Great crisis! In their sleep, they lost their jobs!

Tech 2023-05-16 21:01:51 Source: Network

On Labor Day on May 1st, IBM announced that 7800 people in the company will be permanently eliminated.In order to save $2 billion annually, IBM has launched an "expense management" program, one of the key measures being to suspend recruitment for positions that AI can handle, affecting approximately 26000 employees

On Labor Day on May 1st, IBM announced that 7800 people in the company will be permanently eliminated.

In order to save $2 billion annually, IBM has launched an "expense management" program, one of the key measures being to suspend recruitment for positions that AI can handle, affecting approximately 26000 employees.

IBM CEO Arvind Krishna emphasized that "30% of these positions will be replaced by AI." This means that at least 7800 employees will be unemployed.

Microsoft, the "elderly care powerhouse" in Silicon Valley, also kept up with the pace at the beginning of the year: laying off 10000 employees and investing $10 billion in OpenAI.

Although executives are emphasizing that AI has led to employee layoffs. However, from a global perspective, the trend of large-scale layoffs by internet technology giants has become inevitable, and AI seems to be unable to be the scapegoat.

From a deeper perspective, the liquidity tension caused by the Federal Reserve's interest rate hikes and quantitative easing policies not only curbs the expansion of large companies, but also makes them feel like frightened birds, striving to seek self protection from a long-term perspective.

This wave has also spread to China. According to data released by the National Bureau of Statistics on May 16th, the unemployment rate of 16 to 24 year olds in the survey reached 20.4%, the highest since the statistics began in 2018.

In the year of great changes in 2023, under the wave of layoffs, the pressure on employment will be increasing.

Star unicorns collectively fall down

The first quarter of 2023 is not yet over, but the sound of money shortage seems to be reverberating for a whole year. Even VC/PE began to howl.

According to news from Bloomberg last week, Tiger Global Management reduced the investment value of all its venture capital funds in unlisted companies by approximately 33% in 2022, resulting in a $23 billion decrease in the value of its startup investment portfolio.

The benchmark fund for commercial real estate in the United States, Blackstone BREIT (Blackstone Real Estate Income Trust), has also been facing continuous waves of "investor redemption" and forced "redemption restrictions" since the end of last year.

The most eye-catching one is Silicon Valley Bank (SVB), which was already well capitalized, but it's a flop. The key is that SVB is Silicon Valley Bank, which focuses on the technology sector. It is the 16th largest bank in the United States and also one of the most commonly used banks for many startups.

The joys and sorrows of humanity are not interconnected, and so are businesses. A large number of unicorn and celebrity companies have either declared bankruptcy or suffered a significant decline in valuation.

Just as ChatGPT exploded and attracted major internet giants to compete for Allin, and even this trend spread to China, Silicon Valley Bank, which is also in Silicon Valley, announced bankruptcy.

On the eve of the bankruptcy of Silicon Valley Bank, a star unicorn in the United States announced its downfall, which was the American autonomous truck unicorn Embark. The founder of the company, Alex Rodrigues, sent an email to the entire company stating, "Capital abandoned us and we are unable to raise funds. We are very sorry..." At the same time, the company announced that 70% of its employees were directly dismissed, and the remaining 30% were processed through the company's shutdown process.

In 2021, Embark successfully landed on US stocks through backdoor trading, with a market value of up to $5.2 billion (36 billion RMB). In less than two years, Embark went from peak to fall.

The same fate also occurred in another leading autonomous driving company. In October last year, ArgoAI, an autonomous driving company jointly invested by Ford and Volkswagen, was announced to be closed and dissolved. Its valuation once exceeded 50 billion yuan.

If the collapse of these two autonomous driving companies is due to investment institutions not seeing the feasibility of commercialization in the short term, they chose to stop losses in a timely manner. So the bankruptcies of many companies below can fully demonstrate that money shortage is no longer just an industry issue.

In the biotechnology industry, there have been at least four bankruptcy incidents of celebrity companies in January alone. They are Nabriva, an innovative anti infective drug development company engaged in the treatment of severe infections, Calithera Biosciences, Theonys, a tRNA drug development company, and Goldfinch, a kidney disease drug biotechnology company.

Last year, at least 9 unicorns in the cryptocurrency industry filed for bankruptcy, including the world's second largest cryptocurrency exchange FTX, which had a market value of $32 billion at one point. According to CBInsights, the number of new unicorns globally decreased by 85% from the first quarter to the fourth quarter of 2022.

According to a report by the Financial Associated Press, Morgan Stanley strategist Edward Stanley stated in a report on Thursday (March 16) that unicorn companies with valuations exceeding $1 billion will require $300 billion in funding by 2023, while startups with valuations below $1 billion will need $250 billion to "establish themselves", and "considering a simple calculation of burn rate, a large proportion of startups may go bankrupt in the second half of 2023".

According to CBInsights, the number of new unicorns globally decreased by 85% from the first quarter to the fourth quarter of 2022.

Significant shrinkage in valuation

On one side is the wailing sound of bankruptcy, while on the other side are the star unicorns distributed around the world, suffering from a continuous decline and contraction in valuation.

As of 2020, the total amount of fundraising raised by Israel's taxi platform Gett has reached $750 million. Previously estimated at $2.5 billion, it has now decreased to $265 million.

According to the Science and Technology Innovation Board Daily, as of mid December 2022, GoTo, the largest technology company in Indonesia, Bukalapak, the e-commerce platform in Indonesia, and Grab, the ride hailing giant in Singapore. These three Southeast Asian unicorns have lost a total market value of $51 billion since their listing. Behind them, there have been domestic internet giants such as Alibaba, Tencent, JD.com, Didi Chuxing, Qunar, as well as well-known investment institutions such as Chunhua Capital, Huaping Investment, Guangsu Venture Capital, Hillhouse Capital, and GGV.

Many domestic giants are also like this.

At the end of last year, according to the Financial Times, Xiaohongshu's valuation in the private equity market decreased from $20 billion to $10-16 billion.

According to Bloomberg News, recently G42, headquartered in the United Arab Emirates, acquired shares worth more than $100 million in ByteDance, and this share acquisition valued ByteDance at $220 billion. This valuation is a 27% decrease compared to the $300 billion valuation set during last year's stock repurchase program, and a significant discount compared to the $400 billion valuation in the market in 2021, with a decrease of 45%.

Not long ago, the low-key cross-border e-commerce SHINE was widely reported due to a sharp drop in its valuation, and even described by the media as "unknown to foreign companies due to a drop in valuation". When the F-round financing exceeded 1 billion yuan in April last year, SHEIN's valuation climbed to $100 billion. However, recently, the valuation of SHEIN, which is rumored to be about to go public in the United States, has dropped to $64 billion, a decrease of nearly one-third.

Some companies even voluntarily lower their valuations. Recently, Instacart, a fresh grocery delivery platform in the United States, publicly stated that due to market turmoil, the company's valuation has been lowered by nearly 40%, from $39 billion to about $24 billion, equivalent to nearly 100 billion yuan in Chinese yuan.

Even listed companies cannot escape bad luck. In the secondary market of the US stock market, SaaS has become a pillar industry, and related manufacturers have long been labeled with high valuations and high growth. But the market value of benchmark company Salesforce has shrunk by 40% in half a year, the stock price of capital market darling Twilio has dropped by 90% this year, and the market value of video conferencing software Zoom has shrunk by nearly 54%.

According to reports, starting from Q3 2022, the valuation of the vast majority of American super unicorn companies has at least been adjusted back to the previous round's level. Even the exclusive beast companies with valuations ranking among the top ten in the world are not immune.

Some investors have pointed out that unicorn companies need a long time to achieve a certain level of profitability, and currently they must obtain the necessary funds to survive by compressing valuations. This may become the New Normal.

The Crime of Global Interest Rate hikes

Why has the highly valued unicorn, which was once sought after, suddenly become difficult to raise funds? There is no denying that the technological foam is being punctured. And the more important reason is very simple, to describe it in three words, there is no money left.

Looking up the chain of unicorn financing, even Tiger Global Fund, which once dominated the global spotlight, has begun to shrink in the VC market.

You know, in China, Tiger Global Fund has launched a series of star companies such as ByteDance, Shence Data, Huolala, Zhenkunxing, Manbang Group, JD Logistics, JD Health, Dingdong Shopping, Meituan Dianping, and SHEIN, a super unicorn from China.

But in 2022, Tiger Global Fund reduced the investment value of all its venture capital funds in non listed companies by approximately 33%, resulting in a decrease of $23 billion (approximately over 150 billion yuan) in the value of its startup investment portfolio.

Another VC giant, Softbank Vision Fund, has also significantly reduced its investment. On March 2nd, Softbank Group reduced its holdings in Shangtang for the third time. This time, we reduced our holdings by 9.79 million shares at a price of HKD 2.5 per share. The cost price of Softbank Group's investor Tang D+round is around HKD 3.2 per share. Therefore, Softbank forced a 30% net loss reduction in its holdings. According to data from February this year, due to the intensified losses of SoftBank's Vision Fund, Sun Zhengyi's personal debt to SoftBank has reached approximately $5.1 billion, equivalent to approximately 35 billion yuan.

To some extent, this is related to the interest rate hike activities of the Federal Reserve and the European Union in recent years. The Federal Reserve has been continuously raising interest rates rapidly since 2022, with a cumulative (1bp=0.01%) rate hike of up to 450BP, setting historical records for both the magnitude and speed of rate hikes. This has led to a significant increase in risk-free returns in the United States, and the valuation of small and medium-sized technology companies has severely shrunk.

In addition, the liquidity tension caused by the Federal Reserve's interest rate hikes and quantitative easing policies has cut off the source of low-cost US dollar financing, directly affecting the financing channels of small and medium-sized technology companies. Moreover, the spending of start-up technology companies is more rigid, and they ultimately have to face bankruptcy.

Furthermore, this also triggered a large-scale run on Silicon Valley banks, ultimately leading to bankruptcy. And this crisis, like the domino phenomenon, has spread to Europe, with European banking stocks generally plummeting, Credit Suisse on the brink of bankruptcy, and Deutsche Bank evaporating more than a fifth of its market value.

In 2023, for star unicorn companies worldwide, this crisis has just begun. And the only thing they can do is to embrace change like Ali!

Disclaimer: The content of this article is sourced from the internet. The copyright of the text, images, and other materials belongs to the original author. The platform reprints the materials for the purpose of conveying more information. The content of the article is for reference and learning only, and should not be used for commercial purposes. If it infringes on your legitimate rights and interests, please contact us promptly and we will handle it as soon as possible! We respect copyright and are committed to protecting it. Thank you for sharing.(Email:[email protected])

Mobile advertising space rental

Tag: their Great crisis In sleep they lost jobs