It's not so much COVID, it's that essentially what has happened is that the cheap VC investment and loan money dried up, as did the high valuations. That's the simple explanation.
It's been an entire generation of cheap or free credit. There are people who are now adults who have lived their entire lives well beyond their purchasing means because financing was close to zero, letting you live in a bigger house, drive a fancier car and all lifestyle aspects beyond what you could purchase outright. This is not a judgement call but just an observation, and now that interest rates have risen (quite modestly IMO) we're seeing the impact on just about everything. VC funding was not immune and despite the article downplaying cost savings, when employees are your major cost by a margin of 5-10x, lay-offs make an big impact on how long you can stay alive. The costs of lay-offs are overstated here based on my experiences on both sides of a lay-off.
The article might be over-arguing that layoffs are always bad, but it definitely raises responses to the idea that layoffs are always a good tactic:
> Layoffs often do not cut costs, as there are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. [...] Companies sometimes lay off people that they have just recruited – oftentimes with paid recruitment bonuses. When the economy turns back in the next 12, 14, or 18 months, they will go back to the market and compete with the same companies to hire talent. They are basically buying labor at a high price and selling low. Not the best decision.
Certainly it's a case-by-case basis, but I definitely remember companies such as Patreon doing layoffs in early 2020, only to be hiring again a few months later in the year.
For example, Tesla’s valuation was probably more dependent on that kind of investment because their valuation was based on the idea that full self-driving AI was achievable. Whereas Google isn’t because no one is waiting for Google to do anything amazing
But I pointed out COVID specifically because it seems tech companies overall benefited from the pandemic. Even I invested extra in tech companies during the pandemic because every other industry was physically being impacted by the virus.
If everyone trips and falls during the race, you’ll get first place, but it wasn’t because you got any better. But wait long enough and everyone will catch up
