Jessica Pons for NPR
Monikers have followed Martin Pichinson for his whole career, given his line of work. He winds down technology companies, selling off their assets in their final days. And so, in some corners, Pichinson has become known as the “Undertaker of Silicon Valley.”
It’s a grim practice he has honed since the dot-com bust of the late 1990s, when he shuttered nearly 200 tech companies.
“If there’s no revenue incoming and there’s no money investing, the company is basically insolvent and out of business,” he said. “We basically come in and clean up the messes.”
Now, once again, Pichinson says, his business is booming because of the coronavirus pandemic.
“Well, we used to do two, three to four a week,” he said of startup wind-downs. “Now we’re [doing] two to five a day.”
Silicon Valley has developed a reputation for building up companies at hyperspeed, propelled by mega-financed investment that can result in overnight fortunes or colossal failures.
That zero-sum approach is now being reimagined as the coronavirus pandemic, which has spared no industry, rips across the technology sector.
Now, with cash reserves drying up and investors scarce, tech startups have put their business plans on ice. Hundreds of startups have shed workers. Other firms have had to fully liquidate.
Thousands of startup employees laid off
Pichinson, 73, is a brash and lively former pop-music manager who now lives in Beverly Hills, Calif., after a long stint in the San Francisco Bay Area. If his firm, Sherwood Partners, is busy, the startup world knows there’s trouble. The company has become so associated with burying failed startups that even the mention of his firm’s name in meetings can incite panic, Pichinson said.
He expects the number of startup companies that he is ending from the coronavirus downturn to exceed the carnage left behind in the dot-com bust.
“This is the great unwinding,” Pichinson said. “We don’t know what’s happening, but we do know everything we believed in is changing. Everything we thought to be true may not be true.”
At least 21,000 employees across more than 200 startups have been laid off since early March, according to Layoffs.fyi, a San Francisco-based job-loss tracking project. Experts say the true depth of the impact is likely far greater, with more than 2.2 million people employed by private companies financed by venture capital dollars, according to figures from PitchBook.
While far greater numbers of people in other industries, such as hospitality and food service, are losing their jobs, the pandemic could dramatically change startup culture. That, in turn, would deeply impact the country’s ability to innovate.
“Everything has been hit. I never in my life thought I’d see a black swan,” Pichinson said. “This is a black swan.”
There is a reason so many technology companies flock to Pichinson. The process he uses to end a troubled company is private, unlike a bankruptcy restructuring, which plays out in public court documents. The confidential nature of his service is a perk to those who do not want to be associated with a failed tech venture, avoiding any possible reputational hit.
So while Pichinson does not reveal what businesses he is closing, the mass layoffs in tech offer clues about which industries are especially feeling the pinch right now: those that rely on people leaving their homes. The list of companies laying off and furloughing thousands include restaurant-review app Yelp, daily deals company Groupon and scooter startup Bird.
Startups in food delivery, remote conferencing and telemedicine are on an upswing. That is the exception, though.
“A lot of startups that are only a couple years old and their business has just evaporated in the last couple months and could be gone for the next six months, they’re going to have a really tough road ahead,” said PitchBook technology analyst Paul Condra.
Young startups running on limited cash are not the only ones feeling the pain. The research firm Thinknum provided data to NPR showing that job postings for about 50 startups worth more than $1 billion have dropped nearly 30% since the outbreak of the virus.
Software engineer on losing job: “Wasn’t very high on my radar”
Condra said many tech jobs will never come back in the post-pandemic world. And firms are going to emerge leaner in the wake of the virus.
“Companies will be used to operating on a shoestring, also. So they’ll have found ways to potentially automate things or do something with fewer employees, and those practices will linger, because it’s all about efficiency,” he said.
In Austin, Texas, software engineer Dan Munro learned that he lost his job during a recent all-staff video chat on Zoom, naturally.
Munro had worked at the artificial intelligence company Alegion for six years. Sales collapsed when the coronavirus struck.
On the video chat, the founders announced that a third of the startup’s Austin-based employees would be terminated. Munro was one of them.
“No one enjoyed it. It was pretty rough for everyone because we’re a pretty small company and everybody knows each other really well,” he said.
Munro had to put his home up for sale. He also let the world know he was looking for a new job by changing the name on his Twitter account to “dan is interviewing.”
He hopes it catches the attention of companies like Google, Amazon and Facebook. Because while the startup world is being shaken, some tech giants are still hiring.
As a software engineer, Munro knows he has a specialized and sought-after set of skills, so while he misses the creativity of his old job, his larger concern rests with the less fortunate.
“There are people who are suffering and are much less well off,” Munro said. “I’m hoping, as a country, we can provide some care to those people.”