Startups in India have always been a cause of talk due to their interesting beginnings and as a dream for the common person that even they can become an entrepreneur one day.
But it seems as if startups are showing their troubles now, especially in today’s economy and Voonik’s latest decision just sheds light on this problem even more starkly now.
On Monday, Voonik’s CEO and co-founder Sujayath Ali informed about 200 of its employees, that they in lieu of taking cost-cutting measures and save funds, will be unable to pay their salaries for the next 3 months.
The employees that are directly hit by this decision, as per news sources are those in the customer support and product development departments while the operations team is still safe from this decision.
But this just goes on to show and fully highlight the unpredictability of startups especially in India and how even if they are funded and making good business can go over their heads and make choices they cannot really afford for a long-term.
Cutting salaries and laying off people are the 2 most frequently seen ways to save funds in these startups and in 2017 alone we have seen a lot of companies taking these steps. Let us take a look at some of them:
While it was announced by Snapdeal founders Rohit and Kunal Bansal that they would be slimming down the employee base and letting go of around 200 employees, some news sources apparently alleged that the number was closer to around 2,300. Considering that the Snapdeal has about 8,000 employees that is a massive almost 30% of the total employees that were laid off.
Just last year in 2016, Snapdeal also lost Jabong their fashion portal to Myntra that is owned by Flipkart. The reasons for this lay off was due to the dwindling revenue and loss in profits that Snapdeal had been seeing for a few years now.
In 2016, Grofers laid off about 200 employees, that amounted to almost 10% of its workforce from a total of 2,000 people. It also, in order to cut costs, decided to not bring in about 67 campus recruits that they had earlier selected to be employed at the company.
Grofers had it tough last year with it shutting down operation in almost 9 cities that included ones like Nashik, Bhopal, Coimbatore, Ludhiana and various others.
This along with the slowing down of growth rate created a tight bind for the founders who had to take some tough calls in order to save as much and wherever they could.
Craftsvilla, a popular fashion portal for ethnic Indian wear also went through some cost-cutting measures when they let go of almost 100 of its employees.
As per Financial Express, Craftsvilla in FY16 although reporting almost Rs. 37 crore in net sales had a high number of losses going at almost Rs. 119 crore.
This and the inability to match-up with in terms of demand with other strong players like Amazon and Flipkart created more problems for this startup.
One of the worst in this list and for any startup would be an absolute shutdown of the company which was what unfortunately happened to AskMeBazaar.
Although the company had been struggling to generate funds and revenue for quite some time, it finally admitted defeat in August of 2016 when the parent AskMe group decided to fully close shop. This, however, resulted in close to 4,000 people losing their employment a big number for a startup.
A lot of industry experts have observed that the reason for such high number of layoffs and frequent cost-cutting measures being introduced is because many startups depend too heavily on their initial success, big funding that they receive because of it and over-reaching by employing too many people at once.
So, as an answer to the question whether startups in India can be trusted with your salary, I would have to say that the odds are not in your favour. The business and ethical modules of the startup scene in India is extremely haywire with founders having little knowledge on how to keep the company floating even during rough times. Although the situation might change over some years, the current economic situation also looks to be putting unnecessary pressure on startups in India.
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