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The Big Take

Tech’s High-Flying Startup Scene Gets a Crushing Reality Check

Job cuts and a sour investment climate are hitting big companies like Stripe and Instacart, and may slam smaller ones as damage spreads.

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Photographer: Daniel Ribar for Bloomberg Businessweek

Bilal Zuberi, a partner at the venture capital firm Lux Capital, has spent the past few weeks sharing an unsettling message with the founders of companies he’s invested in. Startups need to begin slashing costs, he says, which will almost invariably mean job cuts. “The world is falling apart,” he says, “and we need to act accordingly.”

Unlike the 46-year-old Zuberi, many of the people he’s bringing this message to have never gone through a significant contraction in the tech industry. When he told the chief executive officer of a company with hundreds of employees that it was no longer worth the billion-dollar-plus valuation it held in its most recent fundraising round, Zuberi says, the founder reacted with “confusion, fear, and denial.” The CEO had heard other predictions in recent years that dire times were descending, yet things never actually got that bad. Zuberi declined to name the founder or the company, because the conversation was private.