Start-ups shed flab amid a slowdown in large funding rounds

April 28, 2022

Start-ups are looking to prune costs amid the tightening of larger sized funding rounds. They are doing that by shedding staff.

Over the past few weeks, more than 1,800 contractual and full-time employees have been terminated from ed-tech firm Unacademy, social trade start-ups Meesho and Trell, internet learning stage Lido Learning and furniture rental startup Furlenco. Some of these organizations might hope to eliminate more jobs, people in the know said.

The trend is likely to play out further, though the early-stage funding ecosystem still can’t seem to fundamentally taper off. Investors have started to request that high-growth company back to basics chase profits and decrease their cash burn, different individuals told ET.

They all say the layoffs possibly centre around late-stage start-ups that are highly valued and have huge cash burn, with a market slowdown in large financing rounds ranging between $100 million and $150 million.

Cash burn is a proportion of negative cash and is a metric used usually for loss-making start-ups.

In March and April, upwards of four unicorns or privately-held organizations with a valuation of $1 at least billion were minted in India, compared with 10, during a similar period last year. Up until this point this month, no new unicorn adjusts have been announced, against eight new ones in April 2021, signalling the muted market for expensive funding rounds.