Startups in India brace up for ‘long and bitter winter’

Job losses across start-ups have been making headlines. Industry estimates peg the cumulative job losses in startups at over 10,000 so far this year

With funding starting to dry up due to global macro-economic factors, the startup ecosystem in India is bracing itself for a “long and bitter winter” and potential mass lay-offs in the next 12-18 months, particularly in sectors such as ed-tech and gaming that got a significant push during the pandemic, according to experts.

In the last quarter (April-June), start-up funding fell by about 40% to about 6-7 billion, Amit Nawka, Partner, Deals & Startups Leader, PwC India, noted, adding that prior to this, start-ups were seeing investments of about USD 10-11 billion per quarter.

“When we are talking to investors globally, there is limited visibility on when things will stabilise due to factors such as overall macro economic scenario, inflationary pressures, war and fall in the stock markets. While no one really knows, everyone is bracing themselves for a year of low funding. Given all this, start-ups are conserving cash,” he added.

As start-ups look to extend the runway with existing funds, job losses across start-ups have been making headlines. Industry estimates peg the cumulative job losses in startups at over 10,000 so far this year.

“After an extended period of sunshine, Indian startups are now waking-up to a potentially long, bitter and cold winter. A slew of factors have led us here, including the Russia-Ukraine conflict, supply chain disruptions, consequent inflationary pressures, and rising cost of capital, amongst others. As the funding squeeze set in, the layoffs were imminent,” Prabhu Ram, head of Industry Intelligence Group at CyberMedia Research told The Hindu.

He added that over the past years, India’s strong digital boom along with the relative ease of funding fuelled the rise of Indian start-ups, and with an intent to ramp-up growth through new offerings – including products and solutions, they went on a rapid expansion of their product and tech teams.

“Sectors which got a huge natural push during the pandemic such as ed-tech and gaming, their growth has now plateaued, and they are in more trouble. Likewise, there are startups which have not raised capital in the last two years... Irrespective of which sector they operate in, they will also face challenges in raising funds,” Mr. Nawka said, adding that the three main areas of costs for start ups are people, technology and infra, and marketing; cost-cutting is being looked at in all three areas.