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The start of the new financial year has been sombre for many startup employees as news of layoffs and in some cases, shutdowns, began surfacing. 

The reasons are the same across sectors—tepid market growth and the arrival of a “funding winter.”

Multiple growth investors have sent advisories to their portfolio companies to conserve cash, including the likes of Sequoia Capital, BEENEXT, and others, as growth rounds become sparse. 

Investments by private equity and venture capital firms in Indian companies declined by 27 percent in April 2022 to $5.5 billion across 117 deals, according to a recent report by industry body IVCA (Indian Venture and Alternate Capital Association) and Ernst & Young. The report also said that monthly startup investments have plunged 50 percent, on a year-on-year basis, due to a slowdown in large funding rounds.

Startups in edtech, ecommerce, and the direct-to-consumer (D2C) and transport aggregator sectors have been hit the most.  

Edtech companies including Vedantu, Unacademy, BYJU’Sbacked WhiteHatJr, Lido Learning , and more recently, Eruditus , have laid off about 2,255 employees during the year. 

Despite the chaos, startups across stages continue to hire in key roles, as the demand for tech talent continues to rise. 

Edtech firm upGradannounced that it is planning to add 3,000 people over the next three months. Payments company PhonePe is also among the startups hiring this year.

“For the calendar year of 2022, we planned on hiring 2,800 people across verticals and we have hired 250 people or 30 percent of that number so far. Our hiring was budgeted for,” Rahul Chari, Co-founder and CTO at payments company PhonePe, told YourStory. 

The question is will India’s Startup Inc be able to attract top tech talent?

The recent workforce cull at these startups has forced employees to look beyond big pay cheques and toward long-term career planning.

Not all startups are created equal

Core engineering and product roles continue to see demand from startups as well as technology companies. According to the monthly Naukri JobSpeak report, hiring was up 40 percent year-on-year in May 2022.

PhonePe’s Rahul says the company will be hiring people across functions such as core engineering, DevOps, and design, as well as for analytics, business development, sales, and marketing.

This is echoed by Yeshab Giri, Chief Commercial Officer, Staffing and RT Professionals at Randstad India, who says the company expects 41 percent of performing technology companies and new-age startups to continue hiring in 2022-23.

Companies onboarding employees are expected to offer bonuses, perks, and higher salaries to talent with futuristic skill sets. 

“Job roles for full-stack engineers, data engineering, product management, and DevOps will continue to be in demand across IT companies, GCCs, and Software as a Service (SaaS) startups starting June as funding has been favourable for these businesses in the past couple of weeks,” he says. 

He further adds, “Many IT giants have expressed their interest in hiring as the economy recovers to normalcy and companies rise to the pre-pandemic operation levels.”

Jang Bahadur Singh, Director, Industry Lead-Technology, Human Capital Solutions at Aon, believes that layoffs are specific to sectors and it will take the next two to three quarters for it to go back to business as usual. 

“We see D2C (direct to consumer) and B2C (business to consumer) segments such as edtech which benefited from prolonged work from home, seeing the most impact of the post-pandemic opening of the economy and some layoffs in these firms. Most of the attrition we are seeing is in customer support, operations, etc, which are also prone to some amount of automation,” he says.

He added that the layoffs haven’t impacted all roles or sectors equally.

Rethinking long-term goals

For employees, especially those in tech-related roles, layoffs have led to rethinking long-term career goals.  

“The returns from value of efforts being put in for hiring were inverted due to the compensation packages we have been seeing. People will now look at the long-term view of joining a company rather than just compensation,” adds Rahul of PhonePe.

Candidates have also been asking hard questions, industry experts say, adding that there is active interest from IT firms as well as other startups to hire employees with experience working for startups.  

“We have observed a radical change in candidate sentiments as they are now actively asking questions to understand the employer’s business, purpose, and profit projections before giving confirmations,” says Yeshab of Randstad.

Rohit Razdan, Co-founder at alternative data platform Synaptic, said sales and marketing roles have seen an impact due to the nature of the role. 

“The market for good engineers and product managers hasn’t really changed. Operations and sales teams work differently as it has an immediate feedback loop. A good hire in these roles starts paying for themselves soon enough and companies have been laying off those who have not performed too well,” Rohit says. The company is scouting for talent on the back of its recent Series B round of funding. 

Freshers, gig workers for startups, continue to be in demand

The increasing cost of the tech talent pool has pushed the cost of lateral hires, leading to continued buoyancy in campus hiring.

A Naukri JobSpeak report said demand for entry-level talent, with an average experience of up to three years, saw a steep rise in May 2022 with 61 percent growth year on year. 

Jang Bahadur adds, “Our campus survey results show that 80 percent of participating startups are looking at increasing intake from campus since the cost of lateral hires has increased significantly. The focus for startups continues to be on engineering profiles even at campus, with a preference for premier engineering schools. Further, 65 percent of these organisations are also looking at improving their campus compensation, especially at premier engineering schools.”

The employment outlook for gig workers for startups continues to be positive due to the rise of quick commerce.

“On the ground, we have seen the demand go up, especially in the logistics sector, driven by quick commerce. Even if one company is letting go of workers, there is demand from other startups, leading to improved earnings per hour,” says Saurav Chawla, Co-founder of flexible delivery job platform OkayGo which was recently acquired by Jungle Ventures-backed BetterPlace.

There is still a market for talent, especially with young startups and IT/ITeS companies on the lookout to bring experienced talent on board.