Audio podcast: Startup layoffs in a weak job market are worrying

Ashraf Engineer

May 21, 2022

Hello and welcome to All Indians Matter. I am Ashraf Engineer.

India’s much-talked-about startups have begun laying off a worryingly large number of people. Media reports quoted recruiters as saying that another 5,000 employees would be let go of over the next couple of quarters as startups face investor pressure to improve profitability and focus on their core businesses. As a result, the new verticals startups had launched, and for which they had hired large numbers, are either being reviewed or shut. How many more layoffs can we expect and how long will the bloodletting continue?

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Many fear that the startup balloon may be over-inflated, especially when it comes to the e-commerce and education technology firms. Even those hired for grocery delivery operations have reason to worry. It is estimated that edtech startups have laid off at least 1,500 employees, including teachers, contract workers and sales staff.

Vedantu Innovation, for instance, said it was laying off 200 employees after a “load rebalancing” of roles. In April, Unacademy let go of nearly 800 employees, including those from PrepLadder, which the edtech firm had acquired last year. Earlier this year, edtech firm Lido Learning asked many employees to resign after it could not pay salaries.

Financial technology firm OkCredit, furniture rental business Furlenco and social commerce firm Trell have also let go of employees this year.

The edtech sector has an estimated 4 lakh to 5 lakh employees and industry leaders say the layoffs comprise only a small percentage of them. Some have even said they would hire for other departments after the current round of layoffs is complete. That, of course, remains to be seen.

Don’t forget, edtech witnessed great expansion during the COVID-19 pandemic as classes went online. Now, with schools and colleges reopening, demand for online programmes is falling.

Swiggy, meanwhile, has shut grocery deliveries in five cities but is said to be transferring staff to other verticals. Meesho, however, let go of 150 employees as it integrated grocery deliveries into its main app. It too said it would start hiring again later.

There are various reasons cited for the retrenchments. Apart from investor pressure, funding isn’t as easy to get as before and the selloff in technology stocks globally has forced startups to focus on profitability, which is what is leading to layoffs.

Funds were easier to procure as early as last year but investors were turning the screws even then. The heady days of fund and spend are gone.

As I said earlier, many startups launched new verticals for which they hired large numbers even during the COVID-19 pandemic. Now, the costs are piling up – not the easiest thing to manage in a slowing economy that is witnessing record inflation.

When money was easy to get, startups didn’t hesitate to launch new businesses. Now that they’re not taking off, it’s the employees that are facing the axe.

There are other business realities at work. Startups raise millions to back their confidence in a business or market. It’s what fuels their operations and growth. However, markets don’t always live up to expectations and often competition can match them in investments. So, the plans don’t always work out.

As of now, uncertainty seems to be the name of the game. Technology resets, the economic impact of Russia’s invasion of Ukraine, falling stock markets, soaring inflation and slowing growth have combined to rock the startup boat. If things stabilise, the layoffs would be arrested and perhaps significant hiring would resume too. But, if they don’t, more job losses in what is already a very alarming job market are certain.

Thank you all for listening. Please visit allindiansmatter.in for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at editor@allindiansmatter.in. Catch you again soon.