Introduction
The year 2023 was a tough one for the Indian startup ecosystem, as more than 100 companies slashed their workforce by over 24,000 employees, according to a report by market research firm TheKredible. The report attributed the layoffs to a combination of factors, such as funding crunch, profitability pressure, regulatory challenges, and automation.
Major layoffs by unicorn firms
Some of the most prominent startups that resorted to job cuts were Byju’s, ShareChat, Swiggy, and Unacademy, which are valued at over $1 billion each. These unicorn firms faced various issues, such as customer churn, competition, legal disputes, and operational inefficiencies, that forced them to reduce their headcount and optimize their costs. Byju’s alone laid off over 5,000 employees in 2023, amid allegations of unethical sales practices and employee exploitation.
Funding decline and business shutdowns
Another reason for the employment crisis in Indian startups was the sharp decline in funding from investors, who became more cautious and selective in backing new ventures. The report said that startup funding fell to a seven-year low of $8.2 billion in 2023, compared to about $25 billion in 2022. This made it difficult for smaller and mid-sized startups to sustain their operations and compete with larger players. As a result, more than 10 startups shut down their businesses in 2023, including ZestMoney, FrontRow, and Licious.
Automation and efficiency
A third factor that contributed to the layoffs was the increased adoption of automation and artificial intelligence by startups, which enabled them to improve their efficiency and productivity while saving on human resources. The report quoted Aditya Narayan Mishra, managing director and CEO of CIEL HR Services, who said that the layoffs were partly due to the deployment of greater automation in the business and the correction of over-hiring done earlier. Companies like Swiggy and Zomato relied more on technology to streamline their delivery operations and enhance their customer experience.
Conclusion
The employment crisis in Indian startups in 2023 was a reflection of the challenges and opportunities that the sector faced in a dynamic and competitive environment. While some startups struggled to survive and grow, others managed to adapt and thrive by innovating and pivoting their business models. The report suggested that the outlook for 2024 is more optimistic, as the startup ecosystem is expected to recover from the pandemic-induced slowdown and attract more funding and talent.