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  1. Layoffs at startups: Are employees bearing the brunt of drying fund flows?

Layoffs at startups: Are employees bearing the brunt of drying fund flows?

The fund flow to e-commerce firms and tech startups dipped from $2.91 billion in the September quarter of 2015 to $583 million in the June quarter of this year.

By: | Published: August 29, 2016 10:52 AM
startups layoffs, startups job cuts, Zomato job cuts, Zomato latest news, TaxiForSure layoffs Close to 3,000 job cuts have been announced by the 8 poster boys of India’s e-commerce and technology ventures’ space.

For those who are wondering why a slew of startups has suddenly started announcing layoffs and job cuts – here’s the deal – they don’t have enough money to keep the staff that they had chosen to hire in hopes of growth. According to an Indian Express report, the fund flow to e-commerce firms and tech startups dipped from $2.91 billion in the September quarter of 2015 to $583 million in the June quarter of this year. The report suggests that close to 3,000 job cuts have been announced by the 8 poster boys of India’s e-commerce and technology ventures’ space. The reasons given for these layoffs vary from non-performance to organisational restructuring and scaling down of operations.

Free fund flow from angel investors and venture capitalists meant that startups hired people “irrationally” to chase ambitious growth goals, say analysts. Apart from the drying fund flows, consolidation is another reason why costs will continue to be rationalised and more job cuts will happen, feel experts. Pragya Singh of Technopak, advisory firm, is quoted in the newspaper’s report as saying, ““Sometimes what happens is when things are going well, you think they will continue to grow at the same pace for the next five years, but if that doesn’t happen, there are a lot of redundancies in your people.” Singh is of the view that companies then tend to focus on the bottomline and with attempts made to trim costs, it is employees who bear the brunt.

Zomato, the online food-catering startup, had in October last year shown the door to around 300 employees, citing restructuring as the reason for its move. A Zomato spokesperson quoted in the Indian Express report said, “The Urbanspoon acquisition taught us a lot about what works, and how things worked in the way that Urbanspoon used to run their business. Last year’s restructuring was a combination of the best of our knowledge and the best of Urbanspoon’s knowledge and processes.” The spokesperson added that Zomato’s community management teams and content operations were affected as a result of the restructuring.

In early August, Ola’s decision to shut down TaxiForSure had affected the jobs of as many as 700 people. The company on its part had said that it had tried to absorb as many people as possible while offering enhanced severance benefits for those who didn’t fit in the restructuring. Foodpanda, which laid off almost 300 people in December 2015, says that resource management is about optimal utilisation of talent. Technological innovation can lead to some roles becoming redundant, says the startup. “We also look at how best we can utilise brainpower in alternate business verticals and that is why a lot of talent has been recognised and integrated in various functions through the churn we have seen in the past,” a Foodpanda spokesperson said.

And why only startups? Technology and automation will increasingly to eat up jobs in sectors such as IT as well. Labour Bureau has surveyed eight sectors and out of them, information technology and business process outsourcing sector (BPOs) have seen the highest decrease in employment during October-December 2015. Zinnov, a Bengaluru-based consulting firm, recently came out with a report that said that internet of things (IoT), or machine-to-machine communications could eliminate as many as 94,000 jobs in the country’s IT industry over the next five years.

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