Startups continuing Layoffs amid funding winter

Indian startups continued to lay off employees in 2023, with at least 11 tech startups firing 1,400 employees in the first two weeks of the year. This accounts for 7.3% of the total layoffs by startups in 2022 as companies seek to cut costs amid economic uncertainty.

Founders are acutely aware of the slowdown in deal-making, and ‘expanding the runway’ is the mantra they are following to tide over the next quarters. So, startups are on the drawing board to implement those measures. Going back which will help them survive for the next 24 months.

Among companies to end layoffs in 2023, Google-backed Mohalla Tech Pvt Ltd, which runs social media site ShareChat and short video platform Moj, topped the list with nearly 600 layoffs. It states that external macro factors affect the cost and availability of capital.

The Bengaluru-based company cut its workforce by around 20% in the latest round. Mohalla Tech also laid off its fantasy sports vertical Jeet11, which laid off around 115 employees in December.

Another Google-backed startup that laid off its employees in early 2023 is Dunzo. The instant commerce firm laid off 3% or about 90 employees as part of its restructuring. Product and supply chain employees were the most affected. “Some senior developers and at least two directors of engineering have been dismissed,” said a person with knowledge of Dunzo’s development.

The challenge of this “winner-takes-all” model in the corporate world is that the competition has to be decimated with whatever means necessary, the ultimate objective for the winner is a monopoly (the only buyer) and a monopsony (the only seller). There is no room for a second or third player in this model.

The “winner-takes-all” model requires an enormous amount of funding – business fundamentals such as profits or even revenue are not important. The model’s assumption is that equity can fund losses; revenues are not important until such time that there is only one player standing.

Food delivery major Swiggy reportedly plans to fire around 8-10% of its workforce, or 480-600 employees, to reduce costs amid the ongoing funding winter. The layoff at Swiggy will impact its product, engineering and operations teams, Financial Express reported citing sources.

The layoffs come at a time when the company is trying to turn operationally profitable before going for an initial public offering. The Swiggy layoff comes at a time when the foodtech unicorn is saddled with losses and facing stiff competition from Zomato.

Secondly, Sequoia-backed Rebel Foods, SoftBank-backed Ola, B Capital-backed e-2wheeler maker Bounce, WestBridge Capital-backed voice automation startup Skit.e, Tiger Global-backed industrial goods marketplace Moglix, and Upscaleo, a TherSio-style venture a Finance e-commerce brand also sacked employees in January.

Layoffs are likely to continue as VCs believe that companies are staring at tough times. “2023 is bleaker than six months ago. “Winter has really set in,” warns experts.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA