marketing budget Cuts are being made, layoffs are becoming more common, founders and top management are taking pay cuts, and perks – including free meals at the workplace – are being taken away at at least some startups.
Unacademy chief executive Gaurav Munjal, in a note this week, urged employees to “emulate frugality as a core value” and make the edtech firm profitable as soon as possible. Munjal and top management are taking a pay cut, with industry insiders saying founders of some other startups may follow suit. Startups in India have also laid off thousands of employees over the past few months to cut costs. According to the CEO’s note, meals and snacks at Unacademy’s offices will no longer be complimentary.
According to estimates, employee payroll and marketing still account for the largest share of expenses for startups, while travel and allowances account for only 10-15%. Therefore, the later cuts are more about the optics, and layoffs in this area will continue in the coming months, industry insiders said.
“Given the current market conditions, investors are advising startups to have a runway of at least 18-24 months. The high (cash) burn model is being questioned the most and finding investor support difficult. Hence the founders are working very actively on cost optimization,” said Vikram Gupta, Managing Partner, IvyCap Ventures.
Sajith Pai, director of early-stage venture fund Bloom Ventures, said the marketing budget at startups has already shrunk significantly. “They will no longer be putting money behind vanity projects or anything that is not important to the business. If the founders see that there is little chance that VC money will not flow as before, they will do their best to bridge the spend-revenue gap. ,
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Startups raising large capital are under pressure and the top management will see pay cuts for lower marketing budgets and be more watchful on discretionary spending, said Ashish Sanganeria, senior partner at executive search firm Transsearch India.
Startup founders agree that it’s time to be mindful. While there are startups that are burning $5-10 million per month that need to hold back their costs, even those who have tight-lipped on spending will be extra cautious.
Mayank Kumar, cofounder of edtech startup Upgrade, said that many companies have cut their marketing spend by up to 70% by cutting 30%.
“Some, following layoffs, have moved out of large office spaces or cut seats in co-working spaces to save on rental expenses. While there are some K-12 and ecommerce companies, which are likely to take massive cuts to address the cash-flow crunch and build sustainability, the higher education sector is in a relatively strong place,” Kumar said. .
According to Abhishek Mehrotra, chief human resource officer of fintech platform UB (formerly CredAvenue), while his company has always been very cost conscious, the overall industry has to be prepared for funding and plans by being mindful of unit economics. The focus has to be on implementing it. to feel the wave.
Some investors are optimistic, saying that many startups are still growing in this environment.
Prashanth Prakash, partner at venture capital firm
Said said, while the overall focus has shifted towards profitability, they do not see much pay cut by the top management.
“The next few quarters may be a bit evening, but there is still a significant demand for technical talent,” he said.