Introduction
The startup industry is known for its fast-paced and constantly evolving nature. Startups are often required to adapt to changing market conditions in order to survive and thrive, and this adaptability is often a key factor in their success.
However, the upcoming recession has presented unprecedented challenges to many startups, leading some to make tough decisions such as layoffs in order to stay afloat. While layoffs are never easy, they can provide valuable lessons for employers in any industry. This article will discuss what employers can learn from the layoffs that have taken place in the startup industry, with a focus on the importance of adaptability, effective communication, and employee support.
Recent layoffs in the industry and what we can learn from it
Recently, there have been numerous layoffs in various industries as companies have struggled to adapt to the economic impacts of the recession. One sector that has been hit particularly hard is the startup ecosystem, where many young companies have been forced to shut down or downsize entirely due to financial pressures.
In 2022, India's startup ecosystem was impacted significantly, leading many founders to reevaluate their principles and prioritise building more viable companies that could profitably serve customer needs.
As a result, edtech startups, including those valued at over $1 billion, implemented layoffs in an effort to reduce costs and become profitable. These layoffs affected over 20,000 jobs across the startup industry. Companies such as Oyo, Zomato, and Byju's, as well as global firms, all implemented significant layoffs.
Hospitality chain OYO has laid off 600 employees from tech roles in product and engineering teams. The layoffs come after OYO decided to merge the two teams, and they will also impact teams that were developing pilots and proof of concepts such as in-app gaming, social content curation, and patron-facilitated content. OYO did not provide any details about the benefits the affected employees would receive. The company's CEO, Ritesh Agrawal, stated that they would try to help the laid-off employees find new employment. These layoffs come after OYO reported an adjusted EBITDA of INR 56 Cr in Q2FY23, its second consecutive quarter with a positive EBITDA.
Edtech company BYJU'S has laid off 2,500 employees as it aims to become profitable by the end of FY23. The layoffs affected employees across product, content, media, and technology teams. BYJU'S has also restructured its business, consolidating several acquired companies into one unit while allowing others to operate independently. The layoffs come seven months after BYJU'S raised $800 million in a funding round and shortly after the company reported INR 4,588 Cr in losses for FY21, a 20X increase from FY20.
Foodtech startup Zomato has laid off 3-4% of its workforce, or at least 100 employees, due to performance-related reasons. In recent weeks, the company has also seen several high-profile exits, including the departure of a co-founder. Additionally, Talabat, a Kuwaiti startup that acquired Zomato's UAE food delivery business in 2019, has shut down Zomato's food delivery operations in the UAE. In Q2 FY23, Zomato's loss narrowed to INR 250.8 Cr compared to the previous year.
While layoffs may bring short-term challenges, they are expected to drive businesses towards frugal innovation, concentrate capital on successful ideas, and ultimately deliver long-term value. Investors and recruiters have warned that further job cuts may be necessary depending on global economic conditions, including high interest rates, inflation, and the potential for a global recession.
These layoffs and others like them can serve as cautionary tales for other employers and startups, highlighting the importance of financial stability and adaptability in the face of economic challenges. They can also be a reminder of the need for companies to have contingency plans in place and to be prepared for the possibility of downsizing or restructuring.
The harsh truth of unemployment
The harsh truth of unemployment during a recession is that it can be difficult for laid-off workers to find new employment, and it can take a long time. With many companies struggling financially, they may be hesitant to hire new employees, especially in industries that have been hit hard by the recession. This can lead to a high number of deserving candidates competing for a limited number of job openings, resulting in increased competition and longer periods of unemployment.
For those who are able to find new employment, it may not be at the same level or with the same salary and benefits as their previous job. This can be a difficult adjustment, especially for those who have been without work for a long period of time.
Overall, the recent layoffs in the industry serve as a reminder of the harsh truth of operating a business during a recession. They also offer valuable lessons for employers and startups about the importance of financial planning and adaptability in the face of economic challenges.
Recession's tough on companies, especially the early stage companies. If you are an early-stage startup founder, here's candid advices by VCs to early-stage founders.
Conclusion
In conclusion, the layoffs that have taken place in the startup industry can serve as important lessons for employers in any industry. Being adaptable and able to pivot in response to changing market conditions is crucial for the success of any organisation. Effective communication with employees during times of change is also essential in order to maintain trust and morale. Finally, providing support to affected employees and investing in retention efforts can help to retain valuable talent and maintain a positive company culture. By considering these lessons and applying them in their own organisations, employers can be better equipped to navigate challenges and achieve long-term success.
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