Startup employees have had a tumultuous 2022. With funding drying up, a number of companies, including the most well-funded, have laid off large numbers of employees. Startups in India have laid off close to 20,000 employees this year, according to data compiled by Moneycontrol.
The mass layoffs at the start of 2022 followed a year of aggressive hiring and high employee costs as tech salaries skyrocketed in 2021, a time when new-age tech startups led the talent war to support their unprecedented growth with funds pouring into the Indian startup ecosystem.
A year has passed, and the cheers of last year's funding party have been drowned out by louder cries for help from employees who were abruptly let go.
The latest to join the fray was fintech major PayU India. Earlier this month, the company laid off around six percent of its workforce by cutting down 150 jobs. The layoffs at the Naspers-owned company were spread across teams and mainly impacted PayU’s India unit and Wimbo, a payment security and mobile payment technology startup it acquired in 2019.
PayU is not alone in downsizing its staff in 2022. Since the beginning of the year, about 50 startups have sacked a large number of employees, citing funding constraints and restructuring, while others have shifted the blame to employees' performance, calling the layoffs standard.
Founders believe that startups that went on a hiring spree to support their rapid growth last year ended up with an excess of subpar talent at a time when the ecosystem shifted away from spending to grow to profitability at all costs.
Some had to make deeper cuts
While startups across the ecosystem had to make difficult decisions, the cuts were more severe for some. Six of the startups on the list that laid off employees in 2022 have let go of over 1,000 since the beginning of the year.
Notably, four of these firms - Lido Learning, Byju's, Unacademy, and Vedantu - are from the edtech sector, which was the poster boy of last year's startup party. While the Sahil Sheth-founded Lido Learning went bankrupt, leaving hundreds of employees, thousands of parents, and a few creditors in limbo, highly-funded and valued edtech unicorns Byju's, Vedantu, and Unacademy had to lay off large numbers in order to stay afloat, exposing the sector's cracks.
Edtech took the heat
Edtech was, indeed, the hardest hit. As physical tuition centres, schools, and colleges reopened following the pandemic and Covid-19 restrictions were lifted, demand for remote learning and technology-based education services declined.
The slowing demand coupled with the funding winter has had a domino effect on India's thriving edtech sector, resulting in the layoff of over 9,250 employees, or roughly half of the total number of employees laid off.
Other startups that laid off employees were primarily from the fintech, web3 and crypto, and healthtech sectors, among others.
Currently, a lot depends on how the funding environment pans out in 2023. From April to December 2022, VC and PE (private equity) funding to India's startup ecosystem fell nearly 50% year on year to $29.2 billion. Between April and December 2021, PE/VC investors invested approximately $58.9 billion in the country's startup ecosystem, making it the world's third-largest.
It will be interesting to see how long the winter lasts and whether it forces more companies to lay off employees in order to cut costs and extend their runway until the next funding round comes to their aid.