Late-stage U.S. startups are scooping up talent unlocked by layoffs and hiring freezes at Big Tech, adding experienced engineers and project managers to their roster despite signs of an economic slowdown.
Companies, with steady cash flow from viable products in the market, are offering rich pay checks to lure talent that would have otherwise preferred working at big technology firms including Microsoft Corp and Facebook-parent Meta Platforms Inc.
Stack Overflow Chief Executive Prashanth Chandrasekar said the coding platform’s headcount had more than doubled this year to 540, with some of the new hires being tapped from firms such as Alphabet Inc-owned Google and Apple Inc.
“When competitors downsize, other talented people who are employed there may consider looking elsewhere, as they may not see their company as being stable,” Chandrasekar said.
Deepak Rao, CEO of X1 Card, said the credit-card startup’s headcount had more than doubled to 35 in a year and more employees from larger companies would join it in the coming months.
Google, Apple, Microsoft and Meta and did not immediately respond to requests for comment.
The hiring spree comes even as startup funding is drying up in the face of decades-high inflation, a stronger dollar and massive rate hikes, which have pushed Big Tech to pull back on their spending spree.
According to GlobalData, venture capital funding raised by U.S. startups fell by nearly a third to $146.3 billion in the first eight months of 2022.
“Tech startups reliant on ongoing VC funding have cut back on hiring, but companies in the later funding stages with viable products in the market are faring much better,” said Patrick McAdams, CEO of recruiting firm Andiamo.
“These companies have continued to hire strategically and are now able to take advantage of a softening tech hiring market to make key hires that were nearly impossible this time last year (when the pandemic drove up demand for tech workers).”
A survey of 581 executives, almost entirely from U.S. tech startups, showed that more than 40% of them boosted their hiring plans in the first half of 2022, according to hiring firm A.Team and startup consultant MassChallenge.
Companies are also shortening hiring times and offering higher pay packages to lock in candidates as they compete for talent in a tight labor market, recruiters said.
A greater say in decision making provided by startups has also appealed to executives such as Mansoor Basha, who joined Stagwell, a $2.2 billion marketing firm, as technology chief in September from Accenture.
“An opportunity to make key decisions internally was important for me,” he said.
Still, some analysts warn there is only so long until startups can continue the hiring pace amid a weak economic backdrop.
“If the economy does indeed go into recession, it will only add to the pressure faced by tech firms as demand dries up,” says Dante DeAntonio, director of economics research at Moody’s Analytics.
