sharechat. Exceptionally. More consumer internet startups like ShareChat, Dunzo, Rebel Foods join the downsizing wave

Consumer internet majors are moving quickly to contain costs and are planning further cuts as 2023 begins with a cautious outlook for startups, industry executives and investors briefed on the matter told ET.

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

MohallaTech is wrapping up another round of layoffs in the coming weeks, likely to be larger than the previous layoff of around 100 employees in December, said people with knowledge of the discussions for the parent of social media platform and short video app ShareChat.

Cloud kitchen firm Rebel Foods, home to brands such as Behrouz Biryani and Oven Story, has also cut jobs.

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

While Biswas did not disclose the exact number of people who lost their jobs, people in the know said the company axed around 60-80 employees.

The new layoffs at ShareChat’s Bengaluru-based parent company may be 200, but this number could change and be even higher as the official communication is yet to reach employees. “They (company management) are finalizing the details and will likely close it this month. Costs should be optimized in all possible ways. “Obviously, all startups are doing this with an awareness of what’s going on in the market,” said a person familiar with the matter about potential layoffs at the Twitter- and Snap-backed company.

ET reported on December 2 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 was valued at $5 billion, has also retooled its cloud deals to cut costs, as well as eliminating the daily meal stamps previously issued to its employees.

“Cloud storage and employees are the biggest cost centers and those are being reviewed, including company-issued food,” said a person familiar with the matter.

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

Last year, edtech firm Unacademy cut most of the company’s employee benefits after layoffs.

A spokesperson for Mumbai-based Rebel Foods said the changes in employee strength are due to “an annual performance review and realignment of the organization” on its priorities for future goals.

“The number affected is less than 2% of our organization’s capacity,” the spokesperson added. ET was unable to ascertain the total number of employees affected.

Just two weeks into the new year, startups like Ola, Cashfree and Moglix have laid off employees. Amazon India informs its employees about 1,000 layoffs. ET had first reported Amazon India’s layoff plans in its November 16 edition.

Read also: ETtech Morning Dispatch layoffs spread across Dunzo, ShareChat, Rebel Foods and agritech.

Reductions. another round

The recent developments of ShareChat, Dunzo and Rebel are a continuation of what has happened in the so-called new economy over the past six to eight months. Industry insiders say that similar developments can be expected in other startups as well.

One venture capitalist who has invested in several consumer Internet companies said cost optimization is the number one priority for almost all of his portfolio companies.

“Almost everyone is going to do it (layoffs) even after last year’s layoffs. There are more startups that have to choose layoffs,” he said, adding: “This will, however, be the last round of such job cuts.”

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

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

Last week, Ola laid off around 200 employees, while payments company Cashfree laid off around 100. These are among the growth internet companies that have been forced to cut jobs amid a tough funding environment.

BigTech companies such as Meta and Amazon have recently experienced the largest layoffs in their operating history, underscoring a tightening liquidity scenario.

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

“Many believed that more capital would continue to come to India despite the US slowdown,” 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 had delayed their layoff plans are now finally moving forward with their plans.”

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

Structural cleaning

While engineers are typically the last to be axed in a technology-led organization, companies have been forced to cut positions in this department as well, industry insiders say.

“Everyone went a little overboard on hiring engineers and at a premium. Those decisions are now being corrected,” said one investor. Companies also play different roles in marketing and operations.

“The impact on engineering jobs is indicative of a deeper purge at companies,” Das said. “Adding engineering talent is not easy, and firing engineers is a sign of structural change. Operations and sales jobs are more cyclical and engineering is more structured. If engineering jobs are affected, it means that some strategic initiatives that companies have been pursuing may be put on hold.”

Experimentation among startups is shut down because they avoid investing their time and resources in projects that have no impact in the short term.

“A larger number of problems are assigned to a smaller group of engineers. They need to fix it as a matter of priority,” said one of the people mentioned earlier. “Investors are also constantly asking to show how costs are being cut, and these exercises (job cuts) show that in a tangible way.”