New Delhi: The global recession caused by the COVID-19 pandemic has affected businesses across the world, including in India. Both giant and startup companies have been hit hard, with many struggling to secure funding and maintain their workforce. The lack of funding has resulted in several startups in India making the difficult decision to lay off employees on a large scale.
A recent report has shed light on the extent of the problem. According to data from the recruitment firm Careernet, at least 9,400 employees were laid off between January and March this year due to the lack of funding for startups. The list of affected startups includes some of the most well-known names in the Indian startup ecosystem, such as Byju’s, Unacademy, Sharechat, MyGate, and GoMechanic, among others. More than 70% of startups have cut their workforce by 100 to 300 people in this quarter alone, as per the report.
The impact of the funding crunch is not limited to layoffs. Companies have also reduced the hiring of new employees, with Careernet reporting that startups have reduced their hiring for senior positions by up to 80% compared to last year. The annual salary package for these positions is typically more than Rs 50 lakh. Anshuman Das, Co-Founder and CEO of Careernet has warned that the situation is likely to remain the same for the next few days and that these startups will continue to slow down the hiring process.
The root cause of the layoffs and the hiring slowdown is the lack of funding. Experts have noted that startup funding in India has decreased by 71.6% this year compared to the same period last year. In 2020, startups raised a total of $12 billion, whereas this year, the total funding has come down to just $2.1 billion. The market situation has made it challenging for big investors to invest in startups, leading to a shortage of funds. To reduce expenses, startups are resorting to layoffs and cutting salary hikes.
The funding crunch has been a severe blow to the Indian startup ecosystem, which was already struggling due to the pandemic. The layoffs and hiring slowdown will have a significant impact on the livelihoods of thousands of employees and job seekers. It remains to be seen how long the funding crisis will last and what steps the government, and investors will take to support the startup ecosystem.
