Startups, which typically depend on external investments for growth, downsized after a slump in investor funding forced them to cut costs and conserve cash. “The funding crunch is the biggest challenge for these startups with a dearth of new investments flowing into the industry,” said Aditya Mishra, MD & CEO at CIEL HR.
E-commerce (including segments like grocery, baby care, and personal care), fintech, edtech, logistics tech, health-tech are among sectors that have seen layoffs, the data showed. Companies including unicorns like Meesho, Unacademy, Swiggy and ShareChat have cut jobs. In edtech, Byju’s – – which has been battling a series of crises – -has alone fired 500-1,000 employees this year.
Funding for startups declined to $3.8 billion in the first half of 2023 from $18.3 billion in the year-ago period, recording a year-on-year fall of nearly 80%, according to estimates by PwC. This is not to say that there is a dearth of capital in the ecosystem – India focused funds are sitting on an unallocated capital of an estimated $18 billion, according to analysts. However, the flow of capital into startups has become selective amid the economic downturn and investors are writing cheques only for companies that are demonstrating a path to profitability.
“All investors are asking their portfolio companies to improve on unit economics and look at sustainable growth as against growth at any cost,” Amit Jain, co-founder & CEO at the CarDekho Group told TOI earlier.
A report by RedSeer said sustained startup funding continues to be impacted due to the increasing cost of capital, interest rates, and a decline in the value of technology stocks. The firm’s analysis of about 100 unicorns suggests that nearly 20% of them are likely to struggle in the coming years due to unclear business models, regulatory challenges, and plummeting demand. Some could shut, pivot to new models or get acquired.
EV startups, though, are faring better and some are even thriving, said Mishra. In fact, startups experimenting with emerging technologies and operating in areas like AI, EVs, climate tech, deep tech and space tech are seeing a surge in investor interest as they attempt to build products and solutions in line with the changing tech narrative.
