As the year draws to a close, it is time to look back at the loss of jobs of close to 20,000 employees working for startups in India this year.
These people have had to bear the brunt of funding drying up, causing a number of companies, even the most well-funded to lay off people en masse.
How did this all start?
This trend began at the start of 2022, which followed a year of aggressive hiring and high employee costs as tech salaries skyrocketed in 2021.
Back then, new-age tech startups led the talent war to support their unprecedented growth with funds pouring into the Indian startup ecosystem.
Now that a year has gone by, the positive sentiment of last year’s funding party has been dampened by stories of helpless employees that were abruptly let go.
The latest to jump on the depressing bandwagon is fintech major PayU India.
Earlier this month it laid off around six percent of its workforce by cutting down 150 jobs.
The layoffs were spread across teams and mainly impacted the India unit and Wimbo, a payment security and mobile payment technology startup that it acquired in 2019.
PayU is not alone in this, though.
Reasons cited, employees blamed
Since the beginning of the year, about 50 startups have sacked a large number of employees.
They have cited funding constraints and restructuring, while others have shifted the blame to employees’ performance, calling the layoffs standard practice.
Founders believe that they have been saddled by an excess of subpar talent when their startups went on a hiring spree to support their rapid growth last year.
This came at a time when the ecosystem shifted away from spending to profitability at all costs.
Edtech sector at the top
Startups across the ecosystem have had to make difficult decisions but the fallout was more severe for some than others.
Six of the startups 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 dominated the growth of the ecosystem.
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.
What went wrong?
Edtech turned out to be the biggest sufferer due to physical tuition centres, schools, and colleges reopening post pandemic and after Covid-19 restrictions were lifted.
Along with that, demand for remote learning and technology-based education services declined.
This, coupled with the funding winter has had a rippling effect on the country’s once thriving edtech sector.
As a result over 9,250 employees, or roughly half of the total number of employees have been laid off.
Other startups that have felt the heat were primarily from the fintech, web3 and crypto, and healthtech sectors, among others.
How will things be in the new year?
At present, there is a lot riding on how the funding environment will fare 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.
In comparison, between April and December 2021, PE/VC investors invested approximately $58.9 billion in our startup ecosystem, making it the world’s third-largest.
It remains to be seen how long this winter lasts and whether more startups will be forced to conduct mass layoffs in cost cutting measures and in order to extend their runway until the next funding round comes to their rescue.