Recent layoffs and fee cuts at venture firms point toward a difficult year ahead, but a longtime compensation consultant for VC and other private funds said the picture isn’t as grim as some might think.

“We’re still seeing that firms are moving forward, and they are planning to hire and not really laying off,” said Jody Thelander, founder and CEO of J Thelander Consulting, which gathers compensation data for thousands of private funds.

Thelander told me she hasn’t seen anything to make her think that firms have changed their outlook since she published a survey on hiring and retention in December. At that time, 67 percent of 187 firms polled said they expected to hire new employees this year.

“It’s down from when 80 percent of firms said they were going to hire in the year before, but it’s still a healthy figure overall,” she said, adding that if the percentage had fallen to 40 percent, that would have set off alarm bells.


Although the survey was done five months ago, it did ask firms how they would respond to a recession. When asked, “Are you planning on freezing hiring due to a potential recession?” 86 percent said no, and 98 percent said no when asked, “Are you planning on laying off staff due to a potential recession?”

Given those responses, the recent layoffs by Y Combinator and Anthemis Group may not be a sign of more to come. Y Combinator has said its layoff of 20 percent of its staff was due to the firm pulling back from late-stage investing, and Anthemis said it laid off 28 percent of its staff “to better reflect current market conditions and to set up the business for future growth.”

Thelander said if other firms do layoffs, it will most likely be “due to factors that are related to a person’s performance and ability to contribute.”

As for top performers at VC firms, they shouldn’t necessarily expect big increases in compensation this year. “Two years prior was a very big year, so it took top dollar to get top talent,” Thelander explained. “So, it is to be expected that there wouldn’t be large increases in salaries and bonuses when they were hired at a high level.”

While Thelander doesn’t expect major cuts at VC firms this year, I remain unconvinced that we won’t see more layoffs and maybe even see some firms call it quits because there isn’t enough LP appetite for another fund. The forces that led to a major decrease in VC fundraising in Q1 are still very much at play and we have no visibility as to when they will improve. And now we have the added worry that Congressional Republicans may refuse to increase the US debt limit, putting the US government in position to default on its debts as soon as June 1, which JPMorgan chief executive Jamie Dimon told Bloomberg TV on Thursday would be “potentially catastrophic.”

In the meantime, public market indexes and the volume of IPOs and M&A have yet to recover from their dismal performance last year. “Investors seem to be in a wait-and-see mode, looking for more clear indicators to give them confidence about the future direction of the market one way or the other,” according to a recent US Bank report.

Layoffs at large technology companies continue apace, with more than 358,000 tech workers losing their jobs since the start of last year, according to Layoffs Tracker. About 193,000 of those people have been laid off this year, up from about 165,000 for all of last year, the tracker said.

These are gloomy days, indeed. Venture capitalist Hunter Walk recently wrote in a blog post: “If 2022 was the year of the startup layoff, 2023 is going to be the year of the wind down. It will suck – for team members, for founders, for customers of these companies, and for their investors – but by the end of the year we’ll have gotten through the toughest part of the correction.”