Startup bubble burst? 12,000 jobs lost as Indian startups fold

From billions of valuation in 2021, most Indian startups are less than a third of that now

By Kiran N. Kumar

Recently, a Silicon Valley-based tech publication, The Information pulled out data to show that many Indian-based technology professionals are looking to head back home. One reason cited was visa denial or delay but the pertinent one was loss of hope on their American dream.

The Indian diaspora has been a great contributor as out of 20,000 start-ups in the Silicon Valley, 25 percent are run by them. From a top position in 2021 attracting and announcing new funding almost on a daily basis, the current turnaround brings forth a new reality. From billions of valuation last year, most of these startups are less than a third of that now.

Read: Indian techies exploring opportunities beyond America to build their startups (January 11, 2018)

According to Layoffs.fyi, 20,514 people have lost their jobs at tech startups worldwide since April this year and most of them in the US. A report by Crunchbase puts the figure at 22,000 job losses and 12,000 of them in startups by Indian Americans.

The Indian Tech Unicorn Report 2021 by venture capital fund Orios Venture Partners said Indian startups raised $42 billion in 2021, up from $11.5 billion in the previous year.

And 46 firms became unicorns with $1 billion or more in valuation in 2021 alone including ShareChat, Cred, Meesho, Nazara, Moglix, MPL, Grofers (now Blinkit), upGrad, Mamaearth, GlobalBees, Acko, Spinny among others.

After robust funding in Q1’21, the turnaround has been quick. It declined 19% quarter-over-quarter in Q1’22 though remained the fourth largest for funding on record. Barring Altos Labs, which raised a staggering $3 billion, others failed miserably to raise the capital to keep going.

Even e-commerce entities like Rapid grocery delivery startups Zero Grocery, Munchies, and Fridge No More also took a big hit in March. The ensuing crypto melt down is further looming large with Coinbase, Gemini, crypto.com, Vauld, Bybit, Bitpanda and others turning to leaner workforce and announcing daily layoffs.

As Pokemon GO game developer Niantic has asked 8% or about 80 people to leave the company, another arena of shrinking sector has opened as many Indian startups are in this sector too.

Ever since the dot.com bubble burst in 2001, many startups went into bankruptcy except Amazon that managed to survive and herald the world’s biggest e-commerce company. Most of those who lost their jobs then have turned as entrepreneurs later, though. Will it happen to the startup bubble now?

Read: Over 22,000 techies lose jobs in US, more than 12,000 in Indian startups (July 3, 2022)

“This is going to be a very rough year,” said Jeff Richards of GGV Capital, a Silicon Valley venture capital fund. As early as April, he predicted that the startup bubble will burst and the year 2022 will be “arguably the roughest year” since the global financial crisis in 2008.

As not every startup is going to make it out to the other end of 2022, the inevitable tech bubble is likely to shake off unicorns this time and of course, see the birth of new tech companies to lead the next generation.

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