Between Yahoo!, Mixpanel and Autodesk, the news out of Silicon Valley has been bleak. After years of strong growth – 5.2% in 2015 – the news from Silicon Valley is now more about layoffs than it is about new funding. But according to a DataFox analysis, rumors of a bursting bubble may be premature: strong Silicon Valley startups continue to grow their teams.
An analysis of the top 100 Silicon Valley private companies, as ranked by DataFox's quality score, shows that hiring is alive and well: over 1,500 jobs were posted at those companies in the last 30 days. And one company's crisis is another's opportunity – recruiters in the Bay Area are using layoffs to find new talent.
A larger index of 3,659 Silicon Valley private companies shows that while some companies are at risk, others are poised to grow. Roughly a third have not raised capital since 2013, potentially indicating a hiring slowdown; on the other hand, 16% have raised capital in the past six months. Expect this cohort to recruit aggressively from other startups' laid off workers.
- Though over 35 tech companies have announced layoffs since the year began, top Silicon Valley companies continue to hire.
- Companies in the DataFox index of the top 100 Silicon Valley private companies posted over 1,500 jobs in the past 30 days.
- Startups' headcount growth is likely to bifurcate: a broader index of over 3,500 private Silicon Valley companies shows that a third have not raised a round of funding since 2013, putting them at a higher risk of layoffs.
- On the bright side, about 16% raised funds in the last year, meaning that they are likely to grow their teams soon.
Faced with funding crunch, startups pare down teams
As venture capitalists pull back from early-stage startup funding, young companies are feeling the pinch. Startup funding fell 30% between the third and fourth quarters of 2015, signaling trouble for companies with weaker fundamentals.
The longer a company goes without raising a round of funding, the more likely a layoff becomes. DataFox analyzed a larger cohort of 3,659 Silicon Valley-based, private companies founded in the past 10 years to see when they had last raised a round of capital. Of that group, 33.6% have not raised a round of funding since 2015, and the median time since last raise is 18 months.
"This is just the beginning of the startup pinch," said Anisha Sekar, lead researcher on the study. "When money becomes tight, many early-stage companies lacking strong fundamentals fold, while those closer to profitability may cut down their staff or freeze hiring. That cascading effect hast just begun to play out."
Still, job seekers can find positive notes in the data: 15.8% of the companies surveyed have raised a round in the past six months, meaning that they will likely be growing their teams aggressively in the near future.
The chart below shows that many companies have raised capital relatively recently, and will be looking to spend that money on new talent:
Warning signs remain, but Silicon Valley is hardly down for the count – as recruiters and employers will be the first to attest.
Tech layoff victims are quickly snapped up by growing startups
The hiring picture in Silicon Valley is more nuanced than the headlines sound, however. Though startups with few customers and uncertain models struggle in a chilly funding climate, other companies are thriving – and hiring. Our index of the 100 highest-rated Silicon Valley companies by DataFox Score posted 1,533 jobs in the past 30 days, showing resilience to the funding downturn. These companies posted a median of 8 jobs, and heavyweights Uber, Dropbox, and MapR had all posted more than 75 full-time jobs.
Those companies are looking to grow their teams by a median of 1.76%, and top quartile hopes to grow by 5%.
Certain industries seem poised to weather the downturn. Here are the five sectors most represented in our index:
- Enterprise software (26 companies)
- Analytics (19)
- Mobile (16)
- Cloud computing (12)
- Social media (12)
For fast-growing companies with good business models, another startup's layoff represents an opportunity.
"We're actively growing our team, and we often look to recently laid-off employees," said Helen Howard, a recruiter at FastlaunchHR (disclosure: Howard contracts with DataFox for recruiting). "I'll sometimes reach out to candidates the day after a layoff is announced to say, 'I'm sorry about your company, but you have a great skill set, and I'd love to start a conversation.'
"The idea that all Silicon Valley startups are shutting their doors is just not true."
Methodology and scoring
DataFox analyzed the top 100 privately held Silicon Valley technology companies, as ranked by DataFox score. We sourced job listing data from Indeed.com, and employee headcount information from our internal database. Our broader index of 3,659 private Silicon Valley startups comes from our database of over 1 million companies, which draws on information from our data analysts, provided by third parties, and in-house natural language algorithms that process over 10,000 news sources daily.
The DataFox Score is the output of a machine-learning algorithm that measures a company's likelihood of success, and weights a variety of factors including from time since last funding round, headcount changes, management quality, investor quality, and web traffic.
We classified startups by industry using our proprietary Keyword Similarity algorithm, which assigns intuitive sector keywords by parsing companies' websites, news mentions, conference attendee lists, and other sources.
Media contact: Anisha Sekar, email@example.com.