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Zomato said it is set to lay off 13% of its workforce as the lockdown has impacted its food delivery business. (Photo: Mint)
Zomato said it is set to lay off 13% of its workforce as the lockdown has impacted its food delivery business. (Photo: Mint)

Covid-19 impact: Job losses mount in smaller startups, unicorns

  • Many startup founders who had earlier prioritized growth over profitability are now forced to re-look at their business strategy as covid-19 has impacted startups and big corporates alike
  • In April and May, multiple startups have laid off or furloughed employees and contract staff, besides salary cuts to save cash after revenues take a hit

Bengaluru: From online food delivery, hospitality and tourism to mobility, social commerce and foodtech, smaller start-ups and well-funded unicorns are downsizing or streamlining operations to cut costs as demand remains muted due to the covid-19 outbreak and lockdown.

In April and May, multiple startups have laid off or furloughed employees and contract staff, besides salary cuts to save cash after revenues take a hit.

Foodtech startup Dineout and online real estate platform Magicbricks have both laid off employees across different business roles, according to three people aware of the development.

Both Magicbricks and Dineout have decided to cut staff count on basis of performance in early May after the crisis impacted sales at both firms.

A person aware of Magicbricks’ operations said some employees were asked to resign in writing without severance, and serve a 30-day notice period as well. The person added, on condition of anonymity, that Magicbricks has laid off close to 250 employees in May.

A second executive familiar with restaurant booking platform Dineout’s operations said that the layoffs at the firm were based on performance reviews.

“There were few layoffs within the company but these were purely on performance basis and Dineout is still keeping a strong back for rest of the employees in these hard times," the person added.

Mint wasn’t able to verify the number of employees who were laid off at Dineout.

However, a third person aware of Dineout and Magicbricks’ business said both firms have been cutting back on expenses and rationalizing costs since early May as it looks to widen the runway by a couple of months.

Both Dineout and Magicbricks are owned and managed by internet holding firm Times Internet.

Dineout CEO Ankit Mehrotra did not respond to an email seeking queries. A Magicbricks spokesperson did not respond to calls and email queries.

Last week, online food delivery company Zomato said it is set to lay off 13% of its workforce as the lockdown has impacted its food delivery business. Deepinder Goyal, founder and CEO told employees in a note that it will also initiate company-wide temporary pay cuts as it tries to preserve cash in an uncertain business environment.

Earlier in April, rival Swiggy also laid off around 500 contractual members of its cloud kitchen staff, across ten Tier 1 and 2 cities, as it sought to cut costs.

"...Since the restaurant business and real estate market is now going through a slowdown, most of the roles affected will be marketing and sales force, which are now redundant since consumption across both markets are down," said a startup founder in the content and advertising space asking not be named.

A Zomato employee, who spoke on condition of anonymity, said they saw this coming given food delivery orders were down drastically.

“We already saw this coming since less than 25% of the total restaurants listed on the Zomato platform are operational during the covid-19 crisis and food delivery volumes are down by more than 70%," the person said.

Travel and hospitality startups have of course been hit the most.

Bengaluru-based travel startup Flynote has recently laid off most of its 130-strong staff citing fund shortage.

Hospitality unicorn Oyo, which has been laying off people since late 2019 announced salary cuts, besides furloughing staff in late April to save cash after its revenues plunged because of the covid-19 pandemic. Oyo’s moves to cut costs are in line with measures taken by hospitality companies across the world whose businesses have been ravaged by the covid-19 pandemic.

Many consumer internet startups have been cutting costs and firing employees as the future remains uncertain with some not having a runway of more than 3-6 months. Many startup founders who had earlier prioritized growth over profitability are now forced to re-look at their business strategy as covid-19 has impacted startups and big corporates alike.

Home rental startup ZiffyHomes, backed by startup accelerator Y Combinator, has deferred payments of several vendors and are yet to pay for their leased properties, Mint reported last week. Three vendors said the company founders have informed them that ZiffyHomes might file for bankruptcy, which may further disrupt payments that are due.

(Tarush Bhalla contributed to the story)

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