Indian start-ups have laid off 23,000 people since 2020. But here’s why there’s still hope

A crowd-source database shows that at least half the layoffs — over 11,000 — happened in 2022 alone. But data shows that hiring intent has begun to look up.

Credit: Graphic by Soham Sen

New Delhi:  Over 23,000 employees in startups have lost their jobs since the pandemic began in 2020, making India among the top five countries in terms of startup layoffs, a crowd-source database shows. 

Data from Layoffs.FYI reveals that of 23,542 employees that were laid off since 2020, nearly half — 11,098 — were laid off just in this year. Among other countries where startups have laid off people in large numbers is the US where nearly 80,000 people lost their jobs since the beginning of the pandemic. Similarly, nearly 5,000 people were laid off in Brazil, more than 3,000 in Singapore and less than 2,000 in Canada, data shows.

The database shows that 1,45,955 employees have been laid off from 924 startups worldwide since the pandemic began. Layoffs.FYI is a tracker that uses information available in the public domain — such as news reports — for tracking layoffs in startups across the world. 

A startup is a young company founded to develop a unique product or service and rooted in innovation.

However, there appears to be some silver lining: a report released by Teamlease, one of India’s largest human resource firms, shows a 62 per cent hiring intent among startups for the period between July and September 2022 — a marginal increase from 57 per cent in October-December in the 2021-22 financial year. Over 865 small, medium and large companies including startups were surveyed for the report. 

The ‘Intent to Hire’ is a metric that tells you the percentage of employers that are likely to hire in a given quarter. 

“Startups seem to be facing the brunt of the funding slump and exhibit a relatively subdued level of the Intent to Hire of 62 percent,” said the latest ‘Teamlease Employment Outlook Report’, released in July. The report is published every quarter.

Rituparna Chakraborty, the executive director of Teamlease, said that layoffs are happening but that does not mean companies are not hiring.

Experts also claim that cost-cutting isn’t the only factor that influences layoffs. 

“In the last 2-3 years, investors have started asking for a sustainable business model from the start-ups,” said Professor Dhruv Nath, director at Lead Angels, a privately-owned angel network that invests in startups. “They are not happy simply with a revenue generation from whatever source possible. They are asking for a path to profit and when the companies are not able to do that they start cutting costs. That’s how the lay-offs happen.”

Angel investors are individuals that provide backing to companies or startups, typically in exchange for equity ownership in the company.

Rising hiring intent

According to ‘Teamlease Employment Outlook Report’, Unicorns and Soonicorns (soon-to-be unicorns) have shown a 78 per cent hiring intent between July to September. It also shows an attrition rate (rate at which people leave an organisation) higher than 11.04 per cent in e-commerce and allied start-ups.

A unicorn in business refers to a startup with a value of over $1 billion.

Additionally, Teamlease’s ‘Career Outlook report’, released in February this year, showed that startups’ hiring intent for people who have just graduated college had also gone up to 41 per cent in e-commerce and tech startups for the period between January and June this year, compared to the previous half year in 2021.

Vaibhav Singh, co-founder of health-tech platform Visit, said that contrary to popular belief that startups were struggling financially, there were several that were doing well and weren’t laying off employees.  

“This [the narrative that startups were doing poorly] also creates problems for us when we go out to look for talent to join us. Good candidates are apprehensive of joining startups these days because they think that they won’t sustain,” he said.  

Companies that are currently hiring are Utkarsh, an Edtech platform which claims it was on a “hiring spree” in June; Sequretek, a startup in the cybersecurity space and HappyLocate, an app-based relocation platform.

Nath told ThePrint that although layoffs were always multifactorial, the Covid pandemic, the ongoing war between Russia and Ukraine and the subsequent global inflation have caused the market liquidity to shrink.

During times like this, he said, Venture Capitalists (VCs) — investors that provide young companies capital in exchange for equity — want to put their money in “more secure” places.

“The VCs in the US play it safe and put their money in pure currency or bonds,” Nath said. 

A venture capitalist who did not want to be named said that many startups that hired employees at hefty salaries were forced to scale down when they found they couldn’t show profits. 

 “VCs want companies to tell them at least tentatively when they will begin to, if not make profits, then at least break even (a point where there’s neither profit nor loss),” he said. “But not many are able to do so. So when funding starts to dry up, companies begin to scale down.”

(Edited by Uttara Ramaswamy)