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MUMBAI : Many workers who left established companies to join startups, hoping their equity grants will be a ticket to initial public offering riches, are returning to the safety of their previous employers as they realize that the fledgling companies they joined are quick to fire people as well.

These employees, mainly in middle management, are again embracing their previous employers at the salaries at which they had quit. These workers are anxious to return to “stable" jobs as many startups fire employees in preparation for a funding winter.

Executives working on talent acquisition have termed this phenomenon the ‘boomerang’ effect. “They want to head back from startups to their old firms at the same salary at which they quit," said Navnit Singh, chairman and regional managing director of executive search firm Korn Ferry. “While CXOs are yet to see this trend, if the US recession lasts for more than a few quarters, the CXO return will also happen," he said.

The preference for ‘stability’ over better designation, pay, and stock options comes when the startup sector, banking on funds from venture capitalists and private equity investors, is seeing the liquidity tap dry up. The slowdown in the US economy is another reason behind the funding freeze, which is having a domino effect on Indian startups.

“The startup hiring frenzy is ebbing a bit and compensation hikes are muted as the demand-supply equation is changing. Startups take time to mature. It is a long haul, and days of infinite cash burn are over," said K. Sudarshan, managing partner at search firm EMA Partners India. “Those who joined the sector from other areas now realize that, and many of them want to head back to stable and profitable businesses."

After a few quarters of hiring frenzy till the beginning of the year, startups are resorting to layoffs. As many as 11,000 people have been fired from startups, including Byju’s, Unacademy, Meesho, Vedantu, Udaan, Rupeek, Cars24, Trell, and Furlenco.

This is in stark contrast to the times when employees quit mature and profitable firms across sectors to head for startups, with multifold pay increases, jumps in designations and stock options. The older firms tried to retain key employees, but their flexibility to change compensation plans when there are thousands of employees is limited. Now the tide has turned and some recruiters are seeing it across levels.

“Candidates who had joined startups are walking out in less than three months. The jitters are being most felt by those in startups that are in the seed-funding stage or have just closed the series A funding round," said Guruprasad Srinivasan, executive director and chief executive officer at recruitment firm Quess Corp.

As much as 15-20% of those leaving startups are heading back to their ex-employers while the rest are looking for opportunities outside and even negotiating marginal hikes, Srinivasan said. “Those with 3-10 years of work experience in product and engineering roles have other options," he said.

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