These Indian Startups, Unicorns Are Now Firing Thousands Employees To Save Money
All the sectors, from online food delivery, hospitality and tourism to mobility, social commerce and foodtech, smaller start-ups and well-funded unicorns are downsizing or streamlining operations to cut costs as demand remains muted due to the covid-19 outbreak and lockdown.
Why Would This Happen?
As per the reports, multiple startups have laid off or furloughed employees and contract staff, besides salary cuts to save cash after revenues take a hit, in April and May.
The online real estate platform Magicbricks and Foodtech startup Dineout have both laid off employees across different business roles, according to three people aware of the development.
Further, both Magicbricks and Dineout have decided to cut staff count on the basis of performance in early May after the crisis impacted sales at both firms.
Some employees were asked to resign in writing without severance, and serve a 30-day notice period as well, according to a person aware of Magicbricks’ operations.
Moreover the person said that so far, Magicbricks has laid off close to 250 employees in May.
While a second executive familiar with restaurant booking platform Dineout’s operations said that the layoffs at the firm were based on performance reviews.
He added, “There were few layoffs within the company but these were purely on performance basis and Dineout is still keeping a strong back for rest of the employees in these hard times,”.
According to a third person aware of Dineout and Magicbricks’ business, both firms have been cutting back on expenses and rationalizing costs since early May as it looks to widen the runway by a couple of months.
Moreover, both Dineout and Magicbricks are owned and managed by internet holding firm Times Internet.
So far, Dineout CEO Ankit Mehrotra did not respond to an email seeking queries and Magicbricks spokesperson did not respond to calls and email queries.
What About The Online Food Delivery Platform?
The online food delivery company Zomato said it is set to lay off 13% of its workforce as the lockdown has impacted its food delivery business, last week.
The founder and CEO, Deepinder Goyal said to employees in a note that it will also initiate company-wide temporary pay cuts as it tries to preserve cash in an uncertain business environment.
Prior to this, in April, rival Swiggy also laid off around 500 contractual members of its cloud kitchen staff, across ten Tier 1 and 2 cities, as it sought to cut costs.
a startup founder in the content and advertising space on the condition of anonymity said, “…Since the restaurant business and real estate market is now going through a slowdown, most of the roles affected will be marketing and sales force, which are now redundant since consumption across both markets are down,”.
While a Zomato on condition of anonymity, said that they saw this coming given food delivery orders were down drastically.
According to him, “We already saw this coming since less than 25% of the total restaurants listed on the Zomato platform are operational during the covid-19 crisis and food delivery volumes are down by more than 70%,”.
What About Travel And Hospitality Startups?
It seems that travel and hospitality startups have of course been hit the most.
In another development, Bengaluru-based travel startup Flynote has recently laid off most of its 130-strong staff citing fund shortage.
Apart from them, the hospitality unicorn Oyo, which has been laying off people since late 2019 announced salary cuts, besides furloughing staff in late April to save cash after its revenues plunged because of the covid-19 pandemic.
Although, Oyo’s moves to cut costs are in line with measures taken by hospitality companies across the world whose businesses have been ravaged by the covid-19 pandemic.
What About Consumer Startups?
Also, many consumer internet startups have been cutting costs and firing employees as the future remains uncertain with some not having a runway of more than 3-6 months.
While, many startup founders who had earlier prioritized growth over profitability are now forced to re-look at their business strategy as covid-19 has impacted startups and big corporates alike.
On the other hand, the Home rental startup ZiffyHomes, backed by startup accelerator Y Combinator, has deferred payments of several vendors and are yet to pay for their leased properties.
Further, three vendors said the company founders have informed them that ZiffyHomes might file for bankruptcy, which may further disrupt payments that are due.