sharechat: More consumer internet firms like ShareChat, Dunzo, Rebel Foods join the wave of layoffs

Big consumer internet companies are moving quickly to cut costs and plan more dismissal as 2023 begins cautiously for startups, industry executives and investors briefed on the matter told ET.Confidence Supported by retail Dunzo last week it laid off about 3% of its workforce, and the fast-casual grocery and essentials platform is cutting costs elsewhere.

MohallaTech is completing another round of layoffs in the coming weeks, likely to be larger than the previous layoff of around 100 employees in December, people are aware of discussions on the parent social media platform ShareChat and short video app Moj said.

Cloud kitchen company Rebel Foodswhich houses brands such as Behrouz Biryani and Oven Story, has also cut staff.

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

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

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The Bengaluru-based parent company ShareChat could see 200 new layoffs, but this number may change and may even be higher as the official notification to employees is yet to come. “The company management is finalizing the details and they will probably close this month. Costs must be optimized across possible paths. It’s quite evident that all the startups that have realized what’s going on in the market are doing this,” a person familiar with the matter said of the potential layoffs at the Twitter- and Snap-backed firm. On December 2, ET reported that MohallaTech laid off about 5% of its employees due to the closure of its fantasy gaming vertical Jeet11.

A company that raised $255 million in new funding last June and valued at $5 billion, it also revamped its cloud deals to cut costs and scrapped the daily meal coupons its employees previously received. “Cloud storage and employees are the biggest cost centers under review, including benefits such as company-provided meals,” said a person familiar with the matter.

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

Last year, edtech company Unacademy cut most employee benefits at the firm after layoffs.

For Mumbai-based Rebel Foods, the spokesman said, the changes in workforce were due to an “annual performance review and realignment of the organization” to its priorities for future goals. “The number involved is less than 2% of our organisation’s strength,” the spokesman added. ET was unable to ascertain the total number of affected employees.

Just two weeks into the New Year, startups love it Ola, Cashfree and Moglix laid off employees. Amazonian India is informing its employees of the reduction of approximately 1,000 employees. ET first reported on Amazon India plans for layoffs in the November 16 issue.

Layoffs: another round

The latest developments on ShareChat, Dunzo and Rebel are a continuation of what has happened in the so-called new economy over the last six-eight months. Industry insiders said that similar developments may occur in other startups.

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

“Almost everyone will do it (layoffs) even after last year’s layoffs. There are more startups that would have to opt for gradual layoffs,” he said, adding, “However, this would perhaps 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 said.

“We should see some improvement in the second quarter (April-June),” said Anshuman Das, managing partner of the executive search and consulting firm. Longhouse Consulting. “Compared to the US, India has been a bit late in laying off. So it will be another two to three months of activity. This quarter should be the same as the previous quarter. They don’t have to bounce back, but the layoff trend should recede and we may see more hiring activity from Q2.”

Last week, Ola laid off about 200 employees while payments fixed Cashfree fired around 100. It belongs to Internet companies in the growth phase that have to cut jobs in a difficult financing environment. BigTech firms such as Meta and Amazon recently posted 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 staff since the start of the new year.

“Many thought that additional capital would continue to flow into India despite the slowdown in the US,” said Das of Longhouse Consulting. “However, many companies have decided to raise money in the last six months and come back empty-handed. Companies that have delayed their layoff plans are now finally moving forward with their plans.

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

Structural cleaning

While engineers are typically the last to be settled in technology-driven organizations, companies have also had to cut positions in that department, industry insiders said.

“They all went a bit overboard hiring engineers and at a high price. These decisions are now being corrected,” the investor said. Companies are firing across roles in marketing and operations.

“The impact on engineering jobs is a sign of a deeper corporate purge,” Das said. “Adding engineering talent is not easy, and laying off engineers is a sign of structural change. Operations and sales jobs are more cyclical and engineering is more structural. If engineering jobs are affected, it means that certain strategic initiatives that companies have been pursuing may come to an end.”

Across startups, experimentation stops because they avoid investing time and resources in projects that don’t have an impact in the short term.

“A larger number of the problems at hand are getting to a smaller group of engineers. They need to fix it as a matter of priority,” said one of the people quoted earlier. “Investors are also constantly asking to show how costs are being reduced, and these (layoff) exercises are showing that in a tangible way.”

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