Mass Layoffs Blotted Startups’ Employer Profile In 2023. Will 2024 Be Any Better?

Companies resorting to mass layoffs is a common spectacle in the funding winter-riddled Indian startup ecosystem. According to Inc42’s layoff tracker, more than 35,000 people working with startups have lost their jobs since 2022. 

While 2022 was exceptionally bad for the Indian startup workforce, 2023 didn’t seem to provide any respite either, as 17,000+ startup employees received pink slips as of December 8, 2023. 

As a direct consequence of this layoff streak, the cumulative employer brand of Indian startups has taken a significant hit. This has resulted in uncertainty in the startup job market and has left many wondering whether the homegrown startup ecosystem is indeed a stable and viable career option for the long term.

On top of that, the flurry of bad press that came with the layoffs also raised apprehensions in the minds of the new talent pool that was previously eager to join and contribute to the Indian startup story.

These concerns also appear to be on the minds of Indian entrepreneurs. According to Inc42’s Indian Startup Founder Survey 2023, around 43% of the over 400 Indian startup founders surveyed felt that the string of layoffs has hurt talent’s enthusiasm to join a startup and thus will elect to not associate with them. 

Interestingly, a similar number of founders (43%) believed that potential employees now are unsure of whether the startups can provide them with a secure career choice.

However, a very limited number of the founders, around 14%, feel that layoffs were inconsequential when it comes to their employer profile. 

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Can ESOPs Keep Workforce Motivated To Join Startups In 2025?

According to the Inc42 survey, about 55% of founders are banking on Employee Stock Ownership Plans (ESOPs) to bring the Indian workforce back to the startup ecosystem. 

So far, between January 2016 and October 2023, 1.14 Lakh DPIIT recognised startups have created more than 12 Lakh jobs, according to a report by the Department of Economic Affairs. 

In the last two years (2022 and 2023), many growth and late-stage companies even used ESOP buybacks as a medium to continue the enthusiasm in the otherwise bearish market. Major tech companies such as Razorpay, Pine Labs, and Rebel Foods made ESOP buybacks worth $196 Mn in 2022.

As funding winter extended into 2023, we saw players like Zomato, Paytm, Mamaearth, and Perfios take the lead to issue lakhs of ESOPs to their employees.

Expansions On The Horizon For Indian Startups

While a majority of startups cumulatively slashed their workforce by thousands in the last two years, 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 2023.

As many as 16% of the 400+ founders surveyed boasted a team expansion of over 50% in the same year, while 8% highlighted that they ramped up hiring by 40-50%.

Further, to sustain and expand their existing employee strengths, startup founders are looking to adopt different strategies to conserve cash in 2024. Further, around 30% of the surveyed founders reduced their ad spending last year, 18% were conservative in their market expansion strategy, and 15% remained slow in hiring. 

Outlining the FY25 outlook, 90% of the surveyed founders said that they have team expansion on their agenda. The positive sentiment could largely be attributed to financial conditions improving on multiple fronts for startups. 

Analysts anticipate that with investors sitting on more than $23 Bn of dry powder, the fund infusion will increase in the ecosystem in 2024.

Further, India’s startup ecosystem, which has enjoyed great policy and regulatory support from the government, is poised to ride on the country’s GDP growth boom. The country’s economy is expected to outpace the growth of the United States (4%) and the European Union (1%), trailing only behind China (9%) in the next decade. 

Here, Indian startups are expected to drive a 5-10% surge in India’s GDP by 2030. Further, just 1% of the founders are looking at making pay cuts at a company-wide level and only 4% will enforce salary cuts at the senior management levels.

With changing fortunes on the cards, the year could open up a window for Indian startups to re-emerge as employers offering lucrative opportunities again. 

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