In a year that saw renewed uncertainty for the global economy, thanks to Russia’s war against Ukraine following the two years of the pandemic, jobs took a serious hit. This has been especially pronounced in the tech space—startups and corporations, both included.
Globally, 1,003 technology companies laid off over 152,000 employees this year (by December 21, 2022), as per data from layoff.fyi, a platform collating data on firings by tech companies. This surpassed tech lay-offs during the Great Recession of 2008-09. India accounts for a little over 14,200 in this pool. Some estimates pegged this close to 18,000 earlier this month, involving lay-offs announced by 52 startups.
The reason is obvious: The startup space in India, as also elsewhere, is seeing a ‘funding winter’. As per data from Entrackr, startup funding in 11 months this year (till November) stood at just $25 billion, and could reach just $26 billion, if the current trend holds, at the end of this year. For perspective, the funding in 2021 was $37.2 billion. Importantly, the bulk of the funding this year—$19.45 billion—seems to have come in the first half, when the effects of the Russian war against Ukraine were only beginning to show on the global economy. The funding crunch, according to experts, has not just pushed down hiring but has also forced startups to try and cut their salary expenses.
The edtech space, which saw considerable investor interest in the two years of the pandemic thanks to the so-called paradigm shift in delivery of education, from brick & mortar classes to digital classrooms, suffered particularly this year. The reopening of schools and colleges, and the return to the pre-pandemic normal of in-person teaching, saw demand slipping. Concurrently, edtech startups saw a 39% drop in funding this year, compared to the year before, as per data from Tracxn, a market intelligence platform.
This showed in the lay-offs not just at the smaller startups, but also at the likes of Byju’s, Unacademy, and Vedantu. By some estimates, the space let go of as many as 7,000 employees. Byju’s alone is estimated to have fired 2,500.
The pain has been secular in its spread. Big Tech companies have also pleaded restructuring to lay off thousands worldwide, with obvious implications for their India workforce. The most dramatic cuts have happened at Twitter, following the takeover of the company by Elon Musk. The company is estimated to have shed almost half of its global workforce, with nearly 90% of its India staff at the start of the year out by the end of the first week of November.
While Meta laying off 13% of its global workforce didn’t impact its India team much, uncertainty surely hasn’t cleared. Meta CEO has made it amply clear that the company will focus on “becoming more capital efficient”. Read against the backdrop of the lukewarm interest its newer forays—such as the company’s $100 billion metaverse bet—have generated, the cloud doesn’t seem to have lifted yet. Google, Microsoft, and Amazon have also announced plans to bring down the size of their global workforce.
A big part of the problem, experts say, is the aggressive hiring undertaken by tech companies over the last two years, particularly in 2021, in the belief that the pandemic has precipitated irrevocable adoption of tech across sectors, and the digitalisation of key services would mean ever-increasing business for companies.
But more companies, big and small, are joining the list as the year comes to a close. From FMCG to financial services to media, as evident from the announcements from PepsiCo, Citigroup, and Washington Post respectively, more and more segments of industry seem to be succumbing to the Great Lay-Off.
Is the situation going to be better in the coming year? The jury is out on that. In May this year, Unacademy founder and CEO Gaurav Munjal wrote to employees saying that there could be 18-24 months of pain ahead. In late November, Munjal tweeted that he “hears” 2023 will be worse than 2022 for tech. With inflation raging in much of the West, central banks have doubled down on rate hikes, making borrowing costlier. Consumption capacity, too, has taken a hit.
Uncertainty over the Russian war, and the rising likelihood of the Chinese economy being severely impacted by a Covid-19 surge also cast a shadow on the global economy and investment sentiment, at least in the early part of 2023. The International Monetary Fund (IMF) has termed growth forecasts for 2022 and 2023 gloomy, with its GDP growth estimates for the two years being among the lowest since 2001, except for the Great Recession years.
While there are headwinds, there are reasons for cautious optimism as well. Investor interest is still betting on the Indian startup space, with obvious implications for jobs. Till November, as per data from Entrackr, over 110 venture capital, private equity and debt firms had announced new fund launches, with seven in November alone. So, even as hiring indicators suggest weakening from last year — the IT services sector registered its second sharpest year-on-year drop, of 39%, in active jobs volume over November 2021—the hope is 2023 won’t end up as a complete washout.