Beyond the layoffs: Startup hiring cools as AI, money worries sweep businesses

Some companies have also let people go or reassigned roles as they dropped new non-core businesses that simply weren’t working or to improve organizational efficiency.

Big tech-enabled names such as Zomato, Cars24 and Gupshup, among others have cut jobs over the past quarter, while others such as Swiggy and Flipkart have pruned divisions and moved people to different roles. Newer startups are also being more careful about who they hire because investors want to see profits.

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Vikram Chopra, co-founder and chief executive officer of used-car platform Cars24, told Mint that the firm had “refined" its project list and will focus on core engines such as its used car platform, lending and international business. “We don’t anticipate doing a lot of hiring," he told Mint. “However, we continue to seek out exceptional talent in business, product and technology." 

In a 26 April blogpost, Chopra had said that Cars24 had initiated layoffs for around 200 executives not because of performance, but structure. “Over the last few months, we realized that some projects did not deliver what we expected. Some roles were added too early. A few hypotheses simply didn’t hold when tested. And, in some cases, we couldn’t offer the kind of growth or learning that people truly deserve," he wrote in the blog.

Anusha Mallana, head of talent acquisition at quick commerce major Zepto, said the startup is not hiring as aggressively as last year, “since we doubled our workforce in under eight months in 2024 at one-tenth the typical acquisition cost". On redeployment of talent, she said the company has seen interested junior tech executives moving to data science.

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Some other startups, too, have undertaken such a review. Conversational messaging platform Gupshup’s spokesperson said that “while hiring continues in strategic areas, our current focus is on optimizing resources". 

Gupshup announced layoffs of around 300 executives in mid-April, following multiple acquisitions over the past 18 months. “As we integrated these companies, it was natural to consolidate teams and optimize for efficiency across the organization," the spokesperson said. 

Padmaja Ruparel, co-founder of Indian Angel Network, sees the recent adjustments in the startup world, including layoffs, as a correction after a period of hyper-growth. She believes that founders are now strategically building for the long haul and focusing on sustainable value creation for shareholders. “This surely is a sign of maturity as we will see more stable, robust businesses building," she said.

Rethinking the organisation

There is an element of reorganization happening across startups, said Anshul Lodha, managing director of recruitment firm Page Group India. “Roles such as customer service are being replaced by AI. Startups with too much talent are reducing team sizes," Lodha said. “Focus is on hiring senior people in key roles like sales, tech and general management leadership to have a strong core team."

Some of this has led to a churn in talent in top startups. While Flipkart has seen over a dozen senior executives leave over the past 18 months, it has also hired many more at the senior levels, a person with knowledge of the development said. However, at the junior level, Flipkart has also reorganized its ranks.

The IPO-bound unit of Walmart shut down its health division and ANS Commerce (a SaaS platform that helped brands set up a digital storefront) and redeployed staff into high-growing segments such as travel and grocery, the person cited above said on condition of anonymity. 

Around 50-60% of the staff from those two divisions were absorbed into its quick commerce offering Minutes or Cleartrip (travel portal) and some other parts of the business, the person said, adding that the impact of AI has been most visible in supply chain systems where it has brought in more efficiency and, therefore, there is less need to hire.

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Meanwhile, Zomato’s increased use of AI in customer service also saw the company lay off 600 executives over the past few months, according to multiple media reports. The firm also said in its Q4 earnings call earlier this month that it has shut down its ultra-fast food delivery service Quick.

Similarly, Swiggy shut down Genie (an on-demand pick up and drop service) and deployed the staff on its food and grocery businesses. Flipkart, Zomato and Swiggy did not respond to requests for comment. 

Rationalisation at senior level

At senior levels, there is also an element of rationalization when poaching senior talent from peers. The process is longer and the salary hikes are also more rational, a startup executive said.

 

The pruning has led executives to hunt for jobs and even accept offers at a pay cut. “We are also seeing senior professionals in the startup segment ready to take up new assignments with even a 10-20% cut in compensation," said Jyoti Bowen Nath, managing partner at search firm Claricent Partners, adding that many of these seniors “had outpriced themselves when they were hired by startups that are eventually laying them off".

This is a reference to the period between the second half of 2020 and most of 2021 when companies across sectors were guzzling talent. The pandemic had accelerated digitization of businesses and companies hired employees in droves, backed by private equity and venture capital funding.

When the funding winter struck in 2022, the companies realized they had over-hired and started retrenching in large numbers. In fact, in 2022 and 2023 all from global tech giants to small-scale startups went on a layoff-spree almost to compensate for the earlier enthusiasm. While 2024 was stable, the past few quarters have pushed firms to work with leaner teams in the backdrop of rising geopolitical crises and poor visibility on client demands.

“Startups with initial funding are finding it tougher to raise more money from the market," said Lohit Bhatia, president-workforce management at Quess Corp, one of the largest staffing firms. Bhatia added that larger IT firms are outsourcing fewer contracts to vendors, which is leading to reduced hiring. Further, Bhatia said he has noticed that employees are moving from less-funded startups to GCCs (global capability centres) and the IT departments of non-tech firms.

With the evolution of new technologies such as AI, reskilling is becoming the new normal, said Ruparel. “Reskilling is easier and less expensive than recruitment and training from ground level and yet living with the risk of a wrong hire."