First, The Exuberance, Now the Job Cuts-Indian Startups
After a headlong rush to get funding and to ramp up teams, startups in at least two Indian cities have been firing employees in the past weeks. At least a thousand workers have lost their jobs in the recent layoffs.
For the last couple of years, India’s e-commerce startups have had an exhilarating ride. Many of them have been wooed by a horde of venture capital funds, angel investors and overseas technology billionaires who have poured billions of dollars into every conceivable business idea. The hype seemed to suggest that launching startups and getting funded was effortless. Now, the layoffs have brought in a much-needed reality check for the upstarts who have been dispensing millions on hiring teams across the country, mounting large marketing campaigns and offering aggressive discounts to lure customers.
Two significant rounds of recent lay-offs came from Mumbai-based food ordering and delivery startup TinyOwl which showed the door to over a 100 employees last month as part of a massive restructuring. The venture had earlier laid off nearly 200 employees.
Gurgaon, New Delhi-based food discovery and delivery startup Zomato, the country’s biggest in the food e-commerce segment and the only Indian startup with global operations, recently laid off a tenth of its 3,000 employees, over three hundred in total. Additionally, in a biting memo freely floating around on social networks, its founder & CEO Deepinder Goyal rebuked the Zomato’s sales team for non-performance and asked them to pull up their socks.
Goyal said the memo presented an incomplete picture. “Our revenue growth is still going to be extraordinary. Just a little short of crazy expectations – which our investors also told us will be hard to do. So, we are mostly falling short (a little) of our own expectations,” he said in an email response to a query on the memo.
In Mumbai, SoftBank-backed real estate startup Housing.com is reportedly pink-slipping a couple of hundred employees as it attempts a major re-orientation after firing hundreds just weeks ago. Housing.com became infamous after its co-founder and CEO Rahul Yadav exited under dramatic circumstances earlier this year after accusing a leading venture capitalist of poaching Housing.com employees and then telling off his own board members. Housing.com had earlier ‘restructured’ and sent home a couple of hundred employees.
In many cases, investors are said to be pushing the startups to rethink business models, trim teams and control their “cash burn rate”, investor-speak for rate at which a startup uses its investors’ money.
Mumbai-based TinyOwl was launched in 2014 by five graduates of the renowned tech school, the Indian Institute of Technology in Mumbai and got funded within months of launch by VC firms like Sequoia Capital and Matrix Partners.
Just ahead of lining up employees for the firing squad, TinyOwl’s co-founder and CEO Harshvardhan Mandad wrote a blog titled, “Some difficult steps towards the big dream” where he said that restructuring was necessary to increase efficiency and productivity. The venture shut shop in four cities and retains just its Mumbai and Bangalore operations.
Zomato’s investors including Sequoia Capital and Singapore’s Temasek Holdings had accorded it unicorn status through their funding. The startup which is based in Gurgaon near New Delhi had recently raised $60 million from investors and some months ago acquired rival startup Urbanspoon in the United States. Now, it has pulled the plug on its cashless payments service in Dubai and is reportedly laying off in earnest.
The food e-commerce segment has been particularly hard hit with several startups either getting acquired or shutting down. SpoonJoy, another much-talked about food technology startup, was recently acquired by Tiger Global-backed online delivery startup, Grofers. Another food startup Dazo, funded by Google India head Rajan Anandan among others, closed down in October.