- Stella Alexandrova was one of 1,000 employees laid off by e-commerce giant Shopify in July.
- He saw the layoff and five months of severance as an opportunity to launch a business.
- A recession is a really good time to start a company, says venture capitalist Paul Asel.
Stella Alexandrova had been leading growth in Canada at Shopify for three years when she received an email one morning in July informing her that she was being laid off.
“I was surprised,” Alexandrova said in an interview. “I’m confused because I didn’t see this coming.”
Although layoffs were occurring at other major technology companies, he “felt pretty secure,” and didn’t think his job would be affected.
Alexandrova is one of 1,000 employees laid off at the e-commerce giant this summer. Shopify CEO Tobi Lütke explained the cuts in a memo, saying he incorrectly predicted pandemic-fueled demand for e-commerce would continue.
“Ultimately, placing this bet was my call to make and I made a mistake,” Lütke wrote. “Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.”
Tech companies are cutting thousands of roles this year in an effort to cut costs and prepare for the recession. Just this month, Meta announced plans to lay off 11,000 employees, Twitter cut 50% of its 8,000 employees, and Amazon cut 10,000 jobs.
Alexandrova saw her dismissal as a shot at starting her own business.
“I can’t control the layoff – it’s what happened and the business has to make the cuts,” he said. “I can’t control the outcome but I can control my reaction.”
He is unlikely to be alone. Entrepreneurship is known to boom during recessions, with some of the most successful tech firms emerging from the recession — such as Airbnb, Uber, and Microsoft.
It makes sense to get a high-paying job at an established company “when hiring is hot and the pay is high,” says Paul Asel, a venture capitalist at NGP Capital. But in a downturn “the opportunity cost of leaving your job and starting a company is lower.”
That, he said, frees up potential entrepreneurs to pursue their own ventures.
Severance pay can be a runway
Alexandrova, an avid traveler, was planning a trip earlier this year when she realized that the rise of DIY travel sites meant consumers were now spending some time trawling others’ t other sites to arrange trips.
Shopify offered him five months of severance after being laid off, effectively “paying for me to start my own thing,” he said.
“It was five months that I didn’t have to worry about an income to pay my rent. It gave me peace of mind that I didn’t have to think about my bills and it’s a runway that most people don’t get. people. in starting their business.”
A week after being fired, Alexandrova started her travel app Mave to help people plan trips in minutes. After sharing his plans to launch Mave on LinkedIn, the post went viral. Despite the support, Alexandrova fully felt the risk of starting a business.
Now is a good time to start your own venture, Asel says, because “capital requirements are down” and businesses can grow at a more moderate pace.
“One of the biggest mistakes any entrepreneur makes is they try to grow their business too fast, too soon,” Asel said. In a downturn, entrepreneurs have more time to develop products that meet customer needs, increasing the chances of success.
Asel said that it does “feel like it’s harder” to start a business in a downturn because it’s harder to raise money but the “long-term likelihood of success is actually higher.”
“It’s just more painful in the beginning, but that pain turns into success at a higher level for those who get past the first couple of hurdles,” he said.
Alexandrova has now hired 11 employees and says the waitlist for Mave has grown to 16,000 people. He plans to raise funds for the startup at the right time.