sharechat: More consumer internet startups like ShareChat, Dunzo, Rebel Foods are joining the wave of layoffs

Major consumer Internet firms are moving fast to rein in costs and plan to cut additional jobs as 2023 begins on a cautious note for startups, industry executives and investors told ET.

Reliance Retail-backed Dunzo laid off about 3% of its staff last week, and the fast-paced trading platform for groceries and other essentials is also cutting costs elsewhere.

MohallaTech is finalizing another round of layoffs in the coming weeks that will be larger than the previous layoff of about 100 workers in December, people familiar with the discussions on social media platform ShareChat and short video app Moj said.

Cloud kitchen firm Rebel Foods, which houses brands such as Behrouz Biryani and Oven Story, has also cut staff.

“Any decision that affects people is tough and always our last resort. Last week we had to part ways with 3% of our team strength,” Dunzo co-founder and CEO Kabeer Biswas told ET in a statement.

Biswas did not disclose the exact number of those who lost their jobs, but people in the know said the company had laid off 60 to 80 workers.

Discover stories of interest

At ShareChat’s Bengaluru-based parent, the new layoffs could be as many as 200, but the number could fluctuate and even be higher as official information is yet to reach employees. “They (company management) are finalizing the details and will probably close it this month. Costs should be optimized in all possible ways. “It’s very clear that all the startups are doing it with an understanding of what’s going on in the market,” a person familiar with the matter said of potential layoffs at the Twitter- and Snap-backed firm.

On December 2, ET reported that MohallaTech has laid off about 5% of its employees due to the closure of its fantasy gaming vertical Jeet11.

The company, which raised $255 million in new funding last June and is valued at $5 billion, has reworked its cloud contracts to cut costs in addition to canceling the daily meal coupons previously given to its employees.

“Cloud storage and employees are the biggest cost centers and are being considered, including benefits such as company meals,” said a person familiar with the matter.

MohallaTech did not respond to ET’s email seeking comment.

Last year, edtech firm Unacademy cut most of the perks given to the firm’s employees after layoffs.

According to a spokesperson for Mumbai-based Rebel Foods, the workforce changes are due to an “annual performance review and alignment with the organization’s priorities for future goals.”

“The number of people affected is less than 2% of our organization’s strength,” the spokesperson said. ET could not ascertain the total number of workers affected.

Just two weeks before the new year, startups like Ola, Cashfree and Moglix have laid off their employees. Amazon is warning its Indian employees of nearly 1,000 layoffs. ET first reported Amazon India’s layoff plans in its November 16 issue.

Also read: The layoffs have spread to Dunzo, ShareChat, Rebel Foods and agritech firms

Layoffs: another round

The latest developments in ShareChat, Dunzo and Rebel are a continuation of what has happened in the new economy over the past six to eight months. Industry insiders said similar developments could be at other startups.

One venture capital investor who has invested in several consumer Internet firms said cost optimization is the number one priority at nearly all portfolio firms.

“Almost everyone will do it (layoffs) even after last year’s cuts. There are more startups that will have to choose to phase out,” he said, adding, “But this would perhaps be the last phase of such job cuts.”

According to industry experts, layoffs at tech startups are expected to continue until the end of the current quarter.

Initial staff reductionETtech

“We should see some improvement in the second quarter (April-June),” said Anshuman Das, managing partner at executive search and advisory firm Longhouse Consulting. “India has been a little late in firing compared to the US. So it will be another two to three months of activity. This quarter should be the same as the previous quarter. It may not come back, but the layoff trend should ease and we may see more hiring activity from Q2.

Last week, Ola laid off around 200 employees, while payments firm Cashfree laid off around 100 employees. They are among growing Internet firms forced to cut jobs amid a tough financial environment.

BigTech firms such as Meta and Amazon recently posted the largest layoffs in their operating history, highlighting a tightening liquidity scenario.

Electric mobility startup Bounce, Tiger Global-backed business-to-business marketplace Moglix and Unacademy’s Relevel have also cut staff since the start of the New Year.

“Many thought that despite the slowdown in the US, more capital would continue to flow into India,” said Das of Longhouse Consulting. “But many companies have gone out to raise money in the last six months and come back empty-handed. “Companies that have been postponing layoff plans are finally implementing their plans.”

Venture funding in calendar year 2022 fell by at least 30% to around $24 billion after a record year for fundraising in 2021, ET reported on December 29.

Structural cleaning

While engineers are typically the last to be laid off at a technology-led organization, firms have also been forced to cut positions in that department, industry insiders said.

“Everybody went a little higher in hiring engineers and higher prices. Now those decisions are being corrected,” said the investor. Companies are also hiring for roles in marketing and operations.

Starting firesETtech

“Engineering being affected is a sign of a deeper purge in companies,” Das said. “Adding engineering talent is not easy, and laying off engineers is a sign of structural change. Operations and sales are more cyclical, while engineering is more structural. If engineering works are affected, it means that certain strategic initiatives carried out by companies may be stopped.”

Among startups, practices are closed because they are reluctant to invest their time and resources in projects that are not effective in the short term.

“More problems are outsourced to a smaller group of engineers. They need to fix that as a priority,” he said. “Investors are also constantly asking to show how costs are being reduced, and these exercises (cuts) clearly show that.”

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