Wages Dry up at Startups on Back of Funds Drought
Salaries for new hires slashed, hiring curtailed as investors put pressure on cos to save costs and improve cash flow
Kala Vijayraghavan & Rica Bhattacharyya
Mumbai: Surge pricing at startups has ended — for now at least. As investors put pressure on companies to save costs and improve cash flow, new hires in turn are getting offers that aren’t as spectacular as they used to be till some months ago. Compensation packages have been slashed by half or more while recruitment is also down by the same extent — 50-60% — since the beginning of the year, according to executive talent search agencies.
Salary offers of .₹ 1 crore and above per year have dropped to 100, a fifth of those as of this time last year. Number of ₹ this year from 500 a year ago Hike offered to CXO-level hires in last 3-4 months not more than
of current pay Flipkart, Snapdeal, Urban Ladder, Ola, Uber, Quikr and Myntra among cos cutting down Turnaround time to close a position now
a year ago
Average pay for fresh hires at startups, including unicorns are down to .₹ 50-70 lakh from .₹ 1-1.5 crore in the previous year, said executives at five search firms, including RGF Executive Search and Longhouse Consulting. These include companies such as Flipkart, Snapdeal, Urban Ladder, Ola, Uber, Quikr and Myntra. A unicorn is a startup that’s valued at $1 billion or more.
“.`1 crore is very rare these days and is offered to only very specialised people,” said Siddharth Raisurana, director, ABC Consultants, which hires senior executives for ecommerce companies. “Companies don’t want high-cost hiring and investors want to drive efficiency.”
The hiring slump is directly related to investors becoming more watchful.
“Companies are not hiring as they were earlier since there is a slowdown on the funding front,” said Debabrat Mishra, director, Hay Group India, a consultant. “With venture capital funding not as easily available as it was a year ago, crore-plus salaries, which were coming in hordes a year ago, are being impacted drastically.”
Quikr Chief Operating Officer Atul Tewari said its salary policy remains the same.
“We have always offered competitive compensation packages commensurate with experience and skills of the talent we bring on board, and we don’t foresee any change in that,” he said.
An Ola spokesperson said: “We continue to grow fast and hire top talent to be part of our mission of building mobility for a billion people.” The other companies mentioned above didn’t respond to queries.
Investors want companies to be cautious when picking people, preferring those who can help them scale up, said Vinod Murali, managing director, InnoVen Capital, a venture lending firm.
“The days of mass crore-plus hiring are over,” he said. “Investors want startups to be more choosy and cautious in hiring. Initial phase of crazy hiring is over and out. Startups are also offering deferred compensation packages. The focus is on efficiency in operating costs and hiring where needed.” Along with compensation, mandates to head hunters have also dropped. The hike offered to a CXO-level hire in the past three-four months is not more than 2040% of current compensation compared with 70-100% around the same time a year ago. RGF Executive Search and Longhouse Consulting, which hired as many as 10 CXOs for the unicorns as of this time last year, have been asked to look for three to four such people so far in 2016.
“The hiring graph is dipping since January. The market is becoming saturated in the ecommerce space,” said GC Jayaprakash, executive director, RGF Executive Search. The sheen is wearing off as expectations become more realistic. For instance, the valuation of India’s largest ecommerce firm Flipkart has been marked down by investors. On Monday, US investment firm T Rowe Price, which invested in the company in 2014, reportedly cut the valuation of its 15% stake to $120.70 per share from $142.37 last year. A Morgan Stanley fund had cut the valuation of its investment by 27% in February.
Not surprising then that online retailers aren’t rushing to recruit, said Anshuman Das, managing partner, Longhouse Consulting. “The ecommerce euphoria is done with. Selection processes have become much more rigorous. Turnaround time to close a position now is six months or more compared with a quarter in the previous year,” he said. “Though the number of companies we are catering to has grown, there is a 50-60% dip in hiring by the pool of startups that was liberally rolling out crore-plus salaries a year back.”
While new startups are emerging, these are still in their infancy, paying a maximum Rs 30-50 lakh annually, said Raisurana of ABC.