In recent weeks, Cisco warned state and local employment officials it was cutting 108 workers in San Francisco; Instacart, 105; Aurora Solar, 115; Grammarly, 82; Okta, 83; and Salesforce, 51.

They’re not the only ones. Since July, tech companies and venture-backed startups have shed more than 3,000 workers in San Francisco. Over the last year, The City’s unemployment rate has risen and its tech employment has fallen.

And don’t expect the mass layoffs to cease anytime soon, business experts say. While there’s a lot of buzz about artificial intelligence possibly eliminating jobs, other factors are likely prompting the ongoing cuts, such as the swelling of tech workforces during the pandemic, a kind of herd mentality among tech executives, stock market pressures and the investment climate.

Indeed, if the overriding factor driving the job cuts is an attempt to address what many now see as overhiring during the pandemic, “we still probably have a few more years of layoffs,” said J.P. Allen, a professor at the University of San Francisco’s School of Management.

When San Francisco’s tech companies and startups started shedding jobs en masse in mid-2022, those initial job cuts weren’t much of a surprise.

Many companies in the sector had bulked up their workforces in the go-go days immediately after the COVID–19 lockdowns, expecting the boom in tech demand sparked by the pandemic to keep going — only to be caught flat-footed when it didn’t.

Meanwhile, numerous signs pointed to economic trouble ahead. Inflation was spiking, and interest rates were rising in response. The stock market had fallen precipitously from its highs the previous fall. Venture firms were starting to curtail their investments, and many businesses and economic experts were beginning to worry about a recession.

Less than two years later, the economic situation looks dramatically different. The stock market has more than rebounded. Company finances have largely stabilized or improved. Inflation is down and interest rates have started to fall. And fears of a recession have receded.

But the tech sector continues to cut jobs in large numbers.

All told, in California’s Employment Development Department’s fiscal year to date, which began July 1, tech companies, startups and traditional companies cutting tech workers have laid off 3,215 people in San Francisco. That’s down from the same period in the previous year, when the tally was 5,719. But it’s well above the pace of the period immediately before the onset of the pandemic, much less the boom times of three years ago.

Many tech companies have said they’re cutting staff to invest in other areas or to streamline their operations. For example, when Instacart announced earlier this month that it would lay off 250 people companywide, CEO Fidji Simo described the move as a kind of trade-off for the company.

“This will allow us to reshape the company and flatten the organization so we can focus on our most promising initiatives that we believe will transform our company and industry over the long-term,” he said in a letter to shareholders.

Grammarly plans to focus on investing in artificial intelligence and restructuring its operations to encourage more collaboration, CEO Rahul Roy-Chowdhury said in an open letter to employees earlier this month. The decision by the provider of automated writing-assistance software to cut 230 total workers was made with those priorities in mind, he said.

“To arrive at [the layoff] decision, we took a look at our organizational design and the current skillsets of our teams through the lens of our company strategy,” he said in a letter earlier this month.

But some business experts think there’s more going on than just streamlining and shifts in strategy.

Many tech businesses and startups went on hiring binges in the wake of the pandemic. The work-from-home era that immediately followed the COVID-19 outbreak prompted a surge in usage and demand for a wide array of online and digital services or technology products, including everything from computers to online shopping to video conferencing. Tech companies big and small responded by hiring workers to meet the surging demand.

Roy-Chowdhury noted that before its layoffs, Grammarly’s workforce had grown from 200 to 1,000 people over the preceding five years. Salesforce’s employee base jumped from 49,000 in January 2020 to 79,390 three years later. Okta’s workforce soared from 2,248 to 6,013 over the same period.

But in many cases, the heady growth companies saw in the early days of the pandemic started to taper off — and their expenses started to catch up with them.

Salesforce, for example, saw its sales grow 24% from its 2021 to 2022 fiscal years, which ended Jan. 31. But its revenue growth fell to less than 15% in the first nine months of its most recent fiscal year. Meanwhile, the company saw its profit shrink from $4 billion in fiscal 2021 to just $208 million two years later.

In many cases, tech companies seemed to conclude that they overstaffed during the pandemic boom and needed to get their workforces back in line with what they would have been if not for that bubble, business experts said. Even with the mass layoffs last year, many are still well above their pre-pandemic staffing levels, they note.

“The economy has not entirely reverted to the pre-pandemic situation, but many of those special circumstances [seen during it] have kind of gone away,” said Alex Field, an economics professor at Santa Clara University. “So, it’s not completely surprising that there would be a reassessment of where they stood at this juncture.”

Another factor likely playing a role in the ongoing layoffs is tech leaders following the playbook of their peers. Alphabet and Meta’s announcements in late 2022 and early last year that they were laying off thousands of workers helped set the tone for the industry. Those moves gave permission to other companies to follow suit, experts say.

“As soon as it becomes OK for people to lay off (workers), then the floodgates are open and this is your big chance,” Allen said.

The fact that Wall Street often reacted to layoff announcements by boosting company stock prices has given tech leaders an even bigger incentive to unveil their own cuts. That dynamic has largely continued today.

“Rightly or wrongly, the stock market is rewarding this behavior,” Field said.

Another factor playing into the ongoing layoffs is the investment environment. While the stock market is up and inflation is down, interest rates remain relatively high.

During the post-pandemic boom, interest rates were near zero, making it easier for tech leaders to justify investing in risky initiatives that might offer much bigger payouts in the future.

But investors can now get a decent rate of return by just parking their money in a bank account, Allen said. That makes it much harder for tech leaders to argue in favor of investing in new projects or large workforces rather than returning money to shareholders, he said.

Meanwhile, venture investment in San Francisco startups stayed relatively flat last year after falling 42% the year before, according to data from PitchBook. With new funding harder to come by than before, startups have been forced to be frugal, Allen said.

Among venture investors, like tech leaders, there’s likely a herd dynamic going on, he said.

“If everyone else is not investing, then it’s kind of OK for them not to invest at the moment,” Allen said. “If everyone’s still sort of hiding under a rock, then it’s OK.”

The tech industry tends to be marked by marked booms and busts. An up period can go south quickly with just a change of sentiment. Similarly, the current down period, in terms of employment, will likely continue until sentiments in the industry and among investors change, experts said.

That may come from pressure on tech leaders to show that their companies are growing or to prevent being left behind by rivals, Allen said. They may feel forced to bulk up their staff and invest in new initiatives. Likewise, venture investors will likely feel the need to start putting the money they’ve used to work in startups with promising technology, such as artificial intelligence, he said.

“Once those (new technologies) appear, then the floodgates will open again,” Allen said. “Then everyone will be in a desperate race, and then we’ll go up to the boom cycle again.”

Craig Lee/The Examiner 

The former location of Yoshi’s jazz club at 1330 Fillmore St. is going to get new life thanks to the hard work of local organizers.

An iconic former jazz club in the Fillmore is getting a new life due to the hard work of some local nonprofits seeking to revitalize small Black-owned businesses in the neighborhood.

The venue is Yoshi’s former sister location, which opened in San Francisco in 2007 as a live jazz venue and Japanese restaurant as an offshoot of the decades-old club in Oakland. But from the onset, the San Francisco venue struggled financially and was rebranded as the Addition in 2015 before closing altogether that year.

Now, the San Francisco Housing and Development Corporation, Fleming Development and Westside Community Health have joined together to lease the entire building at 1330 Fillmore St. It includes the former Yoshi’s spot, as well as some smaller commercial business space and the Fillmore Heritage Center.

The goal is to turn it into a food hall with an incubator kitchen for small culinary businesses that otherwise wouldn’t be able to afford brick-and-mortar spaces in the neighborhood.

“It’s such a difficult time, and we want to make sure that they are going to be self-sustaining,” said Pia Harris with the San Francisco Housing and Development Corporation.

Harris said the project will be different from another culinary incubator in The City — La Cocina, which is located in the Mission. Participants won’t necessarily be startups, but rather established businesses that need extra support.

“The Yoshi’s kitchen is so huge,” Harris said.

While the details are still being finalized, the project is currently working with some 30 small culinary entrepreneurs who might operate out of the space and share the cost of the rent, if they meet certain criteria.

“We’re really just trying to redevelop Fillmore back into the Harlem of the West,” Harris said. “There used to be hundreds of Black businesses, but now it’s not even an option because rent is so high.”

While music won’t be the focus in this new iteration of the business, Harris said it’s definitely a possibility that events and celebrations might be held in the space.

“The idea is to support the local entertainment and event producers,” in addition to the culinary entrepreneurs, she said. “It’s going to be really important to get experienced candidates as far as the producers and businesses that we’re supporting.”

Harris and her partners became interested in the space when the Mayor’s Office of Housing and Community Development put out a request for proposals last year.

So far they’ve signed a letter of intent with MOHCD and are in negotiations over the lease with the Office of Real Estate, according to Anne Stanley, the communications manager for the MOHCD. The deal is expected to be finalized by the middle of the year.

“We wanted to keep the ethos of the space being a public space with some kind of art or food or cultural activation,” Stanley said.

The length of the lease will be for five years, and could be extended for three additional five year terms. The City will still own the building while the organizations will maintain operations. Once the deal is finalized, it will go before the San Francisco Board of Supervisors for a vote, Stanley said.

In the meantime, others in the neighborhood are looking forward to the potential opportunities that reopening the club will yield for advancing the community and the history of the neighborhood.

“I’m really interested in how we’re going to reactivate that space and open that space up to the community,” said Shanell Williams, who worked for several years as a violence-prevention organizer in the Fillmore and still lives in the area. “Not only for entertainment purposes, but also for economic development.”

Many, including Williams, have said they feel that the long history of urban renewal and how it decimated the Fillmore’s business and culture from the 1960s and onward is a sore subject that has yet to be rectified by The City.

“That is the legacy that we’re dealing with in this community is that folks don’t have housing,” she said. “They don’t have those roots here anymore because of the unaffordability.”

Prior to the 1960s, the Fillmore was referred to as the Harlem of the West and was one of the more integrated neighborhoods of San Francisco, with a lively arts and music scene.

“We really created a thriving community that was becoming known around the world as a cultural haven for blues, jazz, food, and just the richness of diversity,” said Majeid Crawford, a Fillmore native and activist whose father and uncle played in the neighborhood’s jazz clubs.

But homes and businesses were bulldozed in favor of new housing and business locations, and by the time the redevelopment was over, costs were too high for former residents.

“Poverty started to set in, and then many people fled early on, because they just saw the writing on the wall,” he said. “They saw what was going on, it was too devastating.”

But the transformation of Yoshi’s and other projects in recent years have given Crawford, Williams and others hope that the neighborhood could reclaim some of its initial glory.

“I’m really hopeful that the space will continue to lift up that history and bring up even more social reform for our community,” said Williams.

Craig Lee/The Examiner 

Supervisor, Connie Chan, District 1, during a Board of Supervisors meeting at City Hall in San Francisco on Tuesday, July 25, 2023.

The Board of Supervisors approved a five-year extension Tuesday to the law that allows San Francisco to nimbly — or, according to its critics, ineffectively — address homelessness.

Legislators grappled Tuesday with how much latitude to give city officials responding to the ongoing homelessness crisis at a time when many question whether San Francisco is spending its money wisely.

Given the scale of homelessness in San Francisco, The City adopted a policy in 2019 that allows the Department of Homelessness and Supportive Housing to readily ink deals to expand homeless services without normal processes such as soliciting competitive bids.

In October, Mayor London Breed proposed extending that policy into 2029 but met pushback from supervisors.

“HSH has a budget of over $600 million and has had a contract waiver in place since 2019, allowing them to circumvent the city’s standard oversight process without any real results,” Supervisor Connie Chan, who chairs the board’s Budget Committee, said in a statement Tuesday.

In justifying the policy — which sets the departments of Public Works and Homelessness and Supportive Housing apart from other corners of city government — officials have explained that homelessness is an issue that demands a flexible, prompt response.

They noted that in the most recent Point-in-Time Count, a biennial census of The City’s homeless population, the overall number of people experiencing homelessness in San Francisco in 2022 had slightly declined while other Bay Area counties saw an uptick since 2019.

Several supervisors had questions, but the board ultimately adopted the proposal to extend HSH’s latitude over such deals on Tuesday by a 7-4 vote. Supervisors Ahsha Safai, Aaron Peskin, and Matt Dorsey joined Chan in voting against it.

The City’s spending on nonprofits and homelessness services was questioned in a 2023 civil grand jury report that noted San Francisco does not have a standardized way of evaluating the efficacy of services it funds.

In explaining her vote, Chan pointed to scandals plaguing San Francisco nonprofits. Last week, NBC Bay Area reported that federal Housing and Urban Development officials inspected a vehicle triage site operated by Urban Alchemy for potential violations of the Americans with Disabilities Act.

Last year, the nonprofit United Council on Human Services was cut off after an audit of the homeless-services provider — which had received about $28 million in City contracts — found financial mismanagement and a litany of other issues.

The streamlining policy does not create a contracting free-for-all. The Board of Supervisors must receive an annual report on streamlined contracts and still have to sign off on any deals that amount to over $1 million.

City officials have said the exemption from a normal bidding process can trim about three months off the time it takes to get a new project up and running.

In its first four years, the policy streamlined 159 contracts to 52 nonprofits, amounting to 10,199 units of supportive housing, 2,858 shelter beds and additional homeless services, according to HSH.