Startups ShareChat and Dunzo became the latest to lay off employees on Monday, as consumer internet companies struggle with a funding slowdown and the ongoing economic downturn.
Vernacular social media app ShareChat laid off around 20% of its total workforce, which impacted at least 450-500 employees, said two sources close to the development. The retrenchment drive at Sharechat began in mid-December, the sources added.
Similarly, Reliance-backed hyperlocal delivery platform Dunzo laid off around 3% of its total workforce last week. The layoffs come almost two months after Dunzo was said to be in talks to raise close to $200 million from equity investors at a flat valuation growth over its previous funding round. FE reported in November that the talks were in the advanced stage, with Abu Dhabi Investment Authority looking to lead the round.
A company spokeswoman declined to share the total number of employees affected by the layoffs, or the number of employees Dunzo had on its payroll prior to them.
However, a person aware of the operations at Dunzo told FE that Dunzo employs close to 2,000 employees in the country, and around 100 employees were let go in a retrenchment drive that started in December 2022.
According to the person, the firm had earlier planned to expand into at least 20 cities by the end of 2022, but this was contingent on it being able to raise a fresh round of $100 million and above. “It’s unclear if the funding went through, and many employees working on the expansion plans were asked to leave in December 2022 since the company seems to have paused expansion,” the source said.
Kabeer Biswas, CEO & co-founder, Dunzo, said any decision that impacts people is tough, and the company’s last option. “Last week, we had to part ways with 3% of our team strength. Whatever the numbers, these are people who chose to build their careers with Dunzo, and it is sad to have talented colleagues leave us. We are extending the best support possible to help them during this transition,” Biswas said.
Mohalla Tech, which owns ShareChat, closed a multi-tranche funding round worth $520 million in July 2022, making it one of the country’s most significant deals in the consumer internet space. ShareChat’s valuation reached $5 billion in the current round. In the first part of the round, ShareChat had raised $266 million in December 2021 from Alkeon Capital, Temasek, HarbourVest, Moore Strategic Ventures, and India Quotient. Despite the funding, Sharechat seems to have chosen to rationalise costs since late-stage funding has dried up due to the ongoing slowdown.
A spokesperson for ShareChat said that even as the company plans to grow, several external macro factors have impacted the cost and availability of capital. Over the last six months, ShareChat claims to have aggressively optimised costs across the board, including in marketing and infrastructure, and ramped up its monetisation efforts.
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“As capital becomes expensive, companies need to prioritise their bets and invest in the highest-impact projects only. The decision to reduce employee costs was taken after much deliberation and in light of the growing market consensus that investment sentiments will remain very cautious throughout this year,” the ShareChat spokesperson added.
Sharechat, however, said it would double down on efforts in advertising and live-streaming revenues. It is also extending healthcare and ESOP benefits and two-week severance pay to all affected employees.
Dunzo had raised $240 million in the last round of funding led by Reliance Retail Ventures in January 2022. It also subsequently raised another $6.2 million in debt from Blacksoil last year. The hyperlocal startup was last valued at around $750 million and the startup has so far raised over $400 million from its investors.
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The tech industry, including Big Tech and startups, have together laid off over 17,000 employees in CY22. Many of these include unicorns, late-stage firms and even early-stage startups that were unable to raise crucial cash amid the funding crunch. The consumer internet segment currently remains the most affected in terms of job cuts. Startups in edtech, fintech, hyperlocal delivery, insurtech, content and gaming, logistics and online commerce are some of the worst affected. According to some estimates, edtech was the worst affected with 14 startups in the sector laying off 6,898 employees in 2022.