As investors put pressure on startups in India to cut costs, employees are collateral damage.
In the first six months of this year, more than 10,000 staff have been laid off by at least 27 startups across the country, according to Inc42’s analysis.
In a widely-circulated 2020 memo, marquee investor Sequoia had warned portfolio companies to keep their staffing levels sustainable. US-based startup accelerator, Y Combinator, also asked founders of its portfolio companies to “plan for the worst.”
The startups, though, seem to have botched it up. They have mostly cited cost-cutting and extended cash runways as reasons for slashing headcount. Macroeconomic uncertainties surely didn’t help.
“War in Europe, impending recession fears, and Fed rate hikes have led to inflationary pressures with massive correction in stocks globally and in India as well,” Vamsi Krishna, CEO of e-learning platform Vedantu, wrote in a May 18 blogpost. “Given this environment, capital will be scarce for upcoming quarters.”
There are myriad other ways to curb spending—a hiring freeze, curtailed marketing, saving on real estate—but laying off is evidently quick and easy. This is particularly so at tech startups which typically tend to over-hire while business is brisk.
Worryingly, the correction is far from over. Experts estimate that the layoff count will rise to 60,000 in the next six-to-nine months.