Industry executives and hiring experts said while layoffs may be down from the 2023 highs, they aren’t over as startups deal with a constrained funding environment and cost conservation focus, especially for those preparing for initial public offering. There are also others that are grappling with regulatory or legal issues.
“The intensity has reduced; the bottom is behind us but it’s not like good days are immediately ahead,” said Anshuman Das, chief executive of Longhouse that put together the data for ET.
Hiring is still down by 35-40% from the 2021-22 highs, though improved from last year when startup companies hired 60-70% fewer employees compared with the previous year, he said.
Overall, the situation is much better than 2023, when Das said startups across the board handed out pink slips in what he called an ‘Operation Clean-up’.
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More than 36,000 people lost their jobs last year, compared to 20,000 in 2022 and 4,000-plus in 2021.In 2024, significant layoffs — ranging between a few hundreds to a few thousands — have happened at Ola Electric, Paytm parent One97 Communications, Byju’s, Unacademy, Swiggy and Flipkart.
Agritech startup Waycool laid off 200 employees as recently as last week. Others which have laid off this year include Healthify, The Good Glamm Group, ReshaMandi and Scaler, for reasons ranging from failure to secure funds, restructuring the business and making them profitable, or as part of a strategy for long-term growth and sustainability.
“There may be some pockets where some layoffs are still happening or will happen but most of the calls that were supposed to be taken have already been taken. Most companies have now tightened their screws enough already,” said the CEO of an edtech startup, who did not want to be named.
“IPOs are one place where most are trying to get the costs right; there may be some bigger issues with large companies like Byju’s or wherever more M&As may be happening,” he added.
Indian startups raised $38.8 billion in funding in 2021 at the height of the funding frenzy, which came down to $25.6 billion in 2022 and dropped sharply to $10.3 billion last year, according to data from Tracxn.
In the first half of this year, they raised around $5.2 billion, compared with $5.6 billion in the corresponding period in 2023 but up from $4.7 billion in the July-December 2023 period.
In July this year, Indian startups raised $296 million so far.
“Funding is not easy. Some startups are seeing a push to hit public markets early, they will have to be frugal,” said Das. However, compared to 2023 when layoffs happened across the majority of companies, the job cuts this year are concentrated in fewer startups.
For a long time, startups felt they were in the business of raising capital, not building a business, said Sandeep Murthy, partner at venture capital fund Lightbox Ventures. That fuelled a lot of irrational spending on hiring, customer acquisition, etc., that led to business models that were unsustainable. When funding stopped, that’s when the drastic job cuts happened.
“We seem to have right-sized now,” said Murthy.
While these phases are cyclical, Murthy said the swing in the other direction is not yet happening. “Meanwhile, most companies have realised that what they should invest in is future growth and make do with fewer resources and lower cost of hiring.”