Amid scarce funding and pressure from investors to move towards profitability, startups across segments slashed jobs in a bid to rein in costs.Funding into startups declined to a seven-year low of $8.2 billion in 2023 compared to about $25 billion in investments that firms had managed to pocket from investors in 2022.
Apart from companies trimming their workforce, a clutch of small to mid-sized startups also shut shops last year, adding to the share of laid off employees. More than 10 startups shut operations in 2023, the data showed. Startups typically rely on external investments to fund their growth and a prolonged funding crunch made it difficult for smaller players to sustain operations. Besides, regulatory challenges and inability to build a viable business model also added to woes of startups like ZestMoney that halted operations and FrontRow, which shut down last year. ZestMoney recently got acquired by DMI Group in a fire sale deal.
Few experts tracking the space also attributed the layoffs to deployment of automation by companies. “The layoffs have been as a result of deployment of greater automation in the business, correcting the over-hiring done earlier,” said Aditya Narayan Mishra, managing director and CEO of CIEL HR Services. Companies have been increasingly leaning on technology to make operations more efficient and save on costs. Artificial intelligence has been gaining ground.