The beginning of the Indian “startup winter” has been signalled by the large-scale layoffs and decreasing financing caused by a worldwide market collapse and ensuing cash constraints.
Well, the funding winter is not really a surprise. The downturn in funding and grim valuations, according to experts and industry watchers, were anticipated given the federal reserve’s interest rate rise in the US, which had already spurred on a bearish climate. An important indication was already being sent by the falling share prices of IT organizations across all industries in the US and India.
Amid a slowdown in significant startup investments, venture capital and private equity investments fell by 37% quarter over quarter in Q2 2022 to $7.3 billion.
This succeeds two years of funding and valuations that have soared. The worldwide supply chain disruptions brought on by lockdowns, the Russia-Ukraine conflict, the collapse of global tech stocks, the rise in inflation, and the subsequent increase in interest rates are just a few of the many causes contributing to the liquidity crisis.
Image Credit: Gergely Orosz (Pragmatic Engineer)
Startup pundits out there have signalled founders to reduce burn and build a 24 month runway. Well-known venture capital companies like Sequoia, KKR, and Y Combinator have raised the alarm and given survival advice to the entrepreneurs in their portfolios. There is a clear message within all the flowery language: extend endurance and reduce expenses. This appears to have been construed by many of these businesses as permission to terminate employees as part of a “cost-cutting exercise,” upsetting thousands of people’s livelihoods in the process.
Unfortunately, cutting personnel is the quickest option for startups to escape the tunnel and save money on daily operating costs. According to the present demand trends, startups can get by with a smaller headcount and rehire after the market has stabilised.
27 Indian businesses, including unicorns like Cars24, Ola, Meesho, MPL, Trell, Unacademy, and Vedantu, have so far laid off 10,029 workers. The social commerce platform Yaari from Indiabulls is also on the list. – Inc 42
What does this mean for the recruitment market?
Here are some adjustments the startup environment is reportedly seeing after two years of financing and valuations that have skyrocketed:
- Some firms have delayed filling vacancies and deferring hiring objectives until the upcoming quarter in recent weeks.
- Companies are dropping counteroffers and there are fewer available vacancies.
- Offers to incoming FTEs and interns are being rescinded. Newer product lines are being put on ice and people are being shuffled internally.
- For new recruits, compensation will be more tightly managed.
- For present staff, evaluations and quality control will be more stringent.
- Burn strategies are being discussed in boardrooms; these plans will have an influence on recruiting and rightsizing.
- Startups are re-evaluating side initiatives and taking a cautious approach to growth.
- Investors, major shareholders, and firm founders predicted that layoffs would rise and that team sizes would be reduced as a result of mergers, acquisitions, and consolidation.
- New hires at organisations that have sought huge layoffs will now look for assurance and clarity on the viability of the company, its reliance on outside funding, and whether the positions they are being hired for are fundamental to the firm or a new branch.
The full implications of the significant changes in hiring processes will only become apparent in the upcoming months.
How do you communicate the layoffs?
- Empathize: Letting go of someone is not a transaction. Put yourselves in their shoes. Every dialogue should start and end with empathy.
- Authenticity over uncertainty: Your communication plan for the layoff doesn’t have to be extensive. Explain why you are doing this, how you will be helping the laid-off employees, what you plan to do next, and similar information. Avoid using words and jargon that obscure your message. Be sympathetic, but be clear-cut.
- Own it: This takes experience, but sometimes being honest and owning your faults is the best course of action under trying circumstances.
- Don’t leave your employees hanging: If you’re a founder or a CXO talking about the same thing on your social media platforms, respond to the comments as much as you can. Treat this as ongoing dialogue rather than just posting once and then cutting off all contact. Think ahead.
Layoffs happen. It’s the reality. Businesses run according to the inflation cycles that are widespread in their state. If we observe the pattern, businesses of all sizes need to keep resizing during the peaks and valleys of the economic cycles. Numerous startups are also prepared to assist folks who have just lost their employment as a result of layoffs.
Funding Winter ≠ Hiring Freeze
Well honestly, economic downturns are the best time to hire, if you have the appetite that is. Exceptional talent have fewer opportunities to choose from and probability of you hitting gold is much higher. Keep looking out for that needle. Here’s what you should be doing differently.
- Polish your “War-time” Pitch: Re-evaluate your company and role pitch. In this market, talent has questions that you might not have previously encountered. And selling your company’s vision and the team’s culture is even more important considering most are going to be looking for stability
- Vitamins vs Painkillers: As pointed above, lot of hiring decisions come down to a call between vitamins (the good to haves) v/s painkillers (the must have hires). Go hard on hiring your must haves, you won’t be sorry.
- Freshers & Junior Hiring: Pay extra attention to the bottom of the pyramid. Freshers & junior hires are going to be available in abundance. This is the best way to keep your costs down and numbers up. Obviously, do not over play your hand, which might lead to bad talent experience and harm your talent brand.
- Sales & CS: If you are somehow not in the headwind of this downturn, double down on direct revenue-linked functions of Sales and Customer Success. Again, there’s no better time to hire both, reps and execs for these functions. They might even be available at literally no notice.
- Raise the Bar: Having said that, do not lower your hiring bars to get quick hires. We have seen a lot of companies make such mistakes. In fact, it might be a good time to raise the hiring bars.
- Return to Office: In case you are one of those companies who are switching from remote to a more hybrid/ in-office set up, this might be a good time to enforce such a change. We still believe that future is always going to be remote-first, but if you are principally wanting to make this adjustment to suit your particular DNA, it might be a safe time to risk “healthy” attrition and re-hiring if warranted
If you are one of those companies who are taking advantage of this economic downturn to grow your team and get ahead of your competition, then you might want to look at hiring via recruitment experts on Spottabl. Our recruitment partners make sure that each of hiring strategy is taken into account while submitting the best matching interview-ready candidates. Spottabl makes sure that hiring doesn’t take a back seat while majority of your company might be on a hiring freeze in this funding winter.