Techies may escape the axe in tech layoff season

Since February, over 5,000 employees have been fired or forced to resign from the startup workforce.

While the layoff count in well-funded tech startups has crossed 5,000 since February, industry insiders say that the number could be anywhere between 9,000 to 10,000 if smaller startups are included.

However, as startups walk back the excesses of the funding rush that saw around $40 billion of private funding being pumped into the ecosystem, engineering and product roles have been mostly insulated from the heat.

"Engineering, product and design functions are the last functions to get impacted," said Abhishek Poddar, co-founder of Tiger Global and Sequoia-backed Plum.

"Whenever there is a downturn, the very first cost reduction happens with teams that are responsible for growth, e.g., sales and marketing. This is because companies, in such downturns, decide to sacrifice growth," he added.

According to a product manager at an edtech unicorn, a lot of well-funded startups in the sector had gone on an overdrive to hire in sales, marketing and content roles in a bid to enter new markets. "Either the products didn't get off the ground in such cases, or the company realised that you can't scale up faster beyond a certain level anyway. And then they laid off entire teams in one fell swoop," he said.

The situation has become so grim for non-tech employees that many are quitting even without being handed the pink slip.

A former marketing executive at a social commerce platform who quit in March said: “Everyone in my team had been sitting idle since the beginning of January. The marketing spends had come down even before the news about some financial mismanagement came out.”

“Although our salaries were getting credited, we got scared. When one of our vertical heads quit, I realised it is time to look out for another job,” he added.

Even as startups are cutting their marketing spends and headcounts to move towards profitability, industry insiders say that they will latch on to their engineering and product management staff as long as possible.

The founder of a Delhi-based SaaS company went as far as to say that hiring for mid-level tech roles remains a challenge even in this environment. "Engineering and product roles haven't been much affected by the broader downsizing as startups need to lie low and focus on building in leaner periods. Mid to senior level hiring in these domains is still tough to make as the paychecks have remained elevated," he explained.

"Most of the layoffs have happened in the sales roles as investors want to see an immediate RoI for such hires," he added.

While founders and VCs have been saying over the last couple of months that the focus must shift to profitability over growth (which more often than not translates to acquiring more customers via freebies rather than revenue in startup parlance), not everyone is convinced that they will be able to walk the talk.

Siddarth Pai, managing partner of VC firm 3One4 Capital, said, “Founders believe that aggressive cost cutting, including lay-offs, will help them to move towards profitability, but its a long road to profitability for in reality everyone is just hoping that the funding slowdown will get over in 2 or 3 quarters.”

“Until then, you want to hold your core engineering and product functions close to the chest so that you can get back quickly to action as and when greenshoots become visible again,” he added.

The bottomline

According to Ajoy Thomas, Vice President at TeamLease Services, the hiring market for techies will undergo a correction in the broader tech industry. “The overall number of fresh vacancies will come down as a lot of expansion plans are being put on hold. We will also not see the huge hikes and perks that were being given out to techies,” he said.

“However, the levels at which the salaries of techies have reached will still be preserved,” he added.

Despite the thousands of layoffs that have already happened, several startups have also indicated that they are still hiring strongly for non-tech roles. For instance, even in the worst-hit edtech segment, companies like Physics Wallah and TestBook are looking to recruit hundreds of people across functions like teaching, human resource, marketing and communications.

Deepak Abbot, co-founder of fintech startup Indiagold, said: “We still have a shortage of talent in smaller startups and they will continue to hire cautiously. However, we won’t see hikes of 40 percent, 50 percent and 60 percent anytime soon.”

However, he also added that more layoffs will also continue to happen across the board.