A wave of pessimism has washed over the global economy this year amid inflation, rising interest rates, the Covid-related slowdown in China, and the Russia/Ukraine war. Nowhere has that pessimism been felt more than in the tech startup and venture capital ecosystem.

For most employees in the tech world, today’s environment is a sharp contrast to the 2008 financial crisis, which saw tech companies fare comparatively well relative to the rest of the economy. The dotcom era boom and crash draws a closer parallel to today, but many startup employees are under the age of 40 and were not in the workforce to experience it firsthand.

As a result, the economic slowdown of this year seems unprecedented for many people in and around the tech sector. Headcounts have shrunk and valuations have fallen, leading to instability and uncertainty among executives and employees alike. How can founders safeguard the mental health of their teams as we pass through a new era of economic turbulence?

Be decisive and communicate candidly

Layoffs are dominating the conversation, as a variety of companies from Meta and Twitter, to Coinbase and Asana, let go a large number of their employees in a short period of time. The first thing for founders to note is the hidden costs of letting go people. For later-stage companies, headcount reductions may be the fastest way to cut costs, but in a small, tight-knit team, losing colleagues can have a lasting impact on the morale and mental health of employees who stay in place. Some may suffer ‘survivor’s guilt’, not to mention the stresses associated with a change in their workload and responsibilities. Founders should consider every alternative first.

Communication is essential. Even if they are not showing it, teams will be nervous right now, so founders must address job security fears directly. If a company has a strong cash position and thus a long runway, management should not assume employees know that, but rather inform them directly that their company is not at risk of shutting down.

“We had a frank conversation with the team about our financial position and how much runway we have,” says Gaurang Choksi, founder and CEO of Violet, a startup that benchmarks and upskills healthcare providers to serve patients with diverse identities. “Honesty and over-communication help employees feel a sense of safety, no matter the outcome.”

If layoffs are required, inform the whole company. Ensure the best treatment possible for laid-off employees. Laid-off employees will always be part of a company’s story and will continue to tell that story in the future. Twilio gained plaudits for offering 12 weeks of severance pay and full value of the company’s next stock vest when it reduced its headcount in September.

Letting employees go means doubling down on the team that remains in place. They may fear that they will be the next to go or feel “survivor’s guilt” about staying in place. They will also be working under more pressure.

“As we’ve seen around the private sector, high performers who stay with a company are doing more with less and that’s resulting in increased anxiety, burnout, and disengagement. In other words, mental health services are more important now than ever,” says April Koh, co-founder and CEO of Spring Health, a Crew Capital portfolio company, which provides tailored mental health services to employees.

Offer support that is data-driven and personalized

While widespread layoffs are a recent, temporary trend in the tech industry, startups have been grappling with mental health issues for a long time. Startups typically have passionate, close-knit teams with demanding workloads. Coupled with the pandemic, this has increased psychological challenges for employees.

According to a Brown University study, the depression rate among Americans tripled during the pandemic, while depression became one of America’s most costly illnesses to the tune of over $51 bn in absenteeism and lost productivity.

“Working in a hyper-growth company can definitely be turbulent at times,” notes Anna Richardson, VP of People at Aiven, a provider of data infrastructure software and Crew Capital portfolio company. “Things change fast, we have new colleagues joining almost every week and people tend to wear multiple hats. Startups need to be mindful that the tempo of doing business does not become overwhelming.”

Some key lessons have emerged from startups that have taken a lead in tackling depression in recent years. First of all, data is essential. Startups need a baseline against which to measure the mental health of their team. In times of uncertainty, the cadence of data gathering should increase.

To secure this data, management teams should communicate with teams often and through multiple methods, including surveys, polls, all-hands meetings, town halls, and one-on-ones. A variety of pathways can help ensure each individual is able to articulate their concerns in a way that is comfortable for them. Software can provide useful guidance on issues like how much one-to-one time leaders are having with their teams, and whether some individuals are over-burdened with meetings.

A third key learning is that employees’ health needs are unique and require tailored support.

“We encourage our team to articulate their identities, so if somebody is a caretaker for their parents, for example, we can make sure we acknowledge that and support them as well,” says Choksi from Violet.

Most companies will require external support to deliver mental health services in a variety of ways. For example Ledgy, the equity management platform for startups, partnered with nilo.health to offer psychological support from video counseling to online tools, while Aiven uses partners to offer 24/7 psychological support to both employees and their family members.

Third-party providers range from mental health specialists such as Spring Health to companies such as Better Up, a Crew Capital portfolio company that provides professional coaching to help employees grow in their careers.

Harness automation to reduce burnout

Although it may feel like the toughest time to work at an early-stage company, nowadays startups hold the greatest advantage compared to the past. The quality of workplace software can make a real difference to employee well-being, reducing workloads and eliminating tedious and unnecessary tasks.

In the long run, burnout cannot be fixed only by meditation apps, education campaigns, or time off, no matter how important they all are. Structural causes need to be addressed and technology can help.

Salespeople, for instance, are among the most vulnerable to burnout, with research from Gartner showing nearly 90% of B2B sales reps saying they are struggling. This is partly because their compensation, targets, and quotas are among the easiest to quantify and measure. But they also spend too much time on administration or clerical work. One poll found 74% of salespeople agreeing that most of their time is spent on non-selling activities.

As argued by Spiff, a Crew Capital portfolio company, automation can have a positive effect on productivity. Setting up automated dashboarding and reporting can allow leaders to devolve more responsibility to individuals without losing sight of overall performance. Another example is Spiff’s automated commission platform, which helps with sales incentive compensation planning, in addition to providing salespeople with visibility into their quota attainment progress.

Make mental health a priority

The most important step founders can take to elevate mental health within a startup is to show that it is a priority.

Beyond paying for third-party providers, Koh from Spring Health suggests two ways for founders to signal that mental health is important to them. The first is to provide training to anyone who manages people. “While managers usually have great technical knowledge, we are never formally trained on how to manage people,” she notes.

Aiven is one startup that has recently ramped up leadership training and support as part of their attempts to improve employee wellbeing.

The second way Koh suggests is even more straightforward. At Spring Health one key indicator used to assess leaders’ performance is the mental health of their team members. Tech companies tend to be data-driven in measuring performance and rewarding success. Employee mental health should be no exception.

Your people are your business

Nobody knows how protracted or severe this downturn will turn out to be. As startups navigate an uncertain future, many founders are experiencing their first recession at the helm of a company. Effective leadership means candid communication, data-driven interventions, and process improvement through automation. By making these a priority, startups can focus on the well-being of their most important asset, their people.