π€ Can a recession separate well-run startups from "hacks"?
With 6000+ laid off and VCs advising startups to "prepare for the worst!" It seems like the jolly old funding party is about to stop!
The news cycles have taken an unfortunate turn!
It seems like only yesterday when India got its 100th unicorn β the neo-banking startup, Open.
Together these 100 unicorns account for a collective valuation of $333 billion dollars! So, by default, VCs were throwing their BIG bucks at these startups for the longest time.
But, in a weird twist of faith, before we could hear about our 101st unicorn the flood of back-to-back news items on employee layoffs have made an arrival.
The VC tone also quickly changed from "take my money!" enthusiasm to whispered caution. Caution about a looming recession!
It seems like the jolly old summer party for Indian startups is about to end. And, the WINTER is COMING!
Today, we are going to break down all the details about this dynamic. So, let's go π
What goes up must come down
To put it simply, during the last decade, Indian startups have been raising money left, right, and center.
Just look at the numbers over the last few years:
2017 β Deals = 938, Value = $10.7B
2018 β Deals = 964, Value = $9.9B
2019 β Deals = 1127, Value = $14.7B
2020 β Deals = 1088, Value = $11.2B
2021 β Deals = 1376, Value = $36B
Now, following this trend, just in the first 4 months of 2022, Indian startups have raised $14.3B in funding. That is literally 2x of the money raised during the same period in 2021.
But, just when it seemed like the happy days of endless cash would go on forever, a report predicting about a 19% fall in funding in Q2 of 2022 came through.
More grim news followed this prediction, with VCs warning their startups to prepare for a runway of 18 to 24 months.
Among all the uncertainty, VCs were clear on one fact β startups shouldn't expect to raise more funds anytime soon.
Layoffs after layoffs after layoffs
The immediate effects of this development directly showed itself via employee layoffs. And, our ed-tech unicorns were the first to lead the way.
Unacademy laid off over 1000 employees, that's about 17% of its workforce.
Following this, only yesterday, Unacademy-backed ed-tech startup, Frontrow, laid off 145 employees, ie 30% of its team!
A similar trend followed with Vedantu, where the ed-tech startup laid off 600 employees.
The biggest unicorn BYJUs was saved from this grim faith. But, BYJUs backed WhitehatJr abruptly started pushing employees to work from the office, which prompted 800 employees to resign in a heartbeat.
Adding to the list, another ed-tech startup Udayy was shut down yesterday, while its 100 employees were all laid off.
The trend is definitely not limited to just ed-tech. Zomato backed BlinkIt laid off 1600 of its employees. That's after Zomato spent almost $100M (overall, up to a $1B) to bail out BlinkIt just back in March.
In the e-commerce sector, Meesho also laid off 150 of its employees.
The overall tally of layoffs has now reached the 6000+ mark. So, things are definitely concerning.
The dried-up funding means that these high-growth-focused startups can no longer simply throw money at the problem. Seems like the days of 'crazy salaries' have come to an end!
But, what had caused this sudden shift in tone? Well, I explain all the details in this breezy 5-min read on Startup Layoffs and Recession!
What do you think these layoffs can mean for these startups? Let us know your thoughts about this article by simply hitting REPLY!
If you like our articles on buildd so far, I'd really appreciate it if you can give us a shoutout on Twitter β you can use this template
That's it for today! We will be back with more interesting articles!
Stay tuned and keep buildd-ingΒ π
Cheers!
Hrishikesh