In the first half of 2023 alone, approximately 70 startups have collectively laid off more than 17,000 employees, according to data from CIEL HR, a recruitment and staffing firm.
Startups, which heavily rely on external investments to fuel their growth, have been forced to downsize due to a decline in investor funding. The lack of new investments flowing into the industry has become the biggest challenge for these startups, resulting in cost-cutting measures and cash conservation, explained Aditya Mishra, MD & CEO at CIEL HR.
Various sectors have been affected by the layoffs, including e-commerce (including segments like grocery, baby care, and personal care), fintech, edtech, logistics tech, and health-tech.
Even well-known unicorns like Meesho, Unacademy, Swiggy, and ShareChat have had to cut jobs. Notably, Byju’s, a prominent edtech company facing multiple crises, alone fired 500-1,000 employees this year.
Estimates by PwC indicate that startup funding dropped significantly to $3.8 billion in the first half of 2023 from $18.3 billion during the same period the previous year, representing an alarming year-on-year decline of nearly 80%. However, analysts reveal that India-focused funds still have an estimated $18 billion in unallocated capital. The issue lies in the selective flow of capital into startups, with investors now focusing on companies that demonstrate a clear path to profitability and sustainable growth, rather than prioritizing growth at any cost.
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Amit Jain, co-founder & CEO at the CarDekho Group, highlighted that all investors are now urging their portfolio companies to improve on unit economics and pursue sustainable growth strategies.A report by RedSeer warns that sustained funding for startups is being impacted by factors such as increasing capital costs, interest rates, and a decline in the value of technology stocks. The firm’s analysis of approximately 100 unicorns indicates that nearly 20% of them could face challenges in the coming years due to unclear business models, regulatory hurdles, and decreasing demand, with some possibly having to shut down, pivot to new models, or be acquired.
Despite the funding winter, there are some bright spots. EV startups are faring relatively well, with some even thriving, according to Aditya Mishra. Additionally, startups focusing on emerging technologies like AI, EVs, climate tech, deep tech, and space tech are attracting significant investor interest, as they aim to build innovative products and solutions in line with the changing tech landscape.
with TOI inputs