Tech-startup investors expect a big ‘reset’ that creates ‘a two-year period of both pain and opportunity,’ with money still flowing to early-stage startups while older ventures face an uneasy road

As tech workers face mass layoffs for the first time in more than a decade, venture capitalists foresee a “period of both pain and opportunity,” and believe it could be a time for the industry to reset.

Tens of thousands of software engineers and other tech employees have lost their jobs so far this year, but VCs see silver linings in economic downturns: the potential for a rise in people starting their own companies. In discussions with MarketWatch after announcements of job cuts at powerhouse tech companies such as Inc. AMZN, -1.84% and Facebook parent Meta Platforms Inc. META, -3.29%, some VCs said they expect the downturn to last for the next year or so — as is typical of recessions — as the tech industry, which they believe had become overheated, goes through some adjustments.

According to data compiled by Challenger, Gray & Christmas, there have been about 59,000 tech-industry layoffs announced so far this year.

Now, a common utterance among the VCs is the “R” word: reset, not just recession.

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