1. Why some start-ups are laying off their staff

Why some start-ups are laying off their staff

START-UPS may be attracting billions of hot money from investors, jacking up valuations, but they are also attracting flak for laying off staffers on a massive scale and shutting down operations.

By: | Updated: December 20, 2015 8:21 AM

In the last six months, 3,270 employees lost their jobs in start-ups.

START-UPS may be attracting billions of hot money from investors, jacking up valuations, but they are also attracting flak for laying off staffers on a massive scale and shutting down operations. As some reports suggest, start-up employees often live under a constant fear of being a ‘victim’ of this ‘market correction’ exercise, leading to undue performance pressure and higher stress levels.

In the past six months alone, as many as 3,270 employees lost their jobs in the start-up space, as per a survey conducted by GrowthEnabler, an online mentoring and advisory platform for start-ups. The survey says, on an average, companies let go 18% of their staff. In 15% of companies, the staff retrenchment levels were above 30%.
But what exactly is causing the pain? If one looks at the funding pattern for start-ups, in the first 10 months of 2015 alone, 25 grocery delivery companies in India cumulatively raised over $160 million. “The intense competition among funded start-ups hurts growth of all participants as they take business away from each other. Employees, hired on basis of growth projections, become redundant when start-ups fail to meet growth numbers,” says Rajeev Banduni, CEO of London-headquartered GrowthEnabler.

“It is a necessary correction in the market. It is a part of the start-up maturity cycle that will eventually make these companies and the entire start-up ecosystem stronger,” he adds.

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Tags: Start-ups
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