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

The Economic Times - - Front Page -

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

6 months+

com­pared with

3 months

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.

AD­VIS­ING CAU­TION

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.

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