More consumer internet firms like ShareChat, Dunzo, Rebel Foods join layoff wave

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

MohallaTech is finalising another round of layoffs in the coming weeks which is likely to be bigger than its previous layoff of around 100 employees in December, people aware of the discussions at the parent of social media platform ShareChat and short-video app Moj said.

Cloud kitchen firm Rebel Foods, which houses brands like Behrouz Biryani and Oven Story, has also cut headcount.

“Any decision that impacts people is tough, and always our last option. Last week, we had to part ways with 3% of our team strength,” Dunzo cofounder and CEO Kabeer Biswas said in a statement to ET.

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

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At the Bengaluru-based parent of ShareChat, the new layoffs could be 200 but this number can change and even be higher as an official communication is yet to go to employees. “They (company leadership) are finalising the details and are likely to close it this month. Costs have to be optimised across possible avenues. It’s very evident all startups are doing it having realised what’s happening in the market,” a person aware of the matter said on the potential layoffs at the Twitter and Snap-backed firm.On December 2, ET reported that MohallaTech fired 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 been reworking its cloud deals to cut costs along with doing away with the daily-meals coupons given to its employees earlier. “Cloud storage and employees are the biggest cost centres and that are being reviewed including perks like food being given by the company,” the person aware of the matter said.

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

Last year, edtech firm Unacademy cut the majority of perks to staff at the firm after layoffs.

For Mumbai-based Rebel Foods, a spokesperson said, changes to employee strength were on account of “annual performance evaluation and realigning the organisation” to its priorities for future goals. “The impacted number is less than 2% of our organisation’s strength,” the spokesperson added. ET could not ascertain the total number of employees impacted.

Just two weeks into the New Year, startups like Ola, Cashfree and Moglix have fired employees. Amazon India is notifying its staffers about retrenchment of around 1,000. ET had first reported about Amazon India’s layoff plans in its November 16 edition.

Layoffs: Another Round

The latest developments at ShareChat, Dunzo and Rebel are an extension of what has transpired in the so-called new economy over the last six-eight months. Industry insiders said similar developments might be in store at other startups also.

One of the venture capital investors, who has invested in several consumer Internet firms, said optimising cost is the number one priority at almost all of his portfolio firms.

“Almost everyone is going to do this (layoffs) even after last year’s layoffs. There are more startups that would have to opt for gradual firings,” he said, adding: “This, however, would perhaps be the last round of such job cuts.”

The layoffs at tech startups are expected to continue till the end of the ongoing quarter, industry experts said.

“In the second quarter (April-June), we should see some improvements,” said Anshuman Das, managing partner of executive search and advisory firm Longhouse Consulting. “India was a little late to layoffs compared to the US. So, it will be another two-three-month activity. This quarter should be the same as the previous quarter. It may not bounce back, but the layoff trend should subside and we can see more hiring activity from Q2.”

Last week, Ola laid off about 200 employees while payments firm Cashfree fired around 100. These are among the growth-stage Internet firms having to cut jobs amid a tough funding environment. BigTech firms like Meta and Amazon have had their layoffs recently that are the largest in their operating history, underscoring the tightening liquidity scenario.

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

“Many thought more capital would continue to come to India despite the slowdown in the US,” said Das of Longhouse Consulting. “But many companies went out to raise money in the last six months and have come back empty-handed. Companies which had deferred their layoff plans are now finally going ahead with their plans.”

Venture funding had fallen at least 30% in the calendar year of 2022 to nearly $24 billion, after a record year for fundraising in 2021, ET reported on December 29.

Structural clean-up

While engineers are typically the last to be axed in a technology-led organisation, firms have had to slash positions in this department too, industry insiders said.

“Everyone went a bit over the top in hiring engineers and at an expensive price. Those decisions are now being corrected,” an investor said. Companies are firing across roles in marketing and operations as well.

“Engineering jobs being affected is a sign of deeper clean-up happening in the companies,” said Das. “Adding engineering talent is not easy, and the firing of engineers is a sign of structural change. Operations and sales jobs are more cyclical and engineering is more structural. If engineering jobs are getting affected, that means certain strategic initiatives that companies were pursuing may be winding down.”

Across startups, experiments are being shut as they are avoiding investing their time and resources in projects that are not impactful in the short run.

“A bigger number of problems at hand are being given to a smaller set of engineers. They have to fix that on priority,” one of the people cited earlier said. “Investors too are asking constantly to show how costs are being cut and these exercises (layoffs) show it in a tangible manner.”