Indian Startups Remain Defiant, Plan To Increase Headcount By 15% In FY24: Inc42 Survey

2022 has turned out to be a year that most startup founders and venture capital firms would like to forget. Such was the storm that it did not leave one segment of the startup ecosystem untouched and unscathed. 

The year saw startups brave many obstacles, but what impacted a large section were the mass layoffs — taking away jobs of over 18,000 startup employees. Many were fired on weekends, while many others were forced to resign from their jobs.

After the hiring boom of 2021, very few expected the Indian startups to implode the way it did in 2022, especially in terms of hiring employees. 

While mass layoffs eclipsed 2022, entrepreneurs remain defiant. According to Inc42’s annual Indian Startup Founders’ Survey, a majority of the founders do not intend to slash new hiring in the financial year 2023-24 (FY24). 

The survey is part of Inc42’s upcoming annual funding report 2022 which saw participation from more than 150 Indian startup founders.

As many as 71% founders overwhelmingly said that they do not plan to slash new hires. On the other hand, the rest, 29%, expressed support for the idea that they could reduce new hires in the next financial year. Interestingly, every 1 out of 5 startups reduced new hires at the company in FY23, as per Inc42’s annual survey.

A majority of the Indian startups, however, plan to increase their headcount by as much as 15% in FY24 as they look to scale up their businesses. This could also be attributed to the evolving employment market which could enable startups to hire high-quality talent at competitive prices. 

The thinking could also be led by expectations of steady revenue inflow in the next financial year. This point came up in the survey which found that as many as 89% of the founders do not anticipate a slowdown in FY23 revenues.

As a result, Indian startup founders plan to ramp up their marketing and information technology (IT) spending by 16% to 30% in FY24. This could help the enterprisetech and adtech market which have raised prices to deal with onslaught of the bearish market trends. With the negative market sentiment expected to continue well into 2023, startups could undertake measures to cut corners which could include lesser spending on marketing and softwares. 

This comes as scarce funding in 2021 forced every two out of five startups to slash marketing budgets amid weak markets. Inc42’s annual survey also made note of this development, stating as many as 60% of Indian startup founders found it difficult to raise venture capital In CY22

In what seems to be no lessons learnt from the purported funding winter 2022, nearly 38% still prefer top-line revenue growth over operating profit. This largely points to the current sentiment among founders that likely indicates that market expansion continues to remain popular among Indian founders in comparison to churning profits.

2022 has been a testing year for the Indian startup ecosystem which has been reeling under macroeconomic pressures and a raging market volatility. The effect has been manifold – while stocks have plummeted, funding has also dried up startups. This has led to a precarious situation where these new-age tech companies have been forced to cut corners and increase efficiency to tide over the headwinds.

According to Inc42, Indian startups raised a funding of $1.1 Bn across 93 funding deals in November, 2022. On a monthly basis, funding numbers fell 15.4% while the funding saw a mammoth year-on-year (YoY) decline of 73%. 

Overall, Indian startups have raised more than $25 Bn in funding so far in 2022, a far cry from the $41.4 Bn it raised last year. While the markets appear weak, the shakedown has led to startups looking at profitability as an inherent metric of success compared to valuations. 

The uncertainty has also led to startups evolving and maturing at a better pace while scaling their operations. But, how many survive the onslaught of time, only time will tell.