Friday, 17 May, 2024
By: Anshul Vipat
BYJUS announced that it is laying off 5 percent of its 50,000 workforce as part of a restructuring exercise, which amounts to approximately 2,500 people. Image source: IANS
Experts predict that 60,000 startup employees could lose their jobs in coming months
In the past couple of years, India has witnessed a significant boom in startups. Mostly based on innovative business ideas and embedded in technology, they are the new ubiquitous phenomena. However, the segment has started facing a brunt and are now been forced to layoff its employees to cut losses. BYJU’s, one of country's biggest startups is the latest in the pipeline. The company announced that it is laying off 5 percent of its 50,000 workforce as part of a restructuring exercise, which amounts to approximately 2,500 people.
The edtech giant said that this decisions was taken to protect the health of the larger organisation and pay heed to the constraints imposed by external macroeconomic conditions. Company's founder even penned a letter "seeking forgiveness".
"I realise that there is a huge price to pay for walking on this path to profitability. I am truly sorry to those who will have to leave BYJU's, it breaks my heart too. I seek your forgiveness if this process is not as smooth as we had intended it to be. While we want to finish this process smoothly and efficiently, we don't want to rush through it," chief executive and founder Raveendran wrote in an internal letter to employees on Monday. “You are not just a name to me. You are not a number. You are not just five percent of my company. You are five percent of me", he added.
Unfortunately, for startup sector, this is just a tip of the iceberg. It could get worse in the near future as experts predict that 60,000 startup employees could lose their jobs in coming months.
India accounts for 15% of global start-up layoffs
According to the data compiled by layoffs.fyi, a tracker that compiles public information about layoffs in start-ups across the world, Indian startups have laid off a little over 6000 people in the last year. This is close to 15 percent of the total 41,399 start-up employees been laid off across the world. Of these, over 13 per cent were fired by Indian start-ups. Between April 1 and July 12, 2022, 26 start-up layoff events happened in India, causing people to lose their jobs.
To put this in context, in the whole FY22, the number of start-up employees laid off in India were 1,440. This includes unicorn startups like Unacademy, Ola, Blinkit, Cars24, Mobile Premier League (MPL) and Vedantu.
A fifth of the total impacted employees were associated with ride hailing giant Ola. Edtech sector saw greatest number of firings followed by healthcare, transportation and retail sectors.
The funding scene also looks bleak at the moment. According to Tracxn’s ‘Geo Quarterly Report: India Tech Q2 2022’, Indian startups raised $6.9 billion in Q2 2022 (April-June) across 409 funding rounds, a decline of 33%, compared with $10.3 billion in Q1 2022 (January-March). The number of startups funded in Q2 2022 also declined sharply by 29% q-o-q with only 404 firms raising institutional funding.
In the past couple of years, India has witnessed a significant boom in startups. Mostly based on innovative business ideas and embedded in technology, they are the new ubiquitous phenomena. There were eight unicorns minted in 2018, nine in 2019 and 11 in 2020. The year 2021 saw creation of 42 unicorns, a three times jump over last year. The unicorns collectively raised a record $35 billion in new funds in 2021. In the global innovation index, India has now ranked amongst the top 50 countries in the world for three consecutive years (World Intellectual Property Organisation). Today, India has the third-largest startup ecosystem globally.
However, the blockbuster startup party appears to have dried up as country's workforce, especially the young, who quit traditional, stable companies to join startups at crazy packages brace for layoffs. Clearly things aren’t bright for the Indian startup ecosystem as they were last year. The segment is now facing the brunt of Russia-Ukraine war which led to inflation and liquidity crunch – denting the capital raising ability of startups. The investors are getting more selective, and more tightly fisted.
