Good news for employees in the Indian startup ecosystem! After a prolonged storm of layoffs in 2022 and 2023, the ecosystem has been showing signs of stabilization in 2024. Interestingly, the number of layoffs in Indian startups has declined a strong 46.4% YoY in the first half of this year.
Indian startups have laid off 11,250 jobs in H1 2024, a significant decrease from the 21,000 job cuts reported in H1 2023, and 15,000 in H2 2023.
The data, provided by executive search firm Longhouse Consulting, highlights a significant turnaround in the Indian employment landscape. Even though the threat of further job cuts cannot be completely ruled out, this decline offers much-needed relief to both current employees and those seeking new opportunities.
Anshuman Das, Chief Executive of Longhouse Consulting, which compiled the data for ET, underlined a notable improvement in the Indian startup ecosystem in 2024 compared to 2023. Last year, startups underwent a major downsizing initiative called “Operation Clean-up,” resulting in over 36,000 job losses. This figure represents a sharp rise from the 20,000 job cuts in 2022 and over 4,000 in 2021.
Funding Crunch Fuels Layoffs in Indian Startups H1 2024
The substantial number of job cuts in Indian startups in the last few years can be primarily attributed to a critical issue: the lack of funding. The funding crunch has significantly impacted the financial health of many companies, compelling them to adopt stringent measures to manage their expenses.
In response to this funding shortfall, startups have been forced to restructure their operations, streamline their workforce, and implement hiring freezes. For many startups, especially those preparing for an Initial Public Offering (IPO) or those that have recently gone public, achieving profitability has become a key focus. The pressure to demonstrate financial health and operational efficiency in the public eye has led these companies to implement cost-cutting measures more aggressively.
Another reason for the mass layoffs is that many Indian startups prioritize fundraising over building sustainable businesses, which often leads to irrational spending on hiring and customer acquisition. As funding slows down, these companies are compelled to make drastic job cuts to align with their new financial realities.
In 2024, companies such as Paytm (3,500 layoffs), Byju’s (500 layoffs), and Flipkart (1,100 layoffs) are among those that have cut a significant considerable number of jobs.
Funding in Indian Startups H1 2024
However, what’s noteworthy is a noticeable surge in funding in Indian startups in the first six months of 2024, compared to the year-ago period. This improvement has played a significant role in reducing the number of layoffs during the same period.
According to TheKredible, Indian startups raised approximately $7 billion across 685 deals in H1 2024. That’s an impressive 17.2% YoY increase in funding amount and a 38.1% YoY increase in the number of deals. This uptick in startup funding has provided much-needed relief and stability to many startups, allowing them to mitigate some of the severe cost-cutting measures that were prevalent in previous years.
Challenges Despite Funding Surge
Despite the recent surge in funding and a notable decline in layoffs, hiring in Indian startups remains significantly below pre-pandemic levels. In 2024, hiring is down by 35%-40% compared to the peak periods of 2021-22. However, there’s an improvement from 2023, when startups had reduced their hiring by 60-70% compared to the prior year.
Hiring and firing are inherent aspects of running a business, especially in the fast-paced Indian startup ecosystem. Yet, entrepreneurs must focus on optimizing their operations effectively to keep the business afloat, particularly when external funds are scarce.
What are your thoughts on the ongoing layoffs in Indian startups? Let us know in the comment section below!
