With startups laying off around 15,000 employees so far in 2023 amid a funding slump, the next year may see more firings as companies focus more on efficiency and integrating AI capabilities to cut costs.
The trend seems to have begun before the end of the year after Paytm on Monday said it has reduced its headcount in the operations and marketing team by implementing AI-powered automation in their processes, leading to a 10-15% cut in its employee expenses.
“We are transforming our operations with AI-powered automation to drive efficiency, eliminating repetitive tasks and roles to drive efficiency across growth and costs, resulting in a slight reduction in our workforce in operations and marketing,” a spokesperson of the company said.
The company did not specify the number of the employees affected by the reduction, but reports have pegged it at 1,000 across sales, engineering and operations teams. In a recent interview with Bloomberg, founder Vijay Shekhar Sharma said he plans to hire more than 15,000 contract sales people to ramp up the wealth management business.
After turning Ebitda positive in Q4FY23, Paytm’s next target is to turn cash flow positive. In its latest Q2 earnings report, its parent One97 Communications posted losses of Rupees 292 crore, compared to a loss of Rupees 571 crore in Q2FY23.
Much like Paytm, most startups are now focusing on shifting gears from a high cash-burn model to a more efficient and lean business structure, with a sustainable growth outlook, as venture capital and private equity investments have declined to a five-year low in 2023.
Investors are increasingly looking for companies with strong business fundamentals and rational valuations, unlike the 2021 funding boom, when a surge in liquidity had led to easy capital and sky-high valuations.
Some of the startups, which had raised funds at high valuations in 2021, saw their valuations drop this year, including that of troubled ed-tech major Byju’s. The valuation crash of these high-valued startups might continue next year as the funding environment continues to be tighter.
At a time like this, companies across industries are looking to optimise operations with AI-powered capabilities. Within AI, while consumer-facing applications based on generative AI such as OpenAI’s ChatGPT was all the rage in 2023, the next year may see increasing adoption of enterprise applications of generative AI.