The Indian startup ecosystem is maturing. While it is still in its early stages, there have been massive layoffs stories since this year.
Almost six months into 2022 and layoff reports are already flooding the Indian startup industry and causing turmoil among employees and job hunters. Many startup employees from Indian startups that had raised millions of dollars are getting the pink slip, as these startups are now struggling to keep their businesses afloat. These startups are “restructuring”, “downsizing” or “automating” operations in an attempt to cut costs.
Here are six of the biggest layoff stories in the Indian startup scene in 2022:
1. EdTech firm Vedantu laid off 424 employees
In May 2022, EdTech unicorn Vedantu laid off around 7% of its workforce, including 424 full-time and contractual employees. “There is no easy way to say this—out of 5,900 Vedans, 424 of our fellow teammates (i.e ~7%of our company), will be parting with us. This has been an extremely difficult call to make, and I want each Vedan to understand why V had to take this call,” wrote the CEO of Vedantu, Vamsi Krishna, in his blog post.
The firm took this drastic step to increase its capital runway (the amount of time a business has before cash runs out). This will help in lowering client acquisition costs and aligning all products to key sectors. Further, in its blog post, Krishna highlighted that due to the tough economic backdrop in recent months, with European wars and inflation fears in stocks worldwide, capital has become scarcer for upcoming quarters. This will make things even more difficult for companies which are currently struggling under the pressure of pandemics, like Vedantu, to survive. As the company experiences slow growth rates over time due to these factors, they need to adapt accordingly in order to sustain itself in future years
2. Social e-Commerce unicorn Meesho laid off 150 employees
In April 2022, Meesho, a Bengaluru-based online e-commerce business for fashion, electronics and home products, let go of over 150 full-time employees. They included city-level managers, product, design and executives who worked on its user interface as well as some third-party roles, such as delivery boys and website designers on six-month contracts.
This strategic move is allegedly part of its restructuring to cut down on redundancy as the company integrated the Meesho Superstore app with their main app, Meesho. To compensate for the layoffs, the company is offering severance packages and also outplacement opportunities to the impacted employees.
This layoff indicates that Meesho, a well-funded Indian startup, is looking to reduce its cash burn after a year of intense competition in the online retail market. According to a report, in September 2021, the company was burning through US$20 to 25 million per month, but that number has since increased to as much as US$50 million per month. Meesho is currently in talks to raise fresh capital after last year’s successful Series F funding round, which saw the company raise US$570 million led by Fidelity and B Capital group.
3. EdTech startup Lido Learning laid off over 150 employees
In India, startups are often lauded for their ability to create jobs and spur economic growth. So when Lido Learning, an EdTech startup, announced the layoff of 150-200 employees in February 2022, it came as a surprise to many in the startup industry. Moreover, this news broke out just five months after it raised US$10 million from Ronnie Screwvala’s Unilazer Ventures. According to the company, the layoffs were due to underperforming employees who were not regular in the office. However, the employees’ version was strikingly different.
Employees revealed that the company’s founder, Sahil Sheth, held a virtual meeting where he informed employees that the startup is facing financial difficulties and will not be able to pay salaries for January and the first week of February. Additionally, the company is exploring options to raise funds or for a merger; but in the meantime, it will have to implement cost-cutting measures, which could include layoffs. This news comes as a blow to the startup’s employees, especially those who are struggling to make ends meet.
4. Digital bookkeeping startup OkCredit laid off 35-40 employees
Besides Lido, digital bookkeeping startup OkCredit announced the layoff of 35-40 employees in February 2022. Most of these employees were from the growth and payments departments, and they have been given standard severance pay along with other benefits, like insurance and outplacement services.
The company has attributed the move to a shift in focus from bookkeeping and e-commerce enablement (the process of submitting purchase orders and invoices over the internet) to FinTech initiatives (there is no official mention of the details about these FinTech initiatives). In addition, they will concentrate on strengthening their growth channels.
Besides, the layoffs come as the company continues to struggle to generate revenue, despite having raised nearly a total of US$90 million in venture capital financing. In September 2019, the startup raised US$67 million in a Series B funding round, but the company hasn’t raised any follow-on rounds since. Moreover, OkCredit remained a pre-revenue stage company during the fiscal year ending March 2021.
“There is heightened competition in the market with large well-funded players including Udaan competing in the space. Funding opportunities are also drying up. Hence, reducing burn and pivoting is the only way forward for OkCredit,” reported ET.
5. Social commerce startup Trell lays off half of its workforce
News is around the corner that influencer-led social commerce startup Trell is on the verge of laying off around 40-50% of its workforce. Reports have revealed that Trell has had a monthly burn rate of US$4-5 million in the past year, and as a result, they were forced to lay off a substantial portion of their workforce to remain afloat.
Also, the move comes as the company is under investigation by EY India for alleged related-party transactions and other financial irregularities. The investigation has put Amazon’s plan to invest in Trell on hold. This is a shocking turn of events for a company that raised US$45 million about ten months ago.
6. Furniture rental startup Furlenco lays off 180 employees
Next on the list is Bengaluru-based startup Furlenco, which laid off around 180-200 employees in March 2022. This bulk layoff includes employees in customer support roles, such as grievance management and scheduling, among other operations.
The layoffs come on the back of the company scaling down operations across various Indian cities, including Pune, Kolkata and Ahmedabad. The company has also outsourced functions, such as asset management, repair and maintenance and asset collection, for returns. These changes come as Furlenco looks to reduce costs and improve efficiency amid challenging market conditions. Furlenco has also raised US$140 million from Zinnia Global Fund in a mix of stock and debt in 2021.
As of last week, 8,364 employees have been laid off by 13 startups in India since the beginning of this year. However, whether layoffs will be sufficient to save the startups from failure is still in question. While some layoffs have been inevitable to handle excessive hiring and remove “underperformers” resorting to this measure without exploring other ways to reduce costs is perhaps not the smartest move. With these developments, we can only hope that the Indian startup ecosystem can weather this storm and emerge stronger than before.
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