Will startups slow down hiring this year?

More than 8000 people have been impacted by layoffs in the last few months

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The startup ecosystem in India is in a turbulent state. As experts say, the hiring intent of the company is a direct reflection of its growth. Last year, talent was much sought after in the startup ecosystem, with demand for tech and digital talent going through the roof. There was much discussion on the ‘war for talent’, with startups hiring in droves. However, the trend has been a turnaround in the last two to three months.

As per reports and data available in the public domain, companies such as Better.com, Ola, Vedantu, Cars 24, Lido, Meesho, Furlenco, Trell and OkCredit have been downsizing and laying off people left, right and centre. In fact, in the first four months of 2022, Indian startups had laid off at least 6,900 people. Another 1,200 were rendered jobless in the last couple of months. Data collated from media reports and company announcements reveal that over 8,000 people have been impacted, primarily due to the layoffs in the startup ecosystem.

This trend is not limited to India alone. Companies such as Netflix have laid off 150 people in the US, while Twitter, Facebook and Uber have already expressed their intentions to freeze hiring activity and focus on cost cutting and profitability in the near future.

“This slowdown and bout of downsizing does not come as a surprise, since these startups, which were heavily funded, were hiring irrationally last year. This kind of rationalisation was expected from them”

Gajendra Chandel, HR leader and practisioner

These trends in the job market come as a surprise when experts and HR gurus had been talking of the time being right for rising demand for talent and rapid generation of jobs in the start-up and tech space, for not just tech talent but also non-tech.

With this slowdown in the start-up ecosystem, are we seeing a reverse trend in the talent market?

Where earlier the demand for talent was quite high, these startups inclined to hire cautiously.

“There is a momentary slowdown in the start-up ecosystem as the outlook of investors has changed, with the global crisis of inflation and less than expected returns for the startups,” says a senior HR leader working with a retail startup in India.

Gajendra Chandel, former CHRO, Tata Motors, who is currently mentoring some starups as a business coach, has his finger on the pulse of the startup ecosystem. He believes, “These start-ups have now started to rationalise their workforce decisions, unlike in the years 2020 and 2021,” Chandel says.

Karan Bajwa, VP-HR, MamaEarth, is of the opinion that despite such crisis situations, where many of the startups are finding it difficult to raise funds, “The demand for talent continues to be high”.

According to him, “Organisations are battling for good talent on a daily basis, and I don’t see that changing anytime soon.”

Bajwa further points out that for every organisation that lays off people, there are others in the market that hire aggressively. Even Chandel shares the same thought. “While we can see some big startups laying off people, there are other smaller startups in the country that are actively looking to hire,” tells Chandel.

CoinSwitch Kuber has recently announced intentions to expand its team and add another 500 people by the end of this year. PlanetSpark, the education technology startup, plans to add 10,000 English teachers in the year 2022.

In an exclusive interview with HRKatha, Vipul Singh, co-founder, Aarav Unmanned Systems, shares that the Company is looking to hire about 300 drone pilots and another 20 people in various other roles.

Why are we seeing a slowdown and major layoffs amongst startups?

Pressure from investors: Experts whom HRKatha spoke with, feel that most of the startups are dependent on external funds to grow their business. Most of their funds come from foreign investors, who are heavily impacted by the cash crunch and disruptions caused by the Ukraine-Russia war.

“Start-ups are battling for good talent on a daily basis, and I don’t see that changing anytime soon”

Karan Bajwa, VP-HR, MamaEarth

Lack of profitability: Furthermore, while many of the startups have been able to create a revenue pipeline, they have not seen profitability. Investors have been pressuring these startups to show profitability. To achieve that, companies have been resorting to reducing headcount to control costs.

“This slowdown and bout of downsizing does not come as a surprise, since these startups, which were heavily funded, were hiring irrationally last year. This kind of rationalisation was expected from them,” says Chandel.

“Their hiring intent is bound to slow down and remain so for a while,’ asserts Chandel.

Slow growth: Startups which were heavily funded expected to grow at a much higher speed this year. However, contrary to expectations, they were unable to achieve that growth, which can be the reason for such major layoffs in the startup ecosystem.

“It is possible that the growth many organisations were projecting and had hired for, slowed down in some quarters over the last few months. Owing to multiple factors, fundraising has also slowed down this year as compared to last,” points out Bajwa.

He goes on to add, “Typically in such scenarios, organisations re-look at how they are spending and re-calibrate business priorities, which can have an impact across the board, including layoffs”.

Another HR leader who works closely with startups, helping them grow, predicts that more layoffs can be expected in the future, and that it will take around a year to recover from this crisis.

Bajwa, however, is quite optimistic. “On occasions, even in the foreseeable future we may come across some instances of slow down in hiring and layoffs, but I still think these will be few and far between,” he says hopefully.

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