Flood of pink slips coming, warn startups, Technology News, ETtech

Illustration: Rahul Awasthi
Illustration: Rahul Awasthi

Technology startups are likely to cut hundreds of jobs over the next 6-8 months, as demand stutters amid tight funding, top venture capitalists and founders told ET.

Much of the layoffs will stem from distress sales and company closures, the people said. “We are going to see a continuous layoff for the next 12 months… Most companies have done one round of layoffs already,” said Anand Lunia, founding partner at India Quotient.

Layoffs may speed up Year-End

Multiple internet businesses — including Oyo, BlackBuck, Treebo, Acko, Fab Hotels, Meesho, Shuttl, Capillary, Niki.ai, Swiggy and Fareportal — have on average cut workforce by 30%, including temporary staff, in the past one month.

Many others, such as Ola, Zomato, Zoomcar, MakeMyTrip, Chaipoint, Cashify, Livspace and Shopmatic, have reduced pay by as much as 50%, while a few have withdrawn job offers, according to data shared by Big.Jobs, a crowdsourced jobs portal.

Read: Startups hardest hit by Covid-19 turn to layoffs, salary cuts

The retrenchments will likely speed up year-end when many businesses initiate merger talks or fold up, said Rutvik Doshi, managing director of Inventus Capital India.

Initially, the Covid-19 outbreak hit early and growth-stage startups, data showed, but it is now impacting larger businesses as well.

“We’ve predicted that the next quarter will be a washout… but a month longer than that and the economics of the business change,” said the founder of a growth-stage consumer business. “I predict it could lead to at least a 20% further cut,” he said.

Getting his business back to levels prior to the outbreak could take as long as two years, he added.

Flood of pink slips coming, warn startups
The worst-hit

Retail, hospitality, travel, mobility and financial services — worst affected by the pandemic — will see maximum job cuts.

More than 600 businesses have downsized staff in the past one month, while a further 660 have cut salaries, according to Big.Jobs.

“Blue-collar jobs in the SME sector have been hit the most in the past two weeks; over 10 crore (100 million) people have fallen into unemployment. For white-collar jobs, the crisis has only begun and is currently concentrated in a few sectors and VC-backed companies,” said Himanshu Geed, cofounder of the jobs portal.

In the next few months, large companies are expected to start restructuring and resort to trimming staff in a bid to go lean. This will be further propelled by a shift towards automation and artificial intelligence. “A few hundred thousand will likely be laid off in the white-collar segment in the next few quarters, mostly driven by large traditional companies,” Geed added.

Investors, however, said that sectors such as healthcare, gaming, educational technology, digital content and indoor entertainment will see higher interest as social distancing brings more cultural changes even beyond the crisis.

Businesses are launching new services during the lockdown, but investors remain uncertain if these will turn viable going forward.

“Pivots, cutting down on business lines, focusing on core areas are a few common strategies that startups are adopting,” said Anuj Golecha, cofounder of Venture Catalyst.

To trim costs, many companies have already cut operating expenses, stopped renewing vendor contracts and let go of rented office spaces.

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