Start-ups slash more than 17,000 jobs in the first half of 2023 amid severe funding crunch

As the start-up ecosystem grapples with a severe funding crunch, lay-offs have continued in the first half of 2023. According to estimates by workforce and skilling solutions firm CIEL HR, more than 70 start-ups have been forced to downsize their operations, affecting over 17,000 employees during this period.  

The impact has been notable across industries, with layoffs seen in six edtech firms. In e-commerce, including large players, groceries, pharmacy, baby care, and personal care, a total of 17 start-ups laid off staff. Business-to-business (B2B) e-commerce faced similar challenges with three start-ups reducing their workforce. In the fintech, 11 start-ups across categories including API banking products, brokerage and mutual funds, credit cards, insurance, and payment solutions, fired employees. Foodtech, healthtech, and logistics services also felt the effects. Furthermore, the SaaS industry saw 11 start-ups making reduce staff numbers.  

CIEL Group includes brands like CIEL HR, a recruitment and staffing company; Jombay, a talent assessment and development platform; CIEL Technologies that offers managed services to optimise IT programmes; CIEL Skills and Careers that engages with various government agencies as well as the CSR wings of corporates to train students; and Ma Foi Strategy that offers consulting services for HR, growth, payroll and compliance areas.

The funding shortfall has emerged as the primary challenge for these young companies, hindering their ability to sustain growth and attract new investments.  

As per reports, India’s venture capital (VC) landscape experienced a drastic downturn in the first half (H1) of 2023, with an alarming 79 per cent plunge in investments, compared with the same period last year. The impact was particularly bad in sectors like fintech, edtech, and enterprise-tech.  

According to data from Venture Intelligence, total investments in H1 2023 amounted to $3.8 billion, a sharp drop from $18.4 billion the previous year. The number of deals, meanwhile, plummeted to a mere 293, a 60 per cent decrease from 727 seen the previous year.  

In the early-stage segment, funding value declined by 65 per cent to $624 million, compared with $1.8 billion in 2022, while for growth-stage companies it was $342 million, a 43 per cent decrease from the previous year’s $602 million.  Growth private equity (PE) investments witnessed the steepest fall. The total investment in this segment amounted to $1.6 billion, an 84 per cent plunge from the previous year’s $10.5 billion. Late-stage funding segment also experienced a considerable decline with value falling 78.3 per cent to $1.1 billion in H1 2023 from $5.5 billion.  

As per data platform Tracxn, the decline was seen across sectors with enterprise-tech taking the hardest hit among the most prominent sectors. Companies in this sector raised $671.7 million across 158 deals in the first six months of the year, down 88 per cent from previous year’s $5.5 billion and 96 per cent from the $18 billion raised in 2021.

Fintech, one of the most active venture investing segments over the past few years, saw a decline of 67 per cent, with start-ups raising $1.4 billion in H1 2023 against $4.3 billion in the previous year period. For comparison, the sector had seen investments worth of $17.5 billion in 2021.

Edtech, which is experiencing severe turbulence after the pandemic boom has waned, saw investments decline 52 per cent to just $886.5 million in the first six-month period of the year from $1.8 billion in H1 2022, and 88 per cent drop from $7.4 billion in H1 2021.