In the last few months, the start-ups are in news not only for raising funds or announcing their plans for further funding or IPOs but they have been in news for firing a significant number of employees. Lido Learning, Blinkit, Vedantu, Unacademy, Trell, etc. are among those start-ups which have fired many employees in the last few months.
According to news reports, more than 5000 employees have been fired by start-ups in 2022 itself and many employees might get the pink slips shortly as the start-ups are facing a liquidity crunch and pressure from their investors to cut their costs and focus on profitability.
In a report, CB Insights, a market intelligence firm, said that venture funding to India-based start-ups has dropped to $3.6 billion in the second quarter of 2022 from $8 billion in the first quarter of 2022. The report also reflects the slowing down of the fundraising by the start-ups globally and this is because investors are becoming cautious in investing their hard-earned money in this difficult macro-economic environment.
Leading investors like Tiger Global and Softbank have explicitly said that they would be going slow and would be selective in investing their funds. Softbank recently declared a whopping loss of $27.7 billion on investments in its Vision Funds. Sequoia Capital is also said to have shared a presentation with their portfolio founders suggesting they prioritize and cut spending. It has been said that the capital is becoming expensive and the focus has changed from growth at any cost to consistent profitability. Start-up accelerator Y-Combinator has also stated on a similar line recently.
This change of stance has also made it difficult for Indian unicorns like Meesho, Slice, Cred, and Groww to raise their next round of funding. Valuations might not remain what they were or at least they may not grow as they were growing. IPOs of Ola, Oyo, FirstCry, etc. are said to be delayed due to unfavourable circumstances.
This whole change in investors’ sentiments would mean restrictions on spending by the start-ups. Start-ups will have to rationalize their spending on advertising, recruitment, and customer acquisition. However, it does not mean that the start-up story is ending but the times will be challenging and tough for the entire start-up ecosystem and those start-ups who can ride this storm successfully will come out stronger.
