get more income and job security. Professionals surveyed by Clarify Capital reported that their annual income increased by an average of $13,000, and 58% of them feel more confident about job security at their new job.

Tech professionals didn’t necessarily launch their startups the day or week after being fired — a third of them launched within the first six months, and 40% did so within six up to 12 months after dismissal. And almost all of them started with initial capital, investing at least $20,000 of their own funds to start.

Industry observers agree that tech specialists have the skills and vision to lead the next generation of innovation, but recognize that launching a startup also requires business acumen:

“If you have a unique idea or what you perceive as an unmet need in the marketplace, then by all means, go for it,” says Mike Jarus, chief architect for Intradiem. “You still need to be reasonable and realistic though; get-rich-quick schemes are way more miss than hit. It will be a lot of work. But if you have a great idea, if you’re confident in your abilities, and if you can remain grounded in reality, then you should go ahead and give it a try.”

Industry observers give the following advice to professionals who are taking the first steps in entrepreneurship:

Temper expectations. One expectation to guard against from the start is that success won’t come overnight — rather, it will take years of building an organization and building a following. The majority of professionals (82%) surveyed by Clarify Capital reported that they did not have a client until they had been in business for at least four months.

“Building a successful startup takes many years, and most will live through both upswings and downswings in the labor and financial markets; this is normal and expected,” says Zaven Nahapetyan.

Ask yourself what business you want to be in. Tech workers choosing the entrepreneurial path need to scrutinize their plans as it is a very crowded and noisy market. Ask: “What problem am I here to solve?” “What need does my business fill?” And perhaps the most difficult test of all: “Can I explain my venture to family and friends?”

Recognize that starting a new venture often requires partners withcomplementary skills.

“Running a business is not the same as writing code, managing data, automating deployments, or any of the other things we do as technologists,” says Grant Fritchey, DevOps advocate at Redgate. “In addition to considering entrepreneurial opportunities, you need to be considering partners who are going to be able to help you with the business and sales sides of things. No matter how great your tech and your ideas, if you can’t manage the people necessary to deliver, and then sell people on the idea, you won’t succeed.”

Consider how it’s going to eventually scale. The ability to scale is what separates a startup entrepreneur from an individual entrepreneur.

“While this is a promising time for startups and small to medium businesses, founders and team members need to start prioritizing and planning their most efficient processes early on to grow a company successfully,” says Gabe Monroy, chief product officer at DigitalOcean.

“Scaling a business invites complexity, and no matter how much funding founders secure or the talented staff they bring on, these ventures can begin to falter if they don’t have efficient and scalable practices in place. This includes building infrastructure that is adaptable to changing demand, controlling cash burn early on, and staying focused on the early needs and feedback of your customers.”

Whether they’re contract workers or building full-fledged startups, many tech professionals recognize that they have valuable skills and insights to offer in today’s digital economy. Standard employment may not always be the best way to bring these talents to market.