Start-ups in India have continued to lay off employees as funding remains scarce, with about 9,400 employees being let go in the first quarter of 2023, according to recruitment company Careernet. The education technology sector was the most heavily hit, with firms such as Byju's, Unacademy and MyGate letting go of more than 1,000 workers at a time.

The study found that 70 per cent of all start-ups made redundancies of between 100 and 300 people. While layoffs are expected to continue, hiring in senior roles has also dropped by about 80 per cent in the first quarter compared with the same period last year.

Edtech Hardest Hit

Start-ups in India have been hit by a shortage of funding as investors adopt a more cautious approach to tech investments. Even companies with sufficient capital are slowing down on hiring as growth plans have been redesigned in line with the current macroeconomic conditions.

Careernet's report showed that even sectors such as banking, financial services and insurance are increasing their hiring. Traditional companies such as these are setting up larger teams in India and start-up employees are showing no hesitation in moving to these sectors. The report warned that the situation is unlikely to improve over the next two quarters.

Seed-Stage Deals Grow

Despite the slowdown in funding, the industry is seeing ticket sizes in seed-stage deals increasing from a minimum of $1 million, said Siddarth Pai, founding partner at early-stage venture capital firm 3one4 Capital. The report showed that there were a total of 260 funding deals during the period under review, with about $3.4 billion being raised, a decline of 71.6 per cent by value from $12 billion in the same period last year.

The number of growth-stage funding deals was led by the e-commerce sector, whereas late-stage fintech start-ups received the most funding. Enterprise technology companies took the top spot in both bridge and seed-stage funding rounds.

Key Findings

• 9,400 employees were laid off in quarter 1, 2023
• Edtech start-ups have laid off the most employees at any one time, according to the report
• 70 per cent of all start-ups made layoffs of between 100 and 300 people each
• Hiring in senior roles has dropped 80 per cent compared with the same period last year
• Even companies with sufficient capital are slowing down on hiring due to a shortage of funds
• The situation is unlikely to improve over the next two quarters