It seems like 2022 has not quite been the ‘IT’ year for a lot of Indian startups. The employees as well as the startups have realized what sort of rut they have been in financially since the beginning of 2022.
A series of major global events such as The Russia-Ukraine crisis, interest rate hikes, and stock market crash can be associated with the funding winter that startups are facing. The first quarter of the year proved to be relatively lucky for the startups as they got $11.7 billion in funding, but April saw just around $3.4 billion in funds. With the following numbers, we can observe that even though the funding amount is more than what it was last year, the momentum and pace achieved by these startups somewhere seems to have fizzled out.
Around 23 Indian startups have laid off close to 9,000 or more employees. These startups also include unicorns such as Ola, Meesho, Vedantu, MPL, and Unacademy to name a few.
Talking about the same, Sequoia had warned earlier about this funding winter. Similarly, ace startup- accelerator Y Combinator too issued a warning which read, “understand that the poor public market performance of tech companies significantly impacts VC investing”. Similar to these, several others including Beenext, Lightspeed Venture Partners, and Orios Venture Partners have handed out these exact warnings to their portfolio companies.
E-commerce followed by Ed-tech has seen the most amount of layoffs. Both sectors together have seen 8,321 employees bid them goodbye. The crisis we are facing currently is going to be a trial for the ecosystem, to say the least, and even big VC firms don’t expect a V-shaped recovery. Indian ed-tech giant Byju’s recently announced its plans to focus more on the international market as the Indian ed-tech market is slowly scaling downwards. These startups have faced investors sitting on their heads for more profits. Add to that the economic stress that the market has already been facing, and then the company sees it right to go for cost-cuttings. This cost-cutting mostly is always laying-off tons of employees rather than going for more conventional methods to do the same.
Our startups couldn’t handle the capital well as well as failed to create sustainable capital reserves for backup. A high cash burn and not using the capital sources carefully have also contributed to driving these firms to the ground. In the middle of all this, constant pressure from investors to adopt more conventional ways of profit-making doesn’t help much with thinking out of the box. This funding winter is said to last for more than 12-18 months and as more and more firms are told to have a conventional modus operandi, the number of layoffs might just keep increasing.