Indian Startups Dressing Up Downsizing 

We are not being emotional when we say these are some of the toughest days for the Indian startup ecosystem and indeed the global tech industry. The cuts are only getting deeper — tech giants Microsoft and Google are together letting go of over 22K employees, besides layoffs at Indian startups Swiggy, Exotel, MediBuddy and GoMechanic announced this past week.

But like an iceberg, the true size of the downsizing spree among Indian startups is the part that is under the water.

Besides stealthy or secret layoffs at a number of Indian startups, we have seen euphemisms such as retrenchment, routine restructuring, performance-based exits and a lot more. The fact is that startups are trying to window-dress their poor state of affairs and only the most visible startups are announcing layoffs in no uncertain terms.

So we are looking to uncover some of these very tactics that have become all too common for startups, while also looking at the true picture of the Indian startup layoffs. Before we do that, here’s a look at the biggest stories of the week:

• GoMechanic’s Fake It Till You Make It: As investors await the results of a forensic investigation, Sequoia-backed GoMechanic’s future hangs in the balance. Here’s what went wrong
• Catching Up With The GainBitcoin Case: Even as the BitConnect case in the US has reached a resolution, the investigation in GainBitcoin, India’s largest crypto scam,  continues to go nowhere
• Reliance Q3 Highlights: The conglomerate’s media business suffered due to advertising revenue decline, while digital services and retail segments recorded double-digit growth

Indian Startup Layoffs Go Under The Radar 

Not all layoffs are created equal — some companies rationalise their workforce every year, while others only take action when the chips are down. The latter is more common among startups and we have seen such downsizing during years past when slowdown bit business growth.

What’s been going on over the past 12-14 months however is something unprecedented for Indian startups. Almost every sector has been hurt, and there’s no clarity on when the axe will finally stop. The buzzword these days is overhiring, but professionals believe this is simply a symptom of easy access to funding which fuels undue optimism.

“We can expect many more layoffs in the next few months. The real extent of the downsizing will only be clear by the end of 2023. We don’t even know what recovery looks like right now so things will be uncertain for many of the startups, even those that have already downsized,” says Ciel HR CEO Aditya Narayan Mishra.

The Toll Of ‘Small Layoffs’

We know that some Indian startups are letting go of thousands of employees, while others are trimming their workforce by a few hundred employees, such as Swiggy this week, which announced layoffs of 380 employees.

Of course, the ones that are talking about their layoffs are some of the largest employers in the startup ecosystem, but the funding winter and slowdown in business has hit smaller startups the hardest.

“Many startups have been running on reserve fuel and the true extent of the damage will only be clear, once we take a look at the number of strike-offs in the next year,” according to one of the most influential angel investors in India.

The investor added that thousands of startups in India have less than 20 or 30 employees, who are also letting go of some positions and looking to fill the gap with SaaS or automation.

These ‘small layoffs’ are likely to be as many in number as the announced layoffs or even more.

Layoffs In Stealth Mode

Then there’s the issue of disguised layoffs at Indian startups. These come in the form of mandates to return to offices after two years of remote operations, through reshuffling of employees to other potentially irrelevant positions, or by forcing employees into a performance improvement programme (PIP). In other words, perform or perish.

SaaS startup Exotel and edtech giant BYJU’S came under fire for their PIP-centric downsizing. Others such as Bikayi and WhiteHat Jr forced employees back to offices to shore up their businesses that were running into losses. And in both cases, hundreds of employees claimed they were forced into resigning due to uncertain relocation incentives.

As we reported this week, the Exotel layoffs took place following a revision in the startup’s PIP policy in November 2022, under which the management removed the clause of giving two warnings to employees for below par performance.

Similarly, at BYJU’S, the PIP under the inside sales process spooked employees. Employees that expected raises were asked to leave while those left behind are feeling extra pressure. “The ones who were left behind were given unrealistic targets. Employees who weren’t laid off have decided to leave the startup to join companies that could assure some stability,” a former BYJU’S sales executive told Inc42 this week.

Performance Pressure In A Down Market

But companies that have put in PIP policies defend them saying this is exactly how they retain motivated employees and let go of those for whom perhaps this is a temporary position. “In the sales role in particular, we see people come in for a few months and quit for studies or move abroad. Our PIPs help us retain only those employees that want to grow and mature within the company,” said the COO of a major edtech company.

Despite that, the toll on employees that have been laid off and even those retained is real, with anxiety and distress growing. According to a recent report, the mass layoffs globally have increased anxiety-related disorders with up to 6 out of 10 employees seeking professional help.

It doesn’t help that many of them are tasked with performance targets in a market that’s not exactly conducive to selling. “There’s already a lot of pressure on employees who don’t know how long they will remain employed. Plus selling in this market is not easy. If companies stick to their PIP policies, we will see more layoffs in the coming months,” added Ciel’s Mishra.

He hopes that the lessons of the hard 12-14 months will be retained by companies as and when the funding tap is turned back on. “We don’t want this situation repeating every few months. This should be a big learning for companies when it comes to hiring without a plan or even over-hiring.”

Announcing The Makers Summit

India’s largest startup growth conference is back with an even more dazzling lineup of the best product makers, enablers and founders in the country.

Set for March 24 and March 25, 2023, this year’s Makers Summit will host 60+ founders, product leaders and makers to help everyone in the maker ecosystem understand the product innovations powering the growth of new-age startups — featuring 30+ unscripted interviews, candid fireside conversations and in-depth masterclasses.

Sunday Roundup: Startup Funding, Stock Markets & More

• PhonePe’s Landmark Round: The past week saw Indian startups raise $455 Mn across 24 deals, with the bulk of this tally coming thanks to fintech giant PhonePe’s $350 Mn round, which valued the company at over $12 Bn
• Zilingo Liquidation: The beleaguered B2B fashion tech startup’s creditors are ready to liquidate the company’s assets after months-long struggle for survival
• What’s In Store Fore Nykaa: ICICI Securities has upgraded Nykaa to an ‘ADD’ position from ‘HOLD’ following a major drop in the company’s share prices. Is a rally around the corner?

• Edtech’s Winter: India’s edtech sector makes for a grim picture after a 44% drop in funding in 2022. How will one of the largest edtech ecosystems in the world bounce back?

We’ll be back next Sunday with more insights and a roundup of the top stories from the world of Indian startups. Till then follow us on Instagram, Twitter and LinkedIn to get the latest news as it happens

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.