Two months back, India’s start-ups were creaming up investments. The money kept pouring in, and then came in COVID-19. Can those billions of dollars have such little staying power?
I met a guy in February, at Delhi's un-Tony Press Club of India on Raisina Road. As the chap got juiced up, he opened up about the millions upon millions of dollars that had come into the country thanks to the entrepreneurial appetite of our unicorn start-ups. The good times were here and here to stay, he blustered, assuring me of great things ahead. To get a peek at (t)his suspect exuberance, I reached for a tacky and sticky napkin, scorched up a Natraj pencil and notched up the quoted score. That run-rate, ahem, came up to a very indubitable but nonetheless impressive $1.6 billion (around Rs 12,000 crore) in February alone, with a few days to spare in the year's shortest month. Reasonably mortared and sanguine with this heartening truth about my country's well-being, I came back to
my cats and purred myself to sleep.
The next few days, weeks and months have been but a demur, without a single purr. Our purring has simmered down to a shimmer. That's because I read newspapers and visit social media sites well before most people wake up – that's a habit through years of earning my living on happenings and events. And the news has been getting scarier and more worrisome by the day after that subliminal day at the Press Club. After India's first confirmed COVID-19 on January 30, 2020, the numbers have deftly scurried and galloped. As a nation, we have fought, faltered, recollected ourselves and bounced back. We continue to fall, gather ourselves, resurrect and fight. On a pristine level, we seem to be losing. On many fronts…
To an extent, we have lost
The soothsayer that I met before Lockdown 1.0, 2.0, 3.0 and now 4.0, forgot to tell me one thing – that if the chips came down, he and his ilk would cower down. Without notice. That the hurrah of February would be shunned and only self-sustainability taken care of. Only self-preservation would be paramount. It seemingly is.
Here's how. The numbers are frightening.
A cursory look at news reports countrywide shows that over 3 crore Indians have so far lost their jobs, or have had their salaries truncated by up to 50 per cent. Let's look at these few reported in top publications across the country.
Private cabs, anyone?
Last week, a blog post by Ola, the country's largest homegrown ride-hailing cab firm, announced the laying off of 1,400 employees (25 per cent of the workforce) following a sharp decline in revenues during March and April, when India was under a total lockdown to curtail the spread of COVID-19. Ola CEO Bhavish Aggarwal wrote to his staff in the blog on May 20, 2020: "This will be a one-time exercise and only by the end of this week. No more Covid-19-related cuts will be done after this exercise."
Uber, the US-based ride-hailing company which is now a hit in India, has also laid off over 6,500 employees worldwide. Chief Executive Officer Dara Khosrowshahi said in a statement: "The company plans to reduce investments in several non-core projects," as per a Reuters report. "We have made the incredibly difficult decision to reduce our workforce and reduce investments. Uber will concentrate on its core businesses in ride-hailing and food delivery," Khosrowshahi added.
Food delivery unappetizing?
Recently, food delivery platform Swiggy announced plans to lay off 1,100 employees as COVID-19 clipped its business model. Impacted employees would receive many months of salary, Sriharsha Majety, Co-founder and CEO, told employees in a Town Hall. For a company that raised millions of dollars in VC funding in the last few months, this was largely unexpected and a blow to the face. Zomato, its close rival, also announced the laying off of 13 per cent of its workforce. The social media went viral, bringing up parallels with Oyo Rooms and countless other start-ups.
That throws up a moot point. Till just two months back, India's start-ups were creaming up investments. The money kept pouring in, in the millions and billions of dollars. And then came in COVID-19. Have those millions and dollars such little staying power? What has caused India's inspirational start-ups to abandon ship and cast away those that stood by their dreams and aspirations so early in the worry game? Why are India's start-ups who have notched up many rounds of funding behaving like fly-by-night operators? No level of workforce compensation payout can drain even 1 per cent of the monies that have already come in. This flight of jobs reeks of a flight of trust, promise and faith.
The reality cuts deeper
In mid-April, one of India's leading business magazines reported: "Several Indian startups –Acko, Droom, Exotel and MakeMyTrip – have started to cut jobs as the pandemic has dented their financial prospects. In some cases, these companies have asked their employees to take pay cuts to keep their businesses running." One online insurance firm laid off 50 employees. A majority of the laid-off staff was employed in customer service, operation sales and marketing segments. All well-funded founders of these start-ups, suddenly worth millions, some worth billions, said their businesses would not recover anytime soon. And given that sobering input, most managerial teams had also taken voluntary salary cuts.
Travel firms like MakeMyTrip, Cleartrip and hospitality firms Fab Hotels have also laid off employees amid the lockdown, as per newspaper reports. On record, MakeMyTrip founder Deep Kalra said pay cuts would happen across levels, while the Group slashed the salary of employees across the board. Some travel players like ixigo have also announced the pruning of salaries across all levels of employees.
VCs put out a warning
In an open letter, top global and local private equity and venture capitalist firms such as Sequoia Capital, Accel, Lightspeed and Matrix Partners warned that unforeseen changes to the macro-environment could impede start-ups' moves to close future fund-raising attempts. The warning came three months after start-ups witnessed record-breaking growth in 2019 and over $14.5 billion was summoned in last year.
VC firms such as Kalaari Capital, SAIF Partners, and Nexus Venture Partners also warned India's start-up founders to get prepared to see a sharp drop in profitability and have a 12-18 month window to burrow out of the crisis. As per a prominent paper, their warning read: "Assumptions from bull market financings even from a few weeks ago do not apply. Investors will move away from thinking about growth at all costs to reasonable growth with a path to profitability. Adjust your business plan and messaging accordingly."
India's start-ups participated in nearly 100 deals to raise monies and mopped up over $1.24 billion in January this year alone, a cursory research shows. In March 2019, Indian startups had raised $2.1 billion over 153 deals. The lockdown, as one can imagine, has severely disrupted these businesses. But the monies remain – and the harsh job cuts raise a burning question of staying power, and a willingness to continue living up to promises made.
All is not so dismal
Amid all this, some good news. The HR vultures are circling. As regular, normal and good people lose their jobs, head-hunters are in all-eyes-out mode. "Many efficient workers are jobless, now willing to join at their existing salaries or less. We are going all out to grab them. In these unfortunate times, we suddenly have a growing pool of readily-available and skilled talent. And they are desperate…"
A prominent Twitter post screeched on Friday night: "Those people that put their health at risk to feed us through the lockdown are losing their jobs today. Who will care for them? Who will feed them? Who will scream for them?" As far as social media is concerned, my bag is mixed. I am very confused. An exacerbation on that in the next rant.
Till then, we shall willy-nilly chant about that went wrong in our start-ups' millions and billions sitting in banks. Our teenage start-up up-starts certainly seem to have let down those who were just getting started in their own little dreams.
The writer is a business analyst and communications specialist. Views expressed are personal