Another Philly tech company announced layoffs: dbt Labs. Is there relief in sight for the industry?

The latest local layoffs news came when local data analytics company dbt Labs announced it was letting go of 15% of its workforce last month.

In a letter to employees that was sent out on May 18 and later published on dbt Labs’ website, CEO Tristan Handy explained that the company experienced a lot of growth in 2020 and 2021, hiring hundreds of new employees. But by the end of 2021 and throughout 2022, the company slowed hiring plans because of  changes in the “economic environment.”

Tristan Handy. (Courtesy photo)

“Coming out of Q1 2023, the software market is looking at a longer recovery and we need to continue to adapt,” Handy wrote in the letter. “Our business is growing quickly, and acts as a steward to both dbt and the dbt Community. In this time of economic uncertainty, my priority is to ensure that we are able to continue to pursue our mission regardless of the external environment.”

Technical.ly reached out to dbt Labs leadership for comment about which roles were affected by the layoffs, what the current headcount is, and if they anticipate further layoffs. Spokesperson Kate Ward responded on their behalf and declined to comment, instead referring this reporter to the published letter.

The company counted 399 employees at the time of its acquisition of San Francisco-based Transform in February 2023, which added as many as 30 more to its headcount. That was up from 225 employees at the time of its $222 million Series D in February 2022, when Handy told Technical.ly he hopes to grow to 500 by the end of the year. As Technical.ly also reported in February, dbt Labs had laid off seven people — 2% of its team at the time — in January to address parts of the business where staffing didn’t align with its current needs, Ward told Technical.ly then.

National trends, local impact

dbt Labs is far from the first in the region to lay off a large percentage of employees in recent months. Gopuff laid off 2% of its workforce in March, and in the year before that had laid off larger chunks of employees. Earlier this year, Misfit Markets also laid off hundreds of employees as part of a consolidation effort before moving out of the Philly region.

Philadelphia Alliance for Capital and Technologies (PACT) President Dean Miller explained all of these layoffs by recalling the start of the pandemic. The tech industry initially boomed when the COVID-19 pandemic hit in 2020 into 2021, and during this time, tech companies hired a ton of people.

Dean Miller. (Courtesy photo)

At the beginning of 2022, heightened inflation hit, and by mid 2022, it was clear there was potential for a recession, so companies started to scale back after that period of growth, Miller told Technical.ly. As growth slowed, Big Tech companies such as Microsoft and Amazon enacted mass layoffs of tech workers.

“Those companies had hired so many people in such a short period of time, they really had to rationalize what those individuals are doing and cut back,” he said. “In Philadelphia, we didn’t see really fast layoffs in parallel with those early rounds by those tech giants. And I will tell you that I think it has a lot to do with the fact that the companies in Philadelphia did not grow uncontrollably in terms of hiring.”

While local companies were not laying off thousands of people, companies in the region were still impacted. Miller said it makes sense that companies would lay people off if there is a restricted amount of capital to grow, which could be seen as investors got cautious in 2022 and more recently.

“They’ve right-sized their organization, given the market and the uncertainty,” he said. “Your most important job as a CEO is to raise capital and build a sustainable organization, and if there’s any questions about the sustainability of it, then you need to take action. Oftentimes that’s cutting costs, and the biggest cost for any company is people.”

The hiring view

Miller has seen that most venture private equity-backed companies have been slower to hire, and especially are not hiring at the rate they were back in 2020 and 2021, he said. Even companies with money to grow need to be careful about their sustainability for the next few years.

However, he has also heard that people who are getting laid off seem to be finding their next position relatively quickly. To him, this shows that Philadelphia’s economy and the economy overall are still strong.

Miller calls himself an optimist. Looking forward, he expects the health of the innovation economy will turn around because of positive signs from IPOs and PitchBook data, for example.

“My hope and belief is that by the end of 2023, going into 2024, that we see more of a turnaround, further opening up the capital markets and capital raising and hopefully setting a foundation for a more extensive growth period in 2024 and beyond,” he said.