NEW DELHI: The year 2023 was not well-savoured by people in the technology and start-up sectors. Severe funding crunch, popularly known as funding winter, manifested in different ways. Lay-offs were a norm and many big start-ups, some of which were part of the Unicorn club, started falling by the wayside. The year also saw big tech companies shedding a lot of bulge as many Western economies began to feel the slowdown pangs. In India, Byju’s faces an existential crisis. The central bank made things tougher for fintech companies while a GST googly by the government clean bowled the fledgling online gaming firms.
Funding winter
The slowdown in funding that started around mid-2022 continued in 2023 as start-ups received only $8.1 billion funding compared to $25.2 billion in 2022. Many start-ups struggled to raise funds from venture capitalists as funding winter brought many challenges and hindered fresh investments. Start-ups in 2023 learnt to run with less cash and started focusing on profitability. Ashish Sharma, Managing Partner, InnoVen Capital, said the funding environment has been weak over the last 18 months, driven by global macro headwinds and we expect that it will remain sluggish as we get into 2024.
From early-stage to late-stage start-ups across various sectors faced relentless funding winter. Late-stage funding dropped by over 73% to $4.2 billion this year compared to $15.6 billion in 2022. Even early-stage funding fell by 70% to $2.2 billion compared to $7.3 billion last year. Compared to the second half of 2023, the first half of this year was challenging as start-ups raised only $5.5 billion, a 72% decline compared to H12022. Start-ups had raised $19.7 billion in H12022.
Homegrown fintech start-up ZestMoney had to shut down its operations in 2023 despite managing to raise fresh capital after struggling for many months. Announcing layoffs, Gaurav Munjal, co-founder and CEO, Unacademy Group had said today, the global economy is enduring a recession, funding is scarce and running a profitable business is key. As per VCs, the funding winter will continue in the first two quarters of 2024.
Layoffs in tech companies
In a major blow to the tech sector, 2023 started off with Amazon, Microsoft and Google-parent Alphabet announcing 18,000, 10,000 and 12,000 job cuts, respectively. In the first week of February, Dell said it will lay off 5% of its workforce, about 6,650 employees globally. Tech companies started facing an uncertain global macroeconomic environment, and Facebook-parent Meta announced firing of 10,000 employees and closing about 5,000 additional open roles that were yet to hire. In India, start-ups such as Dunzo, Unacademy, Vedantu announced layoffs. Apart from these firms, tech companies such as Spotify, Yahoo and Unity too announced fresh rounds of layoffs. Paytm is the recent to announce layoff to save 15% of staff costs. It is firing nearly 1,000 employees. Recently, reports suggest that Google might lay off 30,000 employees soon across its ad sales division. As per Layoffs.fyi, which tracks the number of layoffs across the industry, 1,179 tech companies globally fired 2,61,847 employees in 2023. In India, over 16,000 employees were fired across different sectors. Companies that have fired employees said the move is to restructure operations and reduce costs.
Byju’s gets an F
Edtech giant Byju’s, which once attracted a lot of funding, struggled in 2023 to raise money. It announced about 2,500 layoffs in 2022, and continued it till the end of December 2023, as in between it laid off nearly 1,000 more and also announced 4,000 more pink slips as a part of the restructuring exercise under the new CEO Arjun Mohan in September. 2023 was a nightmare for the edtech firm as it struggled to pay salaries, sold its two assets -- Epic and Great Learning -- to repay $1.2 billion term loan that it borrowed in November 2021. Apart from investors slashing its valuation, Byju’s faced another challenge during the year -- ED’s show cause notice for FEMA violations. Recently, Code.org, a US-based non-profit organisation and education website, sued WhiteHat Jr, Byju’s subsidiary over payment dues. Though the company faced many challenges, it managed to settle the long-standing dispute with investment management firm Davidson Kempner as the family office of Ranjan Pai, Manipal Education and Medical Group Chairman, invested Rs 1,400 crore in edtech firm’s subsidiary Aakash Educational Services to clear its debt to Davidson Kempner.