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Home / Companies / Start-ups /  Startup layoffs may worsen as investor pressure mounts

Startup layoffs may worsen as investor pressure mounts

The startup sector may let go of about 5,000 staff in the next couple of quarters as they face pressure from investors to improve bottom lines, recruiters said. mint

Firms may review disproportionate hirings across functions and may not focus on new verticals for now

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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.

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. 

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“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.

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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.

The edtech firm had offered relocation support and provided exceptions for medical and other emergencies, said a White Hat Jr spokesperson.

Earlier this year, edtech Lido Learning asked employees to resign after the startup could not pay salaries because of its inability to raise capital or find buyers. Lido Learning chief executive officer Sahil Seth, on Sunday, disputed the number of employees who had to leave but did not offer details.

“The startup sector has many edtech firms that hired in large numbers during the pandemic as education went online. Now, with schools re-opening, demand for online programmes has gone down," Aditya Narayan Mishra, director and CEO, Ciel HR Services, said. In many startups, the leadership is very young and they hired to drive home the point that they are a growing business, Mishra said. That has now backfired on them.

The edtech sector has 400,000-500,000 employees, and 5,000 people being retrenched over the next two quarters will not stop one from joining the industry, he said. Some startups said they were still hiring, despite rationalizing staff in a few divisions. Those that had raised capital last year have a buffer and will continue hiring in specific verticals, two startup executives indicated, seeking anonymity.

The Vedantu spokesperson said it plans to hire 1,000 people this year, VCCircle reported in May.

Swiggy shut its grocery deliver vertical in five cities, but would map out roles for all of its Supr Daily staff in other verticals across the business, a person aware of the matter said. A blog post said senior executives of Supr Daily had been shifted to other unts. Swiggy also took on 500 employees as part of the Dineout deal last week, the person said.

Meesho let go of 150 employees as it integrated its grocery business into the main app. However, social and e-commerce startup Meesho said it plans to hire more in tech and product roles. “We hired a record 150 employees in tech last quarter. We plan to hire close to 1,000 employees this year, which includes doubling our tech team," a Meesho spokesperson said.

Fintech OkCredit, furniture rental business Furlenco, and social commerce startup Trell have also let go of employees since January, according to multiple media reports.