The Indian startup ecosystem continues to be under severe funding winter with no signs of any recovery so far this year. The available data amply endorses this story. In 2021, Indian startups raised around $42 billion, while 46 of them joined the unicorn club. In 2022, startups overall raised about $25 billion of funding from PE and VC funds. That is when, the ecosystem was hit by funding winter. Last year, funding was down drastically by 60 per cent to around $10 billion across 897 deals.
This year, so far, external funding remains tepid. Several of them are happening in the late rounds. This implies that big startups are able to raise funds, while investors are staying away from early rounds. Against this backdrop, hiring in the startup ecosystem has been down significantly since a year or so. In fact, many employees lost their jobs, which, according to several reports, has been to the tune of one lakh in the last two years. This has not completely stopped in 2024 though the pace of firing has slowed down. More than 5,000 employees were fired or compelled to ‘resign’ this year.
Big names like MFine, Cars24, Vedantu, Meesho, WhiteHat Junior, Unacademy and many others have laid-off employees since January. As the funding crunch continues, startups are likely to right-size their employee pyramid. Hence, the hiring pick-up is less likely in the coming quarters. Following the mass firing, there is a visible change in perception towards startups across the country. Post pandemic, startups chased talent aggressively for manning operations. During their heyday, technology talent was in high demand. Many were offered multiple job offers with sky high salaries. Even incentives like luxury cars, joining bonuses and other such perks were offered to proven talent. Many senior talents were poached from big companies with hefty salary hikes. But these things are passé now. Startups across the country are now in a precarious situation. Good talent is reluctant to join while senior leaders are not willing to take risks even in big startups after the heavy layoffs. Young professionals are no exception.
HR sources state that youngsters are asking too many questions before joining any startup. Queries like timely payment of salary, job stability, layoff possibility and related matters are raised by the aspirants in interview rounds. In fact some are going to the extent of asking business prospects of companies to understand the financial health of startups. In a country like India, where many young talents are not able to find right jobs, this trend has made hiring difficult for startups. Going ahead, such trend is unlikely to change.
Without any significant change in funding, hiring environment will see little change in the coming quarters. Whatever recruitment happens, that will be in startups that have good financial health. Most startups will do replacement hiring. In this context, option for professionals is likely to be limited this year. Technology hiring has already come down across the IT industry. With no signs any improvement in hiring across startups, 2024 is likely to be a subdued year when it comes to new employee addition.