Layoffs despite startups being flush with funds leave workforce enraged

New Delhi, May 28 (IANS) After funding galore that saw more than $42 billion flowing in the Indian startup ecosystem last year alone, the current layoff season has shaken up the country’s workforce, especially the young, who quit traditional, stable companies to join startups at crazy packages.

The blockbuster startup party, that started in the pandemic years, appears to be over as thousands have been fired from startups ranging from edtech to e-commerce and healthtech verticals.

The professional networking platforms like LinkedIn are full with raging posts from employees who have been asked to leave.

The situation is set to get worse with recession looming and funding drying up.

From early-stage startups to “soonicorns” (set to become unicorns with a valuation of $1 billion and above) and the unicorns — all are bracing for a harsh winter ahead.

In total, over 6,000 people have been shown the door in the name of “restructuring” and “cost cut” as startups and unicorns shut non-performing verticals, cut marketing spend, and freezing fresh hiring.

Edtech major BYJU’s-run WhiteHat Jr forced more than 1,000 employees to resign after they were either asked to join at different locations or return to Mumbai or Gurugram.

Sources close to the company had told IANS that WhiteHat Jr asked its nearly 3,000 sales and support employees to report to either Mumbai or Gurugram (out of its 5,000-strong workforce that includes teachers which are on contractual basis, and hence not full-time employees) in April, leading to mass resignations.

Several sales executives have also quit BYJU’s after they were asked by the HR team to join various locations on meagre salaries.

Edtech platform Unacademy first laid off nearly 600 employees, contractual workers and educators — about 10 per cent of its 6,000-strong workforce across the group — in April.

Unacademy’s co-founder and CEO Gaurav Munjal has predicted a funding winter that can last as long as 18 months, saying it will cut costs wherever required to weather the dry spell and become profitable.

In a letter to employees, Munjal said that “we must learn to work under constraints and focus on profitability at all costs”.

“Some people are predicting that this (funding winter) might last 24 months. We must adapt. This is a test for all of us. We must learn to work under constraints. We must focus on profitability at all costs. We must survive the winter,” he wrote.

Another online learning company Vedantu has fired more than 424 workers owing to “financial constraints”.

According to Vamsi Krishna, CEO and co-founder of Vedantu, the external environment is tough as the Russia-Ukraine war, impending recession fears, and Fed rate interest hikes have led to inflationary pressures with massive correction in stocks globally and in India.

“There is no easy way to say this but I am truly sorry. Out of 5,900 Vedans (employees), 424 of our fellow teammates i.e about 7 per cent of our company, will be parting with us,” Krishna said last week.

Healthtech platform mFine has laid off over 50 per cent of its total workforce (more than 500 employees) from operations, product and marketing verticals, according to sources.

Shripati Acharya, managing partner, Prime Venture Partners, told IANS that they are in unprecedented times and the steep change in macro-conditions is particularly difficult on companies who are in active fundraise right now.

Prime Venture Partners is one of its existing investors in mFine.

“Unfortunately, restructuring and layoffs are inevitable in such scenarios and are very hard decisions for entrepreneurs to make. MFine has built a great product which is being used by millions of people and has built a huge hospital network with esteemed doctors,” Acharya said.

Pre-owned e-commerce platform CARS24 has asked around 600 employees to go on the basis of “poor performance”.

“This is business as usual as these are performance-linked exits that happen every year,” the company said in a statement shared with IANS.

The platform was last valued at $3.3 billion, about double the valuation from its previous round in September 2021.

Zomato-owned Blinkit (earlier Grofers) has laid off more than 1,500-1,600 employees owing to “cost-cutting”, in cities like Mumbai, Hyderabad, and Kolkata looking to cut costs and reduce cash burn, according to media reports.

Zomato invested $100 million in Blinkit for a 10 percent stake at a valuation of $1 billion, right before its IPO in July last year.

E-commerce platform Meesho has fired over 150 full-time employees from its grocery business as part of “restructuring” of “Meesho Superstore which is aimed at bringing in efficiencies”

Furniture and lifestyle rental brand Furlenco has laid off over 180 employees as it scaled operations in several parts of the country.

“The decision is a part of a larger cost restructuring exercise to focus on creating an asset-light model,” according to Furlenco.

Social commerce startup Trell asked more than 300 employees to go as it had to do “some right-sizing within the firm”.

According to Ritesh Malik, doctor-turned-entrepreneur and investor, the country will see a lot of casualties in coming months, specially for startups who raised a lot of money without a proper product-market fit (PMF) model.

“This funding winter is a downtime for the ecosystem but is a very good time to actually work on building frugal machinery, consolidating and also ensuring reflection by leaders to ensure unit profit is at the centre of their foundership,” Malik told IANS.

The entire startup ecosystem must reflect, learn, conserve cash and get ready for a turbulent phase ahead.

“The founders need to wear their seat-belts and focus on NPS (net promoter score), customers and teams,” said Malik.

(Nishant Arora can be reached at [email protected])