India Startups Hiring Efforts Hurt By Lack Of Capital, Demonetization

The lack of capital and demonetization has resulted in a reduction of startup employees in India during 2016, with the reductions amounting to between 10 and 50 percent, reported Forbes.

With employees leaving startups at an increased rate, these companies are hard-pressed to attract top talent from bigger companies, multinational firms and the top engineering schools in India, reported Forbes.

“It used to take about eight weeks to complete the decision-making process regarding hiring, but now that cycle has gone up to almost 16 weeks. Momentum has slowed down,” Sunil Goel, managing director of Global Hunts, said, according to the report.

In addition to employees staying put at more stable companies, startups have been laying off workers at an increased rate with Xeler8, the research platform, saying Indian startups fired 9,200 employees in 2016. That compares to 5,500 in 2015. That trend of firing workers at startups is expected to continue in 2017, noted the report. Snapdeal, the third largest online marketplace, grabbed headlines by announcing plans to lay off 1,000 or more employees, but there are others that are following suit including Craftsvilla; YepMe, the fashion website; and Tolexo, reported Forbes. YepMe laid off workers in its warehouses and quality control departments but didn’t disclose how may.

“We were planning to break even in January. But demonetization hit, (the option for cash payments on delivery) disappeared and sales were down. We decided to move our focus outside of India,” said Vivek Gaur, founder of YepMe, which recently began operations in the United Kingdom, in the report.

A lack of capital is partly to blame for the startups’ struggles, but K Sudarshan, managing partner for India at EMA Partners International, told Forbes it also has to do with the demonetization.

“Uncertainty is not good for any economy. Demonetization disrupted the jobs market at a time when it was turning positive after a short lull. In 2017, the new GST regime is going to be another disrupter,” said Sudarshan.