Indian startup layoffs cross 25,000-mark as funding winter persists

The actual number of layoffs can be more as many startups are now resorting to silent layoffs.

Layoffs by Indian startups, which started in the beginning of 2022, have crossed the 25,000-mark as more new-age tech companies take the cost-cutting route to survive the funding winter.

From 2022 till date, about 94 startups have laid off close to 25,805 employees in an attempt to reduce expenses and extend their runway to focus on profitability, according to Moneycontrol’s layoff tracker.

In fact, the actual number of layoffs can be more as many startups are now resorting to silent layoffs.

“If 2022 was a bad year, this is going to be much worse. We are already witnessing funding fall down and I expect that there will be further correction,” Anand Lunia, founding partner at India Quotient - a Mumbai-based VC fund, told Moneycontrol.

Why the layoffs look more alarming now

According to Anshuman Das, co-founder and CEO of Careernet and LONGHOUSE Consulting, the same number of layoffs would not have been as alarming for IT services companies as it employs a large base.

“With a lower base of employees working at Indian startups, reabsorption could stand as a problem especially now when job openings are also much lower compared to last year,” he added.

Also Read: Life after layoffs: How people are coping after losing jobs in Indian startups

Das also expects more startups to make such decisions as cost-cutting becomes a priority. “With no sign of funding coming in, the number could potentially go anywhere near 40-50,000 by the end of the year,” he said.

In 2023 alone, about 46 startups have let go of close to 7,500 employees already.

Moreover, while 50 startups laid off employees last year, 46 have already been added to the list in just six months into 2023. However, in terms of the absolute number of employees, 2022 was much worse with a six month average of close to 9,000 sackings, 20 percent more than this year.

“This time, you will see a lot of smaller companies also making tough decisions. Earlier when it happened, the late-stage companies with a huge workforce conducted layoffs. So earlier, while there was a larger pool with a smaller number of companies, now there will be a smaller pool with a larger number of companies,” Das said.

Finding another mention in the list of companies terminating staff is the world’s most valued edtech startup, Byju’s, which started laying off over 1,000 permanent staff across departments. This move took its layoff toll to over 5,000 since the beginning of 2022.

While Byju’s has also been dealing with issues like accounting irregularities and tussles with lenders, the edtech sector in general, has taken the most heat with the funding drought with a fall in demand for online classes, post the pandemic. Over four of the top six startups belong to the edtech sector.

Over four of the top six startups belong to the edtech sector

Funding crunch

Moneycontrol had earlier reported that funding for Indian edtech companies plummeted 46 percent to $2.86 billion in 2022 from $5.32 billion in the previous year. In 2023, it dropped to $889 million.

Also Read: Indian unicorns cut back on employee appraisals as cost-cutting takes priority

While a large chunk of such layoffs have been due to cost-cutting measures, employees also lost jobs due to corporate governance lapses by their employers.

Trell, GoMechanic, and, more recently, Mojocare are examples.

To be sure, funding to Indian startups plunged to about a fifth in the first five months of 2023, compared to the same period last year.

“Global biggies are not doing little in India, we haven't seen them here for two years in the growth stage and there is churn in investment firms too. That doesn't mean that India is a bad place to invest, it, however, does mean that India was in a bubble and the individual behaviours of some founders have also negatively affected sentiments,” Lunia added.

Lunia also said that while growth funding is expected to go down further, it will only make the startup ecosystem stronger. “Both investors and founders need to do a proper mental reset and realise that their job is to create lasting companies and not just attract funding rounds. That reset is in progress now,” he added.