Indian Startup Employees Brace For Sub-Par Appraisal Season In FY25

The year 2023 proved to be a tough one for Indian startups as funding receded to pre-2018 levels. As per Inc42’s Indian Tech Startup Funding Report 2023, funding raised by homegrown new-age tech startups crashed 60% year-on-year (YoY) to $10 Bn last year, a far cry from $25 Bn raised in 2022. 

A direct casualty of this funding meltdown was the Indian startup job market. While layoffs continued to reign supreme in the world’s third-largest startup ecosystem, reward and recognition activities, including annual appraisals, remained subdued during the financial year 2023-24 (FY24).

According to Inc42’s annual investor and founders’ survey, a majority of Indian startups plan to keep appraisals below 20% next fiscal. 

At least 62% of the founders surveyed by Inc42 echoed this sentiment, while a mere 6% expect to dole out appraisals in excess of 40%. 

Nevertheless, the current anticipations are better than CY23 when many startups resorted to hefty pay cuts (as much as 20%) to cut costs and navigate the funding winter. 

Meanwhile, founders believe that ESOPs are expected to maintain their charm among startup employees with stock options emerging as an attractive tool to cull attrition and boost retention. 

Hiring To Pick Up Pace

Even as layoffs made headlines throughout 2022 and 2023, Inc42’s annual Indian Startup Founder Sentiment Survey, 2023 highlights that 34% of the surveyed startups expanded their teams by more than 30% between April and December last year.

Further, of the 400-plus founders who participated in the survey, 16% said that they expanded their teams by more than 50%, while 8% highlighted that they ramped up hiring by 40-50%.

Interestingly, as per a report, Indian unicorns, including names such as PhysicsWallah, Policybazaar, Delhivery, and BharatPe, increased their workforce by 3.7 Lakh employees between September 2022 and July 2023. 

Outlining the FY25 outlook, 90% of the surveyed founders said that they have team expansion on their agenda. This sentiment could largely be attributed to the era of the funding winter likely coming to an end.

With the risk of layoffs likely plateauing by mid-2024 and consumption improving, the startup job market could see a renewed resurgence. Building on the momentum of last year, sectors such as fintech, cleantech and emerging technologies like GenAI could open up new avenues of opportunities for employees with relevant competencies.

Further, with career growth stagnating in late stage startups, good talent may also veer towards emerging early stage startups where there will be more opportunities to learn, grow and lead. 

Finally, amid the funding winter humdrum, the Indian startup ecosystem is hoping for a better 2024. While it remains to be seen how the year pans out, innovation and sustainability will be the key benchmarks that will decide the future of the world’s third-largest startup ecosystem.

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