Startups in India are grabbing all the eyeballs within the country and abroad (and most of the money on offer by venture capital firms and individual investors too), but the the reality on the ground is that they are increasingly the source of generating the greatest fear in their employees – the sackings have become far too common and this is driving staff unrest and even attempts to physically intimidate senior management. Here we explain why startups are increasingly terminating their staff’s employment and the numbers involved:
1. In startups, as many as 3,270 employees lost their jobs in the past six months alone, as per a survey conducted by GrowthEnabler, an online mentoring and advisory platform for startups.
2. The survey says, on an average, companies let go 18% of their staff.
3. In 15% of companies, the staff retrenchment levels were above 30%.
4. 10% of companies in study closed ops.
5. 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.
6. “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.
7. “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,” Banduni adds.
8. Reasons cited by companies to sack staff include potential acquisition – acquiring companies mandating startups to reduce workforce before asset sale (5% of companies), need to streamline ops (10% of companies), automation (15%)
9. Among the top reasons for startups to sack their employees these three top: business model pivot (20%), inaccessible institutional funding for follow-up rounds, (20%), and unable to meet growth projections (30%).
10. 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.