In 2023, startup and IT industries suffer from the global downturn
Those in the technology and start-up industries did not have a great year in 2023. The severe financial crisis, sometimes referred to as “funding winter,” took several forms. Layoffs were commonplace, and a number of significant start-ups—some of which were affiliated with the Unicorn Club—began to fail. As many Western economies started to feel the pinch of a downturn, the year also saw giant internet corporations shed a lot of their excess baggage. Byju is experiencing an existential crisis in India. The government’s GST gimmick completely destroyed the young online gambling enterprises, while the central bank made things more difficult for fintech companies.
financing the winter
The financial slump that began in the middle of 2022 persisted in 2023, with start-ups receiving just $8.1 billion in capital as opposed to $25.2 billion in 2022. Venture capitalists presented various obstacles and obstacles to new investments, making it difficult for many start-ups to get finance during the funding winter. In 2023, startups learned how to operate on a smaller budget and began concentrating on profitability. According to Ashish Sharma, Managing Partner of InnoVen Capital, “we anticipate that the funding environment will remain sluggish as we get into 2024.” The previous 18 months have seen a dismal funding environment due to global economic headwinds.
Startups at all stages, from early to late, encountered an unending financial winter. Compared to $15.6 billion in 2022, late-stage financing fell by more than 73% to $4.2 billion this year. Even financing for the early stages decreased by 70% to $2.2 billion from $7.3 billion the previous year. The first half of this year was difficult in comparison to the second half of 2023 as startups only raised $5.5 billion, a 72% decrease from H12022. In H12022, startups had raised $19.7 billion.
native fintech startup ZestMoney was forced to close its doors in 2023 even though it was able to get new funding after many months of hardship. Gaurav Munjal, co-founder and CEO of Unacademy Group, announced layoffs today, citing the global economy’s ongoing slump, a lack of finance, and the need to operate a successful company. VCs predict that the first two quarters of 2024 will see the continuation of the financing winter.
Tech company layoffs
The IT industry suffered a severe blow when Alphabet, the parent company of Google, Microsoft, and Amazon, announced 18,000, 10,000, and 12,000 job losses, respectively, to begin 2023. Dell said that it would lay off 5% of its staff, or around 6,650 people worldwide, in the first week of February. Tech businesses began to face an uncertain global socioeconomic climate. Facebook’s parent company, Meta, said that it was terminating 10,000 workers and that it was shutting around 5,000 other vacant positions that were not yet filled. Startups in India that have announced layoffs include Vedantu, Unacademy, and Dunzo. In addition to these businesses, new waves of layoffs were also announced by internet corporations including Yahoo, Unity, and Spotify. Paytm has announced layoffs in an effort to reduce labor expenses by 15%. It has fired about a thousand workers. According to recent estimates, Google may soon fire 30,000 workers from its ad sales group. According to Layoffs.fyi, a website that keeps track of layoffs in the IT sector, 2,61,847 workers were let go by 1,179 tech organizations worldwide in 2023. More than 16,000 workers were let go in India across several industries. Employers that have let go of staff members claim the action is being taken to streamline processes and save expenses.
Byju receives a failing grade.
The massive tech company Byju’s, which once drew a lot of cash, had trouble raising capital in 2023. It began announcing around 2,500 layoffs in 2022 and carried on until the end of December 2023. During that time, it announced approximately 1,000 additional layoffs and 4,000 more pink slips as part of the restructuring process that began in September under the new CEO, Arjun Mohan. The edtech company had a terrible 2023 as a result of its inability to make payroll and its sale of Epic and Great Learning in order to pay back a $1.2 billion term loan that it had taken out in November 2021. In addition to investors reducing the company’s worth, Byju’s encountered another obstacle this year: the ED’s show cause notice for FEMA breaches. WhiteHat Jr., Byju’s subsidiary, was recently sued by Code.org, a US-based non-profit organization and educational website, for unpaid debt. Notwithstanding numerous obstacles, the business was able to resolve its long-running disagreement with investment management firm Davidson Kempner when Chairman of Manipal Education and Medical Group Ranjan Pai’s family office invested Rs 1,400 crore in the edtech company’s subsidiary Aakash Educational Services in order to pay off Davidson Kempner.
