Funding crunch: Start-ups rethink fancy perks

Yatti Soni | | Updated on: May 26, 2022
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File image | Photo Credit: Andrii Yalanskyi

Superbikes and exotic vacations may not be on the plate for now

As cash turns scarce, start-ups are rethinking the many perks they had rolled out earlier to attract or retain talent. 

Until recently, an ongoing war for talent saw start-ups offering everything from dog walking service to BMW superbikes and vacation reimbursements as employee benefits. Now, with a turn in investor sentiment and funding crunch, they may consider reining in the generosity.

“Prior to May 2022, the start-up companies were approaching such benefits aggressively to showcase the differentiators. Now, for sure, such benefits are challenged big time internally. Out of about 30 start-up companies who are our customers, we see that they will watch for some time before they decide to open such schemes again,” Saran Balasundaram, Founder and CEO of tech recruitment firm HanDigital, told BusinessLine.

Rush to grow

India start-ups Leader at PwC India, Amit Nawka observed that start-ups earlier offered substantial hikes to new hires because they wanted to grow fast and try new things. Capital availability drove these companies to hire the best as early as possible. 

“This war for talent led to the rise in salary packages. Now, as companies turn focus towards increasing runway and lay off employees, it will possibly taper down expectations and people will not get the same hikes they may have got till about two months ago,” Nawka added. 

Ankit Pansari, founder and CEO of SaaS start-up OSlash, said, “Founders usually used to think of a 15-month runway but now there are thinking about 36 months. So, this will require squeezing every dollar out of the company to make sure they have more runway. This could mean tightening of salary packages and benefits at startups.”

Slow cash and layoffs

According to data shared by Tracxn, in Q2 CY22 year-to-date (April 1 to May 24), Indian start-ups have raised $3.6 billion in venture capital rounds as compared to $9.7 billion in Q1 CY22 and $14.2 billion in Q4 CY21.

Funding slowdown has hit startups across stages, whether it is growth-stage companies unable to raise new funding, or early-stage start-ups who have to settle for lower-than-expected valuations and fund sizes. There has also been a spate of layoffs as growth-stage startups try to rationalise costs and survive the funding winter. Over 3,000 employees were laid off across multiple start-ups, including unicorns such as Cars24, Unacademy, Meesho, and Vedantu. 

“Start-ups, like any business, will respond to both business cycles, funds availability and talent cycles. With the recent meltdown, there is a clear cutback on frills, and even headcount. If the signals continue to be soft, there will be a near-term hardening on freebies,” added Prabir Jha, Founder and CEO of Prabir Jha People Advisory, which advises startups and large corporations on human resource

Published on May 25, 2022
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