Time for ‘cockroaches, not unicorns’: Layoffs, funding winter set to continue

Thousands lost jobs amid deepening funding winter in 2022 as massive layoffs by the tech companies this year alone surpassed the levels from the Great Recession the world went through in 2008-2009 that began with Lehman Brothers collapse.

In 2008, tech companies laid off about 65,000 employees, and a similar number of workers lost their livelihoods in 2009, according to data by global outplacement and career transitioning firm Challenger, Gray & Christmas.

By comparison, over 1,000 tech companies laid off more than 1,52,000 employees this year globally, surpassing the Great Recession levels of 2008-2009.

More than 91,000 workers in the US tech sector were laid off in mass job cuts in 2022, according to a Crunchbase tally.

Over 17,000 tech employees were shown the door in India, led by edtech companies like BYJU’s, Unacademy, Vedanta and others.

The startup ecosystem’s funding winter could last another 12 to 18 months and the industry may face “a lot of turmoil and volatility”, Flipkart CEO Kalyan Krishnamurthy has warned.

The fact is that only two startups in India, Shiprocket and OneCard, attained unicorn status (valuation of $1 billion and above) in the July-September period, according to a PwC India report.

“There was a definite downturn in Q2 of this year and the quality deal flow had dried up substantially, as investors at large were wary of deploying dry powder,” said Rushit Shah, CoFounder of DevX Venture Fund.

The startups which raised at astronomical valuations were given a reality check by the market and brought to sanity.

“Reducing the burn happened to be the new mantra, which led to layoffs especially in the edtech sector in a gloomy environment,” Shah told IANS.

According to Shrijay Sheth, Founder, legalwiz.in, 2023 will continue to be the year of sustenance for most, and funders will continue to remain more cautious.

“Both valuation multipliers and funding opportunities will go more conservative. Startups must build better units economics as opposed to expensive acquisitions driven growth channels,” said Sheth.

Geo-political issues, global supply chain crisis and other macro issues are expected to prevail.

“Mostly, the serious funding houses will prevail while we will see visitors in the VC world take a break,” Sheth added.

India saw a massive 35 per cent drop in funding this year, from $37.2 billion in 2021 to $24.7 billion. Edtech startups witnessed a significant 39 per cent drop compared to the same period last year, according to Tracxn.

The late-stage investments fell by 45 per cent, from $29.3 billion in January-November 2021 to $16.1 billion for the same period this year.

According to Yash Shah, Co-founder and CEO, Clientjoy, ‘growth at all costs’ is no longer a philosophy entertained by investors.

“During these times, founders must push themselves to identify and optimise their conversion funnels that directly show a reduction in their acquisition costs and push the company towards at-least unit level profitability, if not complete profitability,” he said.

Ambitious projects and long term initiatives with low probability of success that employed talent at the cutting edge of technology are being put on hold and survival has become the priority.

“The market will turn eventually and disciplined founders and top talent will reap disproportionate benefits once this funding winter is over. This is the time for cockroaches and not unicorns,” said Shah.

20221225-105807

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here