Peak XV, Temasek-backed Fi laying off 10% of staff to preserve cash for 2 years of runway

In today’s townhall that happened at 2 pm, Fi co-founder Sujith Narayanan said that the fintech startup will also be looking to prune its marketing, technology costs and shift focus away from products and verticals that aren’t generating revenue

Fi, a neobanking startup backed by investors like Peak XV (formerly Sequoia’s India arm), Temasek and Alpha Wave Ventures, told employees in a townhall on September 27 that 10 percent of the staff is being laid off as the fintech company looks to extend its cash runway to 2 years amid a worsening funding winter, according to sources.

The company has around 300 people on the payroll, which means that about 30 people will be affected by the layoffs. Those close to the developments said that senior management personnel in the company have been asked to take pay cuts to save on costs.

In today’s townhall that happened at 2 pm, Fi co-founder Sujith Narayanan said that the fintech startup will also be looking to prune its marketing and technology costs and shift focus away from products and verticals that aren’t generating revenue.

“It’s a grim environment in the office. HR (human resource) is walking around with envelopes and huge stacks of paper… Sujith told employees in the townhall that the management wants to have a cash runway of 2 years. He also said that the company was 30-40 percent behind the revenue targets for the first half of the year,” said a person aware of the developments.

“The mutual funds product has seen some traction, but not big enough to draw a lot of revenue. There was a plan to launch investments in US stocks in January this year, but compliance matters have tied it down. And the loan disbursals are also underperforming,” he added.

Last valued at $520 million in a funding round in July 2022, the neobanking company registered revenues of Rs 67 lakh in FY20, Rs 1.27 crore in FY21 and Rs 25.6 crore in FY22, according to data from PrivateCircle Research. Its losses were Rs 9 crore in FY20, Rs 50 crore in FY21 and Rs 245 crore in FY22.

The company hasn’t filed its FY23 financials yet.

According to a person in the know, the company has applied for an NBFC (non-banking financial company) licence and expects approval within the next 5-6 months.

"As a company, we constantly evaluate and adapt to the changing landscape of our industry. We’ve recently undertaken a strategic restructuring, prioritising our focus and resources on key growth areas. This restructuring will enable us to double down on our core product features, streamline operations, and ensure a sustainable future,” said Narayanan.

“Consequently, this will impact roughly 10% of our workforce spanning diverse roles. We recognise the significant contributions of our team members and are committed to supporting those affected during this transition," he added.

He further said, "The restructuring will, unfortunately, affect talented individuals who've played significant roles at Fi. We are committed to providing our departing colleagues with comprehensive support, including multiple months of severance, extended healthcare provisions, and extended ESOP vesting as they navigate the next steps in their career journey. During this challenging period, we humbly ask for empathy and discretion concerning the privacy of our transitioning colleagues."

While Fi does not have a banking licence, it has partnered with Federal Bank for customers to open bank accounts, while Fi runs the app and related services. Fi is among a slew of neobanking startups that seek to disrupt traditional banks, which are offline-heavy, often don’t have enough digital presence and run on stodgy and sometimes bureaucratic processes.

Founded by Sujith Narayanan and Sumit Gwalani in late 2019, Fi offers a zero-balance savings account, ways to monitor your expenditure and segregate it and create ‘jars’ for savings. It directly competes with Jupiter, another neobank founded by former Citrus Pay founder Jitendra Gupta. Both startups count Peak XV as a common investor.