The SaaS startup laid off 15% of its workforce after revising its PIP policy, sources said. However, a company spokesperson said that 80 employees were impacted by the policy revision and business restructuring
In line with the standard industry practice, the startup didn’t pay any severance package to the employees terminated due to performance issues
In an internal communication note seen by Inc42, Exotel CEO said that the startup plans to raise a pre-IPO round this year to fuel its growth for the next few quarters
Bengaluru-based cloud telephony platform Exotel recently laid off 142 employees, or 15% of its workforce, citing their poor performance, sources told Inc42.
The layoffs took place following a revision in the startup’s performance improvement plan (PIP) policy in November 2022, under which Exotel removed the clause of giving two warnings to employees for below par performance, one of the sources said.
Besides, the notice period of the employees began as soon as they were initiated into the PIP, the source said.
However, a company spokesperson told Inc42 in a statement that 80 employees were impacted due to the revision in PIP policy and business restructuring.
In an internal communication note seen by Inc42, Exotel cofounder and CEO Shivakumar Ganesan said, “In the model today, there is no appetite for risk. We should land up at INR 44 Cr loss along with a 15% salary hike provided we execute a 142 people PIP plan correctly.”
Meanwhile, the Exotel spokesperson said that while 45 employees were impacted due to the PIP process, which is a standard practice at the organisation, only 35 employees were laid off as part of the restructuring.
“Exotel is an employee-first organisation and any difficult choice that affects our people is our last resort. Exotel is cash positive & we are experiencing steady growth in an uncertain economic environment. Recently, some members of our team have been affected due to our restructuring efforts (3%) & the mid-year review, business as usual performance improvement planning process (less than 5%),” the spokesperson said.
Responding to a question about its IPO plans, the startup said, “While our sights are on an IPO, when that is would be determined by many factors at that given time. Business growth and geo expansion are our more immediate goals.”
In line with the standard industry practice, the SaaS startup didn’t pay any severance package to the employees terminated due to performance issues, another source said.
“Some senior managers directed the HR manager to undertake the layoffs. People were forced to resign and were told that if they took the PIP and failed, their HR records will be marked with termination due to performance,” the source added.
Pre-IPO Funding Round
In the note, Ganesan said that while Exotel had INR 260 Cr cash in November 2022, it is likely to report a loss of INR 50 Cr in calendar year 2023.
“We may exit FY23 with INR 150 Cr cash. So by the end of next fiscal we will have (an) infinite runway,” Ganesan said.
As per the note, Exotel is also planning to raise a pre-IPO round this year to fuel its growth for the next few quarters.
“FY24: Year of Recovery and Consolidation FY25: Year of Bold Bets. Call to Action: We need to put a revenue figure on every engineering project. We should try to keep the next year’s losses to INR 30 Cr and with a bit of push and pull, it looks feasible,” as per Ganesan’s emailed communication to the team.
Interestingly, the company had reported a profit of INR 10.5 Cr in FY21, though its FY22 revenues are not out yet.
Exotel had last raised $40 Mn in a Series D funding round led by Steadview Capital in January 2022. In total, the startup has raised over $100 Mn in debt and equity funding till date.
SaaS Industry Takes A Hit
With this, Exotel, which provides software services to enterprise clients, has joined the growing list of B2B SaaS firms which have laid off employees over the last year or so. Freshworks, Chargebee and global tech leader Salesforce also laid off employees last year as global macroeconomic headwinds have adversely impacted the SaaS industry,
Amid the economic slowdown and fears of a looming recession, enterprises have been cutting their costs, including budgets for tech support and software development.
According to Inc42 Layoff Tracker, Indian enterprisetech startups have fired nearly 675 employees over the past one year (excluding Exotel’s layoffs). While Nasdaq-listed SaaS unicorn Freshworks laid off 2% of its workforce, or nearly 90 employees, across various geographies, Chargebee laid off 10% of its workforce last month citing cost-cutting measures and macroeconomic conditions.
In September, fintech SaaS platform Clear fired 190-200 employees, while logistics SaaS startup FarEye laid off 250 employees across multiple verticals in June.
Update | 19th January 2023, 19:10
The published story and its headline have been edited to incorporate the company’s statement saying 80 employees were impacted by the PIP process and business restructuring.