Tech Layoffs Shift Job Market Dynamics for Startups and Workers

After significant layoffs at major tech companies such as Google and Amazon, the job market is undergoing a profound transformation, particularly in the startup sector. The second wave of layoffs during the 2024-25 period has led to an influx of skilled professionals seeking new opportunities, fundamentally altering the dynamics between startups and potential employees.

The current environment has resulted in a competitive landscape for talent that was previously thought to be unattainable. Startups are now in a position to attract high-caliber candidates who are re-evaluating their career paths in light of longer job searches and shifting employment expectations. The average job hunt has extended to six to seven months, especially for individuals requiring work visas or relocation, prompting many to explore freelance opportunities or part-time roles.

Changing Job Expectations and the Rise of Freelancing

According to Bankrate, approximately 36% of American adults are now engaged in side gigs, with more than half initiating these ventures in the past two years. While many professionals did not initially plan to freelance, economic pressures have pushed them toward this option. Interestingly, some have found newfound freedom and job satisfaction through freelancing, as indicated by internal data from various sources.

Despite the media buzz surrounding the trend of overemployment—working two jobs simultaneously—this phenomenon remains limited to about 5% of the workforce, as noted by the Federal Reserve Bank of St. Louis. The more prevalent scenario involves individuals juggling multiple short-term projects or contracts, creating opportunities for startups to hire top-tier talent on a flexible basis that was previously financially unfeasible.

Streamlined Operations and Lean Teams

As payroll expenses continue to be a major concern for startups, many founders are opting to streamline their teams while increasing output per employee. For instance, Midjourney has reported an annual recurring revenue (ARR) of around $200 million with a mere 11 employees, while Cursor has achieved approximately $100 million in revenue with just 15 to 20 staff members. Data from Carta indicates that the average team size in the seed-stage consumer and fintech sectors has nearly halved since 2022.

This lean approach is not restricted to early-stage companies. A recent survey revealed that about 90% of tech executives are open to hiring freelancers during peak workloads, with over 28% already integrating freelancers into their daily operations. This trend illustrates that smaller, agile teams supplemented by contract workers can move faster and operate more efficiently compared to larger organizations.

The current job market offers advantages for both workers and startups. For job seekers, startups may represent a more stable choice compared to mid-sized firms that are cutting jobs. Startups often provide transparent risk assessments and the potential for equity or future roles based on performance. Conversely, founders have the opportunity to recruit exceptional engineers, designers, and operators under terms that were unattainable just two years ago.

The evolving landscape requires a shift in mindset for founders, including embracing flexible compensation structures, project-based roles, and expedited hiring processes.

The second wave of layoffs has not only altered expectations but has also shifted the supply and demand dynamics in the job market. Workers are increasingly blending traditional employment with freelance projects, while startups are demonstrating that nimble, focused teams can outperform larger competitors. As adaptability becomes the key to success, both companies and employees must embrace change to thrive in this new environment.

Pavel Shynkarenko, founder and CEO of Mellow, is an entrepreneur with over 20 years of experience and a pioneer in the freelance economy. In 2014, he launched his first HR tech company, Solar Staff, which generated more than $10 million in revenue for 2022 and 2023. In early 2024, responding to the growing demand for specialized solutions for contractor engagement, Solar Staff evolved into Mellow, currently achieving a monthly recurring revenue (MRR) of $1 million.

In summary, the current labor market reflects significant changes as startups adapt to new realities. With workers seeking greater flexibility and startups capitalizing on an influx of skilled talent, the future landscape promises to be both challenging and filled with opportunity.