In February of this year, Harshad Punia’s entire world came crashing down. The 28-year-old Rohtak, Haryana, resident with an MBA in digital marketing—whose name has been altered at the request of the individual—had just about finished his second year working at a social media platform based in Bengaluru when he and 600 other employees received the pink slip.

Punia recalls, “We received an email from the founder-CEO informing us the company was laying off 20% of its personnel as it was finding it difficult to secure additional money. We received a month’s warning and our salary along with our IDs being locked.

Punia had just got married in December 2022, and his wife, who was working in a short video app arm of the same company, was laid off too on the same day. “It was a terrible feeling. I always used to wonder why start-ups like the one I worked for splurged on all sorts of perks—food coupons, vacation allowances, big raises for new joiners…a long-term, stable job would have been so much more preferable,” says Punia,

who considers himself lucky to have landed another job after just a month (even as some of his friends remain jobless). However, his wife, having burnt her fingers once in a corporate job, is trying her hand at freelancing from home.

Until a year ago, start-up professionals like Punia were the toast of India Inc. They were much sought after, and those with experience handling big responsibilities (even in small firms) were lured with substantially higher salaries. In the edtech sector, the ‘educators’ or teachers were often hired at twice their old salaries, say sources, with several other perks thrown in, creating an unequal staff structure.

But all that seems a dream now as the Indian start-up ecosystem—purportedly the third largest in the world after the US and China with 84,012 ‘recognised’ firms as on November 2022 (per government estimates), giving direct jobs to 860,000 people—stares at one of its biggest challenges yet.

A double whammy—slowing revenues and no clear path to profitability on the one side, and a funds squeeze on the other—has put Indian start-ups under enormous pressure. It has left them with no option but to lay off staff and cut unwanted expenses to keeps their heads above water. Agencies that track the start-up sector say 88 start-ups laid off over 25,000 staff in the first three months of 2023 alone.

This includes unicorns—start-ups with valuations of $1 billion [Rs 8,200 crore] or more—such as Byju’s, Cars24, Dunzo, Ola, OYO, Meesho, Unacademy and Vedantu, says Inc42, a tech media platform (see Start-up Layoffs). The edtech segment holds the worst record, with 19 start-ups laying off more than 9,000 employees. Last year, Byju’s, a decacorn then (a firm with over $10 billion or Rs 82,000 crore in valuation), announced that about 5 per cent or 2,500 of its staff would be laid off starting October 2022 in a bid to become profitable by March 2023. In June, it laid off another 1,000 as part of a “restructuring process”. The firm employs 50,000 people.

Meanwhile, there has been a significant markdown in valuations. In June this year, Prosus, the biggest investor shareholder in Byju’s, cut its valuations by over 75 per cent—from $22 billion to $5.1 billion (Rs 1.8 lakh crore to Rs 41,820 crore). Invesco brought down Swiggy’s valuation from $10.7 billion (Rs 87,778 crore) to $5.5 billion (Rs 45,105 crore), say media reports.

Vanguard of the US trimmed ride-hailing start-up Ola’s valuation by about 35 per cent to $4.8 billion (Rs 39,365 crore), while financial services start-up Pine Labs saw a 40 per cent drop in its valuation to $3.1 billion (Rs 25,423 crore) by Neuberger Berman, yet another US investment manager. British-American asset management firm Janus Henderson halved healthcare start-up PharmEasy’s valuation to $2.8 billion (Rs 22,963 crore).

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