Startup layoffs may worsen as investor pressure mounts
MUMBAI: The startup sector could let go of about 5,000 employees over the next couple of quarters as they face pressure from investors to improve bottom lines and focus on the core business, recruiters said. They are also less likely to focus on new verticals and are expected to review functions where they have gone overboard in hiring.
“It looks like someone has made a tiny prick in the bubble. Overall, the sector may continue to hire but there is investor pressure on several e-commerce and edtech firms,” said Shiv Agrawal, managing director, ABC Consultants. Some new-age firms had started new business verticals
during the last two years, which are not working out, Agrawal said. “Those hired in sales, delivery and operations in the lower strata have to be let go,” he said.
ABC Consultants has asked its outplacement team to keep a watch on this sector for
retrenchment and subsequent placements.
A Bengaluru-based recruiter, who works for the startup sector, expects 4,000-5,000 employees overall to be retrenched. “During two years of Covid, we knew exactly where and why the layoffs are happening. However, this time, it is worrying us because there is no clear cause.”
So far startups have retrenched employees after identifying redundancies, sometimes after acquisitions. “In the absence of funding, and massive selloff in tech stocks globally, startups are now being forced to focus on cash flows and profitability leading to rationalization of headcount and other costs,” said Anshul Lodha, head of Page Executive, India. “We also expect salary hikes to stabilize.”
Edtech startups have let go of at least 1,500 employees, including teachers, contract workers and sales staff.
Earlier this month, Vedantu Innovation Pvt. Ltd said it was laying off 200 employees after “load rebalancing” of specific roles, based on growth expectations.
In April, Unacademy said it let go of nearly 800 employees, including those from Prepladder, which the edtech firm had acquired last year. Back then, the edtech firm said redundancy and performance issues were key reasons for the layoffs.
A few startups said employee separation had not happened because of layoffs but because of relocation requirements and better job opportunities.
As many as 200-250 employees have resigned from White Hat Jr in the past two months after it asked employees to report to office in Mumbai and Gurugram, said a person in the know. Inc42 and Financial Express reported 800 White Hat Jr employees had resigned.