Hike funding

Funding winter sets in for Indian startups, staff in the cold: more than 12,000 licensees

For most of 2021, investors have been writing big checks to Indian startups – sometimes even WhatsApp message deals – propelling more than 40 startups into unicorns, companies valued at over $1 billion. .

However, Russia’s invasion of Ukraine earlier this year, interest rate hikes by the US Federal Reserve and rising inflation have made capital hard to come by. As a funding winter sets in on India’s startup ecosystem, its biggest chilling effect has been on their employees across all sectors, including some of the country’s most legendary companies like Byju’s, Unacademy, Ola, Blinkit and Meesho. So far in 2022, more than 12,000 people, including employees and contractors, have been laid off by startups as they seek to save money and cut sky-high costs.

In April, The Indian Express reported that startups across the country had handed out pink slips to more than 5,000 people, meaning that number has more than doubled in just two months since then.

The 2022 layoff story has been driven primarily by edtech startups, which have reaped the benefits of Covid-induced lockdowns but have now been impacted by the opening of physical education facilities this year.

The world’s most valuable edtech startup, Byju’s, has reportedly laid off up to 2,500 people across its businesses, including employees of its sales team and WhiteHat Jr. and Toppr, two startups it acquired as part of multi-million dollar transactions in the past two years. Its closest rival, Unacademy, officially claims to have laid off around 600 employees, mostly from its test prep business, while affected employees put the number at around 1,000. Vedantu laid off 624 employees in two rounds of layoffs, and Invact Metaversity, co-founded by former Twitter India chief Manish Maheshwari, reportedly handed out pink slips to 20 employees. FrontRow, which offers e-learning courses hosted by actors, comedians and more, has laid off 145 employees.

Vedantu co-founder Vamsi Krishna, while announcing layoffs within the company earlier this year, said “currently the external environment is difficult”. , spurred by geopolitical tensions, “looming recession fears” and a massive correction in equities around the world, including in India, which will make capital “scarce” for the coming quarters. For at least three small edtech companies, the funding freeze has meant they have had to shut down operations altogether. Lido Learning had closed earlier this year, laying off nearly 700 employees, followed by Udayy and Crejo.Fun, which collectively had to lay off 270 employees during the closure.

“Recently, given market conditions, we have prioritized increasing efficiency across the business, both through increased automation and by focusing on profitable channels… To ensure that we achieve this goal over the next few decades and that we have more than 24 months of track to continue to iterate and improve our core business, we have had to make some tough prioritization decisions over the past few weeks. included laying off approximately 30% of our team, primarily in sales,” a FrontRow spokesperson said.

In the first quarter of 2022, Indian startups collectively raised nearly $12 billion, down from $7.5 billion in the second quarter, a 37% drop quarter-on-quarter, according to data compiled by the Entrackr startup portal.

“Startups are starting to refocus on unit metrics, value creation and thus start to question cost structures. Accordingly, each hire will have to contribute to the existence and merits of the startups. It will be a phase of right-sizing and cost control,” said Lohit Bhatia, president of the Indian Staff Federation (ISF), a Delhi-based labor rights group. “A lot of tech workers during this time will be going back to traditional economy businesses, i.e. services, products, captives where they left for new startup opportunities. We expect the difficult phase to last almost 6 months, while stability could take up to 12 months.

People in e-commerce startups were also affected in 2022. Ola laid off more than 2,000 employees and workers as his plan to launch a fast delivery business failed to take off. As a result, the company reportedly shut down its used-car marketplace Ola Cars and its fast-trading platform Ola Dash. Facebook-backed Meesho laid off 150 employees from its grocery business while platform Blinkit laid off 500 contract workers.

B2B e-commerce giant Udaan has reportedly laid off nearly 200 employees. “We have taken various steps to improve efficiency, refine our cost structure and grow faster on our journey to achieve a strong unit economy. However, the efficiency improvement exercise has also resulted in some redundancies in the system, with some roles no longer needed,” a Udaan spokesperson said. Similarly, social commerce startup CityMall laid off more than 190 employees. “191 of our employees will be separating from us due to structural changes in CityMall functions… After exploring several options, we realized that certain roles within the company needed to be dissolved to align with our model changing business environment and the current business environment,” a CityMall spokesperson said in a statement.

Apart from that, used car market Cars24 handed pink slips to nearly 600 employees, healthcare technology company MFine is said to have laid off 500 employees and online gaming platform Mobile Premier League (MPL) has laid off 100 people and closed its Indonesia Business. Short video platform Trell laid off 300 employees and gold lending startup Rupeek laid off 200.

“With deep regret, we have made the difficult decision to part ways with 10-15% of employees. The gloomy macro-economic environment has forced us to recalibrate our strategy, review our costs and streamline our organizational structure, in order to support our sustenance and growth,” a spokesperson for Rupeek said in a statement. Queries to Byju’s, Invact Metaversity, Cars24, MFine, MPL, Ola, Crejo.Fun and Udayy went unanswered until time to go to press.

While the first half of 2022 saw the employment of more than 12,000 people impacted, experts believe that number may more than double by the end of the year. “Startup downsizing could reach 25,000 by the time it takes hold…the days of exceptional increases may be over for now,” Bhatia said.