Survival Guide for Tech Firms in an Economic Downturn
Finding the delicate balance between risk-taking and financial prudence
The number of tech companies that are owned by private equity doubled between 2011-2020, and the tech sector now accounts for nearly 20% of all PE deals, according to Pitchbook. Thus, private equity operators are playing a much bigger role in navigating tech firms through the current bear market, which partially explains why the sector has been hit so hard by layoffs and cost-cutting in the past 12 months. While the private equity playbook for helping portfolio companies weather an economic downturn is generally the same across industries (free up liquidity through prudent working capital and cost-cutting), research suggests diversification of products and IP can also help tech companies consolidate share position coming out of a recession.