From Indian unicorns like Vedantu and Unacademy to global tech firms and growth-stage startups like Trell and Furlenco are going through a major blood bath after the funding boom in 2021. Since the start of this year, at least 5,600 employees have experienced cutbacks, layoffs, and termination of contracts.
It has given way to fear and panic, with many questioning these companies’ aggressive expansions over the past few years, labeling them reckless.
Layoffs made by Indian Startups:
- Unacademy: 1000+
- Furlenco: 180+
- Trell: 300+
- OkCredit: 40+
- Lido: 150+
- Vedantu: 624+
- WhiteHat Jr: 1,000+
- Cars24: 600+
- Meesho: 150
- Blinkit: 1,600+
Rationalizing the Layoff
Startups like Unacademy, Lido, Vedantu, Trell, Furlenco, and others have cutbacks and layoffs to improve their profitability. In addition, Better.com, a US-based mortgage company, has also asked its employees to accept voluntary separation agreements.
This soft layoff at Better’s Indian operation left 920 employees terminated earlier this month. And this development happened when the company had already let go of more than 3,000 employees in April.
The spate of layoffs promoted many questions about these startups’ expansion over the past few years, giving them labels as reckless.
For instance, Trell had laid off more than 300 employees amid allegations of irregularities. However, according to sources within the company, the reasoning is that many of the categories and languages Trell offered on its social platform over the past two years had not paid off. Hence, the company decided to focus only on revenue-generating categories and languages.
Vamsi Krishna, Vedantu’s CEO and cofounder, announcing the layoff on LinkedIn, claimed that the European war, approaching economic dread, and federal rate interest hikes had caused inflationary strains and a market correction. From a workforce of around 5,000 people, the firm has laid off nearly 600 people in the last several months.
Other founders have defended the layoffs by asserting that they aim to improve unit economics and cut non-profitable sectors or verticals. Automation is also a priority, particularly in high-cost marketing, customer success, and support operations. As evidenced in the case of Furlenco, which laid off 180 people in March, startups are utilizing the larger ecosystem to automate human-driven operations.
Layoff Cycles in the Indian Startup Ecosystem
While expansion needs more spending and scaling up, the risk is that the profits are often harder to come by. It is not uncommon to see revenue taking its time to come in new verticals. Hence, most expansion efforts often throw several darts around and hope that at least some of them will stick.
It happened back in 2016 after the e-commerce boom. At that time, a shutdown of businesses was common, along with frequent layoffs. It happened again in 2019 when we saw another wave of cutbacks with Zomato laying off over 600 employees in a push towards automation.
In the same year, Paytm had also let go of over 500 employees. Rivigo had laid off close to 100 employees before its acquisition, while ShopClue had downsized its workplace by laying off close to 200 employees.
However, with the funding boom after 2020, it was mitigated when hiring was ramped up across sectors. For instance, Swiggy recently increased its team size after venturing into quick commerce.
Hence, we are positive that after more hustling and striving for positivity, the hiring boom will come back as startups semblance some profitability.