Entrepreneurship

Startup layoffs continue in 2023 amid funding winter

NEW DELHI : Indian startups continued to lay off employees in 2023, with at least 11 tech startups shedding 1,400 employees in the first two weeks of the year. This accounts for 7.3% of total startup layoffs in 2022, as companies look to cut costs amid economic uncertainty.

“Founders are acutely aware of the slowing pace of dealmaking, and ‘widen the runway’ is the mantra they’re sticking to over the coming quarters.” So, startups are going back to the drawing board to implement measures to help them survive the next 24 months,” said Bhargavi V., co-founder and partner at Java Capital.

Among the companies that concluded layoffs in 2023, Google-backed Mohalla Tech Pvt Ltd, which runs social media site ShareChat and short video platform Moj, topped the list with about 600 layoffs. External macro factors are said to have affected the cost and availability of capital. The Bengaluru-based company has cut headcount by about 20 percent in the latest round. Mohalla Tech also shut down its fantasy sports vertical Jeet11, which had nearly 115 employees in December.

Another Google-backed startup that has laid off employees in early 2023 is Dunzo. The fast-casualty firm has laid off 3%, or nearly 90, of its employees as part of its restructuring. Product and supply chain employees are affected. “Some senior developers and at least two engineering directors have been fired,” said a person familiar with the development at Dunzo, requesting anonymity.

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Hard hit by the post-pandemic return to PE classes, edtech startups continued to cut staff in 2023. For example, edtech unicorn Lead School laid off nearly 60 employees earlier this month after laying off 100 employees in August, while UpGrad-owned Harappa Education 70 employees. or 35% of its workforce of 200 workers. The HR department has notified the departing employees of the layoff at the company. Relevel also laid off 40 employees, or roughly 20% of its workforce so far in 2023, as it pivots to a product testing app called NextLevel. The massive layoffs across all sectors come after a successful 2021 in which startups collectively raised more than $35 billion in venture capital funding. In 2022, VC funding fell by 30% to around $24 billion, according to Venture Intelligence.

“After a long period of sunshine, Indian startups faced a long, bitter and cold winter in 2022. As funding has come down, startups have been laying off employees to survive and grow their runways,” said Bhaskar Majumdar, managing partner at Unicorn India Ventures.

Sequoia-backed Rebel Foods, SoftBank-backed Ola, WestBridge Capital-backed e-2wheeler maker Bounce, Tiger-backed voice automation startup Skit.ai, Tiger Global-backed industrial goods marketplace Moglik and UpScalio, a venture in Thrasio-style e-commerce financing brands also laid off employees in January. Layoffs are likely to continue as VCs believe the companies may be facing tougher times. “In 2023 it is gloomier than expected six months ago. “Winter has really set in,” Java Capital’s Bhargavi warned. We expect a painful next 2-3 quarters where there could be more layoffs and closures without adequate runways and poor unit economics,” Java Capital’s Bhargavi said.

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