VCs shrink budgets: Startups restructure operations, hand pink slips to over 5K staff in ’22
As venture capitalist funds tighten their purse strings, startups in India’s consumer internet sector have began consolidating their operations, and this has resulted in more than 5,000 full-time as well as contractual employees being handed pink slips in the first four months of 2022 alone.
Startups from across the board ranging from industries like ed-tech, e-commerce, financial technology, real estate and home furnishing are among those that have laid off employees. Housing mortgage company Better.com laid off more than 3,000 employees from India and the US. While the company did not give a breakdown of how many of those employees were from India, the number of those laid off in India are pegged to be around 1,000.
Ola, which recently ventured into quick-commerce is learnt to have laid off close to 2,500 contract workers that it had onboarded to expand its business, and it is learnt, has not started running some of its warehouses that it had leased.
Blinkit also laid off close to 300 contractual workers engaged with the company as warehouse managers, pickers and delivery workers. Unacademy has laid off close to 1,000 people, including employees and tutors that it had hired on a contractual basis, according to sources. Lido Learning laid off more than 200 employees after running out of funding. Social-commerce platform Meesho fired 150 employees from its grocery arm Farmiso.
Sequoia Capital-backed social-commerce app Trell, hit by corporate governance issues, laid off close to 300 employees — around 50 per cent of its entire workforce. Furlenco laid off around 200 employees mostly from customer support roles.
Fintech platform OKCredit has fired around 40 people from its bookkeeping and e-commerce arm. When reached out for a comment, a representative for Unacademy pointed to the statement that the company released earlier this month claiming “less than 600 employees/contractual workers and educators have been laid off”. E-mail queries sent to Better.com, Ola, Furlenco and Blinkit, and messages sent to Lido Learning, Trell, and OKCredit did not elicit a response until publication.
Experts tracking the field said 2022 has seen a slowdown in funding overall, sending high growth, high cash burn startups back to the drawing board to restructure their firms to reduce their burn. Overall, the startup ecosystem raised more than $40 billion in 2021, according to a report by Orios Venture Partners, an investor in early stage startups.
“Everyone knew the funding frenzy of 2021 was not going to last forever,” said a seasoned investor. “Now when the funding has somewhat slowed down, it is natural that startups are looking at cutting headcount since it is a quick way to reduce cash burn and extend their runway”.
A key reason for the funding drying up this year, experts said, is the geopolitical tensions led by Russia’s invasion of Ukraine, and the overall poor performance of fast-growing tech companies in the US and China, impacting major investment houses like Tiger Global and Softbank which have infused billions of dollars in Indian startups in 2021, and had a huge hand in converting a number of those startups into unicorns. Softbank chief Masayoshi Son has also recently written to the Japanese investment company’s senior executives on slowing down of new investments.
Further, a number of Indian startups including BharatPe, Trell, and Infra.Market have been hit by corporate governance issues, including potential instances of embezzlement of funds by senior executives. This is another reason, said analysts, why investors have become more cautious before placing bets. Another reason behind startups reducing their headcount is trimming a part of the company for not performing as well as expected.
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