- Stella Alexandrova was one of 1,000 employees laid off by e-commerce giant Shopify in July.
- He saw the dismissal and 5 months of layoff as an opportunity to start a business.
- A recession is actually a good time to start a company, says venture capitalist Paul Asel.
Stella Alexandrova had been leading Shopify in Canada for three years when she received an email one morning in July informing her that she was fired.
Alexandrova said in an interview: I was shocked. “I was so confused because I couldn’t see it happening.”
Although there were layoffs at other big tech companies, he “felt very safe” and didn’t think his work would be affected.
Alexandrova was one of 1,000 employees laid off at the e-commerce giant this summer. Shopify CEO Toby Lutke explained the cuts in a memo, saying he had incorrectly predicted that pandemic-induced e-commerce demand would continue.
“Ultimately, placing this bet was my call and I was wrong,” Lutke wrote. “Now, we must adjust. As a result, we must say goodbye to some of you today, and for that I am deeply sorry.”
Tech companies have cut thousands of roles this year in an effort to cut costs and prepare for the recession. This month alone, Meta announced plans to lay off 11,000 employees, Twitter to lay off 50% of its 8,000 employees, and Amazon to lay off 10,000.
Alexandrova saw her dismissal as starting her own business.
“I can’t control the layoffs — that’s what happened and the company had to make these cuts,” he said. I can’t control the outcome but I can control my reaction.
It is unlikely to be alone. Entrepreneurship is known to thrive during recessions, and some of the most successful tech companies have emerged from recessions—like Airbnb, Uber, and Microsoft.
“When hiring is hot and salaries are high, a high-paying job at a stable company makes sense,” says Paul Assel, an investor at NGP Capital. But in a recession, “the opportunity cost of quitting a job and starting a company is much lower.”
This frees up potential entrepreneurs to pursue their ventures, he said.
Severance pay can be a bond
Alexandrova, an avid traveler, was planning a trip earlier this year when she realized the rise of DIY travel sites meant consumers were now spending hours on various sites organizing trips.
After he was fired, Shopify offered him a five-month severance, he said, effectively “paying me to start my own business.”
“It’s been five months that I haven’t had to worry about the income to pay my rent. It’s relieved that I don’t have to think about my bills, and that’s a runway that most people don’t get. At the start of their career.”
A week after she was fired, Alexandrova launched 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 danger of starting a business.
Asel said now is a good time to start investing because “the need for capital has decreased” and businesses can grow at a more moderate pace.
“One of the biggest mistakes any entrepreneur makes is trying to grow their business too fast, too soon,” Assel said. In a recession, entrepreneurs have more time to develop products that meet customer needs and increase the chance of success.
Assel said he “feels like it’s harder to start a business in a recession” because it’s harder to raise money, but “the likelihood of long-term success is actually higher.”
“It’s more painful at first, but that pain turns into success more quickly for those who can overcome the first hurdles,” he said.
Alexandrova now employs 11 staff and says the waiting list for Mave has grown to 16,000. He plans to fund this startup in time.