Funding Winter Persists: Over 17,000 Indian Startup Employees Lose Jobs in H1 2023

• ByStartupStory     |    July 31, 2023

In a parallel scenario to the United States, the Indian startup ecosystem is grappling with a prolonged funding winter, leading to a wave of significant layoffs, leaving thousands of employees unemployed.

Data from CIEL HR, a reputable recruitment and staffing firm, reveals that in the first half of 2023 alone, approximately 70 startups collectively laid off over 17,000 employees. These startups, heavily reliant on external investments to fuel their growth, have been compelled to downsize due to a sharp decline in investor funding. The lack of new investments flowing into the industry poses the biggest challenge, forcing startups to adopt cost-cutting measures and prioritize cash conservation, as explained by Aditya Mishra, MD & CEO at CIEL HR.

The layoffs have impacted various sectors, including e-commerce (including segments like grocery, baby care, and personal care), fintech, edtech, logistics tech, and health-tech.

Even well-known unicorns like Meesho, Unacademy, Swiggy, and ShareChat have had to cut jobs. Notably, Byju’s, a prominent edtech company facing multiple crises, alone had to lay off 500-1,000 employees this year.

PwC’s estimates indicate a staggering decline in startup funding, plummeting from $18.3 billion in the first half of the previous year to $3.8 billion in the first half of 2023, representing an alarming year-on-year drop of nearly 80%. Despite this concerning trend, analysts reveal that India-focused funds still have an estimated $18 billion in unallocated capital. The challenge lies in the selective flow of capital into startups, as investors now prioritize companies demonstrating a clear path to profitability and sustainable growth over those chasing growth at any cost.

Amit Jain, co-founder & CEO at the CarDekho Group, highlighted that all investors are now urging their portfolio companies to improve on unit economics and pursue sustainable growth strategies.

A recent report by RedSeer warns that sustained funding for startups is being impacted by factors such as increasing capital costs, interest rates, and a decline in the value of technology stocks. The firm’s analysis of approximately 100 unicorns indicates that nearly 20% of them could face challenges in the coming years due to unclear business models, regulatory hurdles, and decreasing demand, with some possibly having to shut down, pivot to new models, or be acquired.

Despite the challenging funding landscape, there are some encouraging developments. EV startups are relatively resilient, with some even thriving, according to Aditya Mishra. Additionally, startups focusing on emerging technologies like AI, EVs, climate tech, deep tech, and space tech are attracting significant investor interest, as they endeavor to build innovative products and solutions in line with the evolving tech landscape.

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