The Silicon Valley, hub of Indian entrepreneurship that showcases excellence of Indian IT professionals, is bracing itself for a post coronavirus period with layoffs, pay cuts and freeze on new jobs, a top venture capitalist has said. Also Read - COVID-19: Big Relief For Stranded Indians as US Allows H-1B Visa Extension Amid Lockdown
M Rangaswami, well-known venture capitalist and entrepreneur, told PTI that while the IT giants like Google and Facebook might have a different approach, many of the startups were instituting either layoffs or reduction in salary or a combination of both. Also Read - Amid Extension of COVID-19 Lockdown, JNU Starts Finalising Process For Online Exams
“They are all making sure that they have enough cash in the company for 18 to 24 months. This is a bad time to raise money. Because if they go try to raise money now, they’ll get very poor valuation,” Rangaswami said reflecting on the mood among startups in the Silicon Valley. Also Read - Kerala Students in Australia's Victoria Get a Helping Hand During COVID-19 Pandemic
“So, I think over the next month, you’ll hear a lot of unemployment picking up in the Bay Area, which has not happened since 2007, 2008. Even then, it didn’t happen much. But this will be the first time you’ll see that in a long time like after the 2000 bubble. This will equal that type of situation,” he said.
The Silicon Valley is bracing itself for a layoff in the startup community, he said, adding that this is something that the Bay Area has not seen in a long time.
“It’s not like half the Silicon Valley will get laid off. It might impact five per cent of the workforce or 10 per cent of the workforce get laid off. And people might take a 10 per cent salary cut that type of stuff,” he said.
“It’s not that the sky is falling, but the fact is that it hasn’t happened in a long time,” Rangaswami said.
Responding to a question, he said, he cannot talk for the big companies like Google and Facebook.
“They may not do anything. But this is amongst the startup community. Definitely layoffs and reduction in salary,” he said.
“Big companies will probably freeze hiring. That’s what they do because they’ve already got big businesses. They have a lot of cash on hand, and they can weather the storm. Right. But small companies, the startups that are 10-20-50 million is size have to do cost cutting for sure. And main costs cutting of course, in this business is people,” Rangaswami said.
Companies that are selling to travel and tourism industries will see a huge dip in their business fortunes.
Rangaswami said the Indian IT professionals on H-1B visas might not see much firing because they are already saving a lot of money for their business.
“They are already in jobs where they’re saving customers money. So unless their business declined significantly, these people will still be needed. It’s only if there’s a dramatic downturn of the business. And those H1B workers are in that line of business and they don’t need them anymore, then of course it would make it,” he said.
“But if it is just general IT projects, they shouldn’t see any of that decline,” he said.
It will impact the Indian IT companies like if they’re selling to travel, tourism, restaurants, hotels. Those selling to financial services might not see any impact, he added.