Startups Lay Off 9,400 Employees in Q1, More Cuts Expected

• ByStartupStory     |    April 27, 2023

Data from recruitment firm Careernet shared exclusively with ET revealed that approximately 9,400 employees were laid off by startups in the Jan-March period amid the ongoing funding winter. The report noted that Byju’s, Unacademy, ShareChat, MyGate, and GoMechanic were among the startups that terminated a significant portion of their workforce. In the quarter, about 70% of all startups laid off between 100-300 employees each, including Dunzo, Innovaccer, and Ola, among others in the instant delivery, healthtech, and ride-hailing sectors.

As layoffs in startups are projected to continue, recruitment firm Careernet reported a decrease of approximately 80% in hiring for senior positions during the March quarter compared to the same period in the previous year. This trend was prevalent across several sectors such as fintech, ecommerce, edtech, SaaS, and healthtech. Ecommerce and edtech have experienced a significant impact as their hiring during the March quarter declined by 93% and 84%, respectively, compared to the same period in the previous year.

According to Anshuman Das, the CEO, and co-founder of Careernet, the current situation is not expected to improve in the next two quarters, and despite new seed and series A funding, companies are likely to continue hiring at a slower pace. The analysis of new senior positions with annual salary packages exceeding Rs 50 lakh indicated a decrease of about 80% in hiring for senior leadership roles compared to the previous year at new-age tech firms, except for SaaS, where more hiring is expected. Last month, ET had reported a decline of 60-80% in hiring for senior leadership roles at new-age tech firms.

Ashish Dave, CEO of Mirae Asset Venture Investment in India, has stated that “layoffs may continue and at places where you may not see layoffs, you will see muted (pay) hikes.” Dave’s comments follow a period in which many startups have laid off employees, and many new-age tech firms have seen hiring for senior leadership roles dip. Swiggy founder Sriharsha Majety has also acknowledged over-hiring at the food-delivery firm. “Our over-hiring is a case of poor judgement and I should have done better here,” he said earlier this year.

According to Ankush Sachdeva, CEO of ShareChat, the company overestimated market growth during the highs of 2021 and underestimated the intensity and duration of the global liquidity squeeze that followed, leading to layoffs. However, traditional sectors like banking and insurance have increased their hiring, and some global legacy companies are setting up larger teams in India. Abhimanyu Saxena, founder and CEO of tech-focused upskilling platform Scaler, said that startup employees are willing to join these industries with adequate compensation. Scaler is backed by investors like Sequoia Capital India, Tiger Global, and Lightrock.

According to the Careernet report, there were a total of 260 funding deals during the reviewed period, with a decline of 71.6% by value from $12 billion in the same period last year, with $3.4 billion raised. The report highlighted that 110 deals amounting to about $214 million were seed-stage, 41 were pre-series stage amounting to $163 million, 55 growth-stage amounting to $887 million and 24 late-stage amounting to $2.1 billion. Siddarth Pai, founding partner at Bengaluru-based venture capital firm 3one4 Capital, said that the industry is seeing an increase in ticket sizes in seed-stage, starting from a minimum of $1 million despite the slowdown.

Siddarth Pai, founding partner at 3one4 Capital, a venture capital firm based in Bengaluru, said that during dips, investors tend to buy and founders want to raise at least a year’s cash runway. Late-stage companies are still cautious about cash burn, according to Pai. The Careernet report revealed that growth-stage fundraising was led by the ecommerce industry, while late-stage fintech startups received the most funding. Enterprise-tech secured the top spot in both bridge and seed-stage funding rounds in terms of investment amount and deal volume. Large startups like PhonePe and Lenskart raised significant amounts of funding in the March quarter, an exception to the broader funding slowdown.

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