Are the technos the canary in the economic mine? If the cascade of layoffs in recent days at Twitter, Meta and Microsoft and within Montreal companies does not presage an imminent recession, it testifies to a sudden and obvious loss of patience among investors towards the technology sector.
“It’s not a very happy period for technology companies,” notes Guillaume Lajoie, spokesperson for the sector organization Startup Montréal. “Globally, we’re seeing fairly significant layoffs in large companies due to the drop in their stock market value. On the side of the smallest companies, jobs are being cut to meet the new desires of investors who are less patient and who hope for a faster return. »
Last week was particularly painful for the Montreal technology industry. Blaming an economic context that has deteriorated rapidly, the building materials supply platform RenoRun has laid off 43% of its 500 or so employees. RenoRun had already laid off 70 people last August.
All-round cuts
A few days later, Swedish video game producer Embracer announced the permanent closure of its Montreal studio Onoma. After two years of multiple acquisitions, Embracer says it wants to tighten its belt and has decided to exit mobile video games, the specialty of Onoma, better known by its former name of Square Enix Montreal. Some of its 150 employees have been moved to other Montreal divisions of the company, but the majority have lost their jobs.
At the same time, Microsoft and Twitter were also making layoffs. This week, it will apparently be Meta’s turn, US sources report. Facebook’s parent company is reportedly considering laying off “a few thousand” of its 87,000 employees worldwide.
The reasons for these job cuts vary from company to company, but the premise is the same everywhere: publicly traded tech has lost more than a third of its value since the start of the year. Economic forecasts for the coming year continue to be gloomy. This makes investors impatient.
Meta CEO Mark Zuckerberg predicted in late October that “we should end 2023 about the same size, or maybe we’ll be a little smaller organization than we are now.” The founder of Meta says he wants to “focus our efforts on a small number of priority projects in 2023”.
Microsoft sees demand for its cloud computing products plateauing these days. Twitter has a new boss who has just extended US$44 billion to acquire a loss-making social network that analysts estimate closer to US$25 billion.
Uncertain impact in Quebec
All of this has echoes all the way to Quebec. Twitter does not officially have offices in Quebec, but two of its main Canadian leaders based in Toronto have been dismissed, in addition to several other teleworkers spread across the country, including in Quebec.
The impact on us of the refocusing planned by Meta on artificial intelligence, short videos and the metaverse is less certain. Meta’s activities in Montreal essentially revolve around the research and development of artificial intelligence technologies. Part of this R&D is also linked to the metaverse, the immersive virtual environment on which CEO Zuckerberg is betting his company’s future.
In other words, Montreal employees of Meta should not worry too much about their near future. Sources within the Montreal industry consulted by The duty also say they have heard nothing negative about Meta’s activities in the Quebec metropolis.
What is more worrying in Montreal tech is a recent loss of investor appetite for a certain level of risk. More cautious investors hope to see their money sooner rather than later, which forces entrepreneurs to adjust their plans accordingly, explains Guillaume Lajoie of Startup Montreal.
“We feel that capital is becoming scarcer, so startups are cutting jobs and accelerating the marketing of their product or service, to meet investor expectations,” he says.
Technology professionals who are suddenly looking for a job shouldn’t worry too much either, adds Guillaume Lajoie. There is still a shortage of manpower in the industry to fill all the vacancies in more financially stable companies. “In fact, if talent is freed up by big companies, it could even help startups here,” he concludes.