Amid slowing funding, startup investors push founders to focus on stronger unit economics

Mumbai: As Indian startups struggle with funding and investors push founders to focus on stronger unit economics, the number and frantic pace at which companies are hiring for talent has shown signs of slowing just a few months ago.

In the past 2-3 weeks, many startups have put off hiring until the next quarter as they enter the funding winter, want to slow down their expansion pace and act cautiously to save cash, according to executive search firms and startup founders.

Executive search firms Longhouse Consulting and Ciel HR Services said the number of job openings is falling and companies are reducing counter-offers to attract and retain talent.

“Companies are delaying their decision to close open positions. Some are pushing it to next quarter. They are buying time,” said Anshuman Das, CEO of CareerNet and Longhouse Consulting.

“Gone are the aggressive compensation packages, and the preparation for massive counter-offers to attract talent,” said Aditya Narayan Mishra, chief executive of Ciel HR Services.

More than half a dozen investors, board members and company founders interviewed by ET warned that the road ahead will be more bumpy as the cost-cutting axe falls directly on employees, and layoffs will continue to mount over the next two quarters. See more rationalizations. An increase in the number of mergers and integrations will result in leaner teams.

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“By 2022, many startups realize they have redundant people. Now this can lead to a very high standard of quality control,” said Pranav Pai, managing partner at venture capital firm 3one4 Capital.

For new hires, wages will be more controlled, the number of job openings will be reduced, and companies will be willing to delay hiring. For existing employees, appraisals will be more stringent, and quality control and scrutiny of employee spending will be higher.

Board members unanimously agreed that the company must move on if candidates struggle. “If candidates continue to shop, they may lose more… What happened last year in terms of playing the counter-offer and the unprofessional behavior of some candidates is not sustainable… Companies will not tolerate this kind of redundant behavior,” Pai said. added.

Alok Goyal, a partner at Stellaris Venture Partners, agrees: “Most boards are discussing layoff plans, which will affect the pace of hiring and, in some cases, the size of existing teams.”

The change in the entire startup landscape comes after two years of sharp rises in valuations and funding, which have also intensified the war for talent. However, more than 3,000 people have been laid off since the beginning of 2022. this week,
Cars24 lays off more than 600 employees, although
ed-tech unicorn Vedantu lays off 424 jobs. Unacademy, Lido, Trell, Meesho and Furlenco also made layoffs earlier this year.

“Investors are providing cautious guidance to portfolio companies and asking them to invest cautiously,” said Krishna Kumar, founder of edtech firm Simplilearn. “The real impact will be in a quarter or two quarters later,” he added. Appear.”

Compensation has also started to fall, with founders tightening their wallets as liquidity dries up, concerns over geopolitical tensions mount and a stock market correction hits deals.

“Many large startups are rethinking projects outside of their core and are becoming cautious in terms of team expansion. We will see compensation rationalize as the strong demand for talent subsides,” said Sajith Pai, director at Blume Ventures.

“As companies wait for the right person, pay starts to drop,” said Arpi Mehta, co-founder of dental tech startup Toothsi. “Especially in terms of technology and product features, the crazy expectations we saw 12-18 months ago. It’s slowing down now,” she added.

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