Are Storm Clouds Gathering Over Silicon Valley?

Silicon Microchips

SRecent news from Silicon Valley has not been all disruption and billion-dollar profits. Quite the opposite, in fact.

The early weeks of 2019 have produced a slew of bad headlines for some of the U.S. tech industry’s most iconic companies. Reports of layoffs, nervous investors, and looming decline have been steadily trickling from Silicon Valley.

Less FOMO, more SOBS

Stock market volatility over the past few months has hit publicly-traded tech companies particularly hard, precipitating restraint among investors toward startups. One venture capitalist told the Wall Street Journal that the general attitude of investors is shifting from “fear of missing out” to “shame of being suckered.”

A possible result of this newfound caution is a shrinking number of “seed deals” for startup companies. The number of these initial investments dropped to 882 in 2018’s fourth quarter from more than 1,500 three years ago.

The Silicon Valley hustle

Hustle, a messaging-marketing startup, received millions in investment from Alphabet Inc., only to fall into trouble recently. Most startups fail, but Hustle, which WSJ characterized as “the picture of Silicon Valley largess,” is failing in a particularly Silicon-Valley way.

Some of its most eyebrow-raising expenditures have included on-tap kombucha and arcade games in company offices, a six-figure salary for its CEO, and an all-expenses-paid retreat for staff to Napa, California.

Unfortunately, CEO Roddy Lindsay recently announced mass layoffs.

More layoffs, stock routs

Two of Elon Musk’s companies have made similar announcements. Both Tesla and SpaceX say they will cut their workforces by 7 percent and 10 percent respectively — Tesla to increase profits and SpaceX “to become a leaner company.”

Speaking of “leaner,” Apple’s stock price has dropped by about 35 percent since November. At the beginning of January, it dipped 10 percent after the company slashed its earnings expectations for the first quarter‚ a move Apple has not had to make since 2002.

The final bit of bad news comes from Netflix, whose stock dropped 5 percent on Tuesday. Though the market was generally down amidst fears of an economic slowdown, Netflix’s dip was larger than most, precipitating prophecies of decline and fall.

Disrupting the disruptors

If this bad news keeps up, tech startups may soon find themselves with less money to spend on kombucha taps and arcade games. And if the economy really tanks — who knows? — these cats might even lose their home.

Image from Pexels.com

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