High-Flying Startups Feel the Pain of a Long-Predicted Downturn

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 ...