News & Analysis

Layoffs Threaten Indian Startups

Most investors are quite clear that burning cash isn’t going to bring a business glory and are thus asking founders to tighten up and show results

The layoffs aren’t only affecting large companies across the world. A recent report says that as many as 9400 have lost their jobs in India’s booming startup ecosystem between January and March this year. And the malaise isn’t limited to edtech companies as those engaged in services business have also let go of resources in what is turning out to be a lean-and-mean season. 

A report published in ET quoted data shared by Careernet to suggest that some of those who laid off staff include Byju’s Unacademy, ShareChat, MyGate and GoMechanic, though it also noted that the trend was widespread with 70% of all startups removing between 100 and 300 people each in the quarter. 

Layoffs are coming on top of slow hiring

The Careernet report warned that layoffs could continue while noting that hiring for senior roles too had declined by around 80% during the quarter as compared to the same period last year. The report said a similar trend was also visible in fintech, ecommerce, healthcare and a few other business verticals. 

However, the biggest impact of the funding winter was reserved for ecommerce and edtech industries where hiring is down 93% and 84% in the quarter. Additionally, edtech also saw the largest number of layoffs with the report suggesting close to a thousand jobs were removed during the first quarter of 2023. 

Could be a trend for two more quarters

The article quoted Anshuman Das, co-founder and CEO of Careernet as saying that the situation would persist for at least two more quarters as investors tighten both seed and series-A funding. He said jobs across most sectors have been tripped barring a few like SaaS, where the bloodbath isn’t as bad.

In fact, though the situation appears awkward, the fact remains that several founders and their investors are seeing greenshoots already and preparing their enterprises for growth with a redesigned outlook based on the emerging macroeconomic situation at a global level. 

Market watchers believe that while layoffs could continue for some more time, there will also be a freeze on pay hikes or it could be small ones. Given that companies hired last year and the year before expecting a surge in growth, have had to reorient their plans due to the economic instability in North America and Europe. 

But jobs aren’t difficult to find for now

Readers may recall that the Swiggy management had informed its staff back in January that it would be letting go of 380 people as part of a right-sizing effort. Founder Sriharsha Majety actually went on record admitting that this was a case of over-hiring and poor judgment that could have been avoided. 

While the technology companies are going slow with their hiring, the same is not the case with traditional sectors like banks, financial services and insurance. Several companies with a global outreach are expanding their teams in India, thus opening up new avenues for employees who received pink slips from their startups. 

Meanwhile, the Careernet report also pointed to 260 funding deals in the first quarter of the year with about $3.4 billion being raised. This represented more than a 70% decline by value from $12 billion last year. Of these, 110 deals worth $214 million were for seed stage, 41 for pre-series ($163 million), 55 in growth stage ($887 million) and 24 for late stage ($2.1 billion)

Leave a Response