Layoffs at startups continue in 2023 amid funding winter

“The founders are well aware of the slowdown in the pace of trading, and ‘extend the runway’ is the mantra they adhere to in moving forward in the coming quarters. Therefore, startups are going back to the drawing board to implement measures that will help them survive for the next 24 months,” said Bhargavi V., co-founder and partner at Java Capital.

Among companies that completed layoffs in 2023, Google-backed Mohalla Tech Pvt Ltd, which runs social media site ShareChat and short video platform Moj, topped the list with around 600 layoffs. He said that external macro factors affected the costs and availability of capital. The Bangalore-based company cut its workforce by around 20% in the latest round. Mohalla Tech had also shut down its Jeet11 fantasy sports vertical, which had nearly 115 employees as of December.

Another Google-backed startup that laid off its employees in early 2023 is Dunzo. The fast trading firm laid off 3% or nearly 90 employees as part of its restructuring. Product employees and the supply chain were affected. “Some senior developers and at least two engineering directors have been laid off,” said a person familiar with the development at Dunzo, who was seeking anonymity.

Badly affected by the return to physical classes after the pandemic, edtech startups have continued their reductions in 2023. For example, the edtech unicorn Lead School laid off nearly 60 employees earlier this month after laying off 100 employees. in August, while UpGrad-owned Harappa Education laid off 70 employees. or 35% of its 200-person workforce. More layoffs are likely at the company, the human resources department told the laying off employees. Relevel, owned by Unacademy, has also laid off 40 employees, or about 20% of its workforce so far in 2023, as it switches to a trial product app called NextLevel. . The mass layoffs across all sectors come after a 2021 blockbuster when startups collectively raised more than $35 billion in venture capital funding. In 2022, venture capital funding fell 30% to about $24 billion, according to Venture Intelligence data.

“After an extended spell of sunshine, Indian startups in 2022 faced a long, bitter and cold winter. As funding crunch sets in, startups have undertaken layoffs to survive and increase their gateways,” said Bhaskar Majumdar, Managing Partner at Unicorn India Ventures.

Sequoia-backed Rebel Foods, SoftBank-backed Ola, B Capital-backed EV 2-wheeler maker Bounce, WestBridge Capital-backed voice automation startup Skit.ai, Moglix, Tiger Global-backed industrial goods marketplace , and UpScalio, a Thrasio-style company that funds e-commerce brands, also laid off employees in January. Layoffs are likely to continue as venture capitalists believe companies may be in for harder times. “2023 is bleaker than expected six months ago. Winter has really arrived,” warned Bhargavi of Java Capital. We expect painful next 2-3 quarters that could see more layoffs and closures without proper leads and poor unit economics,” said Bhargavi of Java Capital.