Mounting Pressure on Startups
Jun 14, 2022
Indian Startups & Unicorns Focus on Cost Cutting with layoffs
With the deterioration of the funding environment in the recent past, since the beginning of 2022, close to 10000 startup employees have been impacted by cutbacks, termination of contracts and layoffs. Well-funded startups have also taken the path of downsizing their teams. Companies are citing performance-related issues and some of the well-known Unicorns are also no exception to this.
Numerous startups are taking this route after the inflation in the economy largely due to the Russia-Ukraine conflicts. Furthermore, as the Covid-fueled funding is deteriorating, investors are also recommending companies to focus more on cost cutting to increase runway. During the pandemic, highly funded and low funded start-ups had hired employees in bulk to sustain the market value and brand position among established competitors. However, post pandemic these companies are unable to manage the workforce with the current market scenario. Hence, layoffs are turning out to be a positive business impact for some organizations. The HR management also holds a say in layoffs and most of the times they are directly related to employee performance.
Why Are Companies Inclined Towards Laying off Employees?
The very nature of work is being transformed by automation and also the ever-fierce global competition. To keep up, startups are now rethinking their workforce strategies, leading to changes that are unsettling and painful. However, some companies are also terminating employees on performance basis to ensure the quality and effectiveness of the services offered.
Some of the reasons why a firm is willing to lay off employees are if there is a reduction in profits, which forces an organization to reduce its resources to enable saving for corporate emergencies. Another reason for enterprises to reduce their resources is the advancement in technology and trends, which sometimes pose a challenge for the business to follow and adhere to their functionalities swiftly.
Furthermore, the lay-offs are more noticeable in the IT firms compared to other industries in 2022. Some of these technology firms include Meta, Lacework, Getir, and several others are laying off employees.
Investors are focusing more on the current profitability after bearing the losses during the pandemic. Thus, to maintain consistent capital investments and funds, the IT sector is prominently reducing its resources to meet the market’s profit margins. Here are the names of a few other companies that have already reduced their number of employees for the reasons cited above or due to other reasons like performance lay-offs or restructuring.
Market Sustainability and Duplicate Talent
To sustain the market, several companies are now varying their marketing functions and strategies. This process is enabling organizations to lay off employees under performing or are unable to meet market expectations. However, several companies came under the duplicate talent experiences where the employee was unable to perform the responsibilities assigned as promised during the hiring processes.
With several start-ups being established in 2020, it had become vital for the new businesses to create their market identity during the economic crisis worldwide. And as the economy gained profits post-2021, the organizations are downsizing to improve and curate new market value based on current demands and existing competition in the upcoming market years.
The year 2022 is expected to witness further employee lay-offs from various enterprises and start-ups to retain investors to maintain business funding and entail high cash benefits from the market profits. One of the crucial pieces of advice by investors today for new businesses is to avoid venturing into new market sector verticals. For companies, the only way to save on laying off employees and managing the market value and profits is to follow the cost-cutting procedure for enhanced market results.