Around 20,000 Workers Laid Off By Indian Startups Due To Poor Hiring Decisions Made During Pandemic

In 2023, Indian firms continued to fire workers; in the first two weeks of the year, 1,400 workers were let go by at least 11 digital startups. In 2022, startups will lay off a total of 7.3 per cent of their workforce as businesses try to save money in the face of a shaky economy.

According to estimates, approximately 20,000 workers were let go by Indian startups in the previous 12 months. Unicorns like Byju's, Ola, Oyo, Meesho, Unacademy, and Vedantu are among those who have rationalised their workforces. ShareChat said on Monday that it would be firing 500 employees or 20 per cent of its workforce.

Making Up For Errors Made In Haste

These businesses cite the shifting market environment as their main justification. Online sales increased as a result of the pandemic and the ensuing lockdowns. Due to this, businesses that specialise in the online market were forced to hire quickly to keep up with the demand. However, over the past year, customers have reduced their online spending and shifted more toward physical options.

Interest rates have increased concurrently with growing recessionary concerns in the West, making venture capital and private equity financiers more cautious. Because of how difficult it is for startups to continue raising equity capital, the emphasis is now on profitability.

Poor Hiring Judgements

According to ShareChat, businesses must prioritise their wagers and invest only in the initiatives with the greatest potential for effect as capital costs rise. “Over the last six months, we have aggressively optimised costs across the board, including in marketing and infrastructure, among other cost heads, and ramped up our monetisation efforts. The decision to reduce employee costs was taken after much deliberation and in light of the growing market consensus that investment sentiments will remain very cautious throughout this year", reported Business Standard.

A funding winter affected Indian entrepreneurs in 2022, and it's possible that it will do so again in 2023. According to PwC's Startup Deals Tracker - CY22 report, funding for Indian companies in 2022 was roughly $24 billion, down 33 per cent from 2021.

The protracted fundraising winter is not always to blame for the layoffs, according to Shanti Mohan, founder of LetsVenture, an online platform that facilitates angel investment in early-stage firms. Rather, some of the founders who raised money made poor hiring judgements.

She said, "They over-hired and the rationale of building frugality into the business model was completely missing. If you see the recent announcements, those are more skewed towards debt financing than equity funding, as founders don't want to expose their firms to lower valuations. Founders who couldn't build businesses with sufficient funding should brace to revisit their businesses focusing on the fundamentals.”

Also Read: Tech Layoffs: Over 24K Workers Laid Off By 91 Tech Firms In First 15 Days Of 2023; Worse Days Ahead?