Big Tech layoffs could generate wave of future startups

NextView Ventures cofounders Lee Hower (left), David Beisel (center), and Rob Go (right) are looking to back teams laid off from tech companies.Aaron Pressman

Layoffs and spending cuts at tech companies can have a surprising impact on the local economy.

For the past year, high inflation and tumbling stock prices have turned the tech market’s boom into a bust. Dozens of tech companies have laid off workers and put expansion plans on hold — and just this week, fitness-tracker maker Whoop and data company Definitive Healthcare announced new cuts. But while most laid-off workers scramble to find new jobs in a downturn, some decide to strike out on their own and start new companies.

And that could eventually benefit the Boston startup scene.

“We know that a huge number of VC-backed entrepreneurs are corporate ‘refugees,’” Harvard Business School professor Josh Lerner said. “We also know that there is a strong connection between large layoffs and more entrepreneurship in general.”

So while local job cuts at Amazon, Meta, and Twitter — alongside layoffs at smaller companies like iRobot and Wayfair — reduce employment in the short term, they also prompt startup formation and future job growth, Lerner said.

“Unemployment is potentially a destructive experience,” concludes a 2014 study from The Ragnar Frisch Centre for Economic Research. “But unemployment also triggers creativity.”

At least one Boston VC firm wants to feed that trend. NextView Ventures started taking applications for its fourth annual startup accelerator program this week and is looking for ideas from groups of people who have worked together in the past and may have been laid off. They also see potential in groups who are still in Big Tech but are stymied by spending cuts.

The Wayfair company location on Boylston Street in Boston on Feb. 13, 2020. While local job cuts at companies like Wayfair reduce employment in the short term, they may also prompt startup formation and future job growth.David Ryan/Globe Staff/Boston Globe

“Most people working at a big tech company in the not-too-distant past wouldn’t have thought to leave and start a company because that was a pretty comfortable place to be,” said Lee Hower, one of three founding partners at the firm. “But now those companies are changing their focus and taking less moonshots.”

The half-dozen or so companies chosen for the NextView accelerator will participate in weekly programming and advice sessions and get $400,000 each in backing.

NextView has had some hits from betting on what the firm calls “alumni pods,” Hower said. The founders of advertising-tech startup TripleLift got to know each other at AppNexus, for example, and the founders of Drift worked at HubSpot.

“High-caliber teams that have worked together before are just so far ahead in their ability to execute,” NextView’s Rob Go said.

NextView focuses on early-stage startups that appeal directly to consumers or use consumer-like strategies to appeal to business customers. Past startups it has backed include Whoop and Waltham health tech firm Devoted Health.

The rise of artificial intelligence apps that can create art, imitate voices, and compose text has also caught NextView’s attention. The firm has already backed one startup taking advantage of what’s known as “generative AI” and expects to find more this year, NextView’s David Beisel said.

“The classic uses of AI were about analysis and formulating conclusions; this is about creating something new,” Beisel said. “It is going to affect how a lot of creative professionals do their work.”