Indian unicorns like Oyo, PayTm and now Uber are shedding flab — resulting in thousands of pink slips

• Unicorn startups like Oyo, Ola and PayTm are handing over pink slips to its employees to cut losses.
  
• Food delivery platform Zomato acquired Uber Eats’ India operations for ₹2,485 crore — but will not absorb UberEats employees.
  
• The buyout comes in the backdrop of the budget hotel chain Oyo letting go of over 2,500 employees in India and China.

After the textile and auto sector, startups and that too unicorns could be where the next set of pink slips will come from.

After Oyo fired 2,500 people last week as a part of a major rejig, Zomato’s acquisition of UberEats will affect 245 jobs, said a statement by Uber.

“Today what is happening is that they are being told their roles are affected, but they can apply for positions inside Uber. They will be on the rolls of Uber until March 3. In case they want to look for opportunities externally, they will be given outplacement support and services. If the company can't find them positions by March then they will be eligible for severance,” sources at Uber told Business Insider.

Unicorn startups like Oyo and PayTm are handing over pink slips to its employees to cut losses and keep up with the ecosystem. Ride hailing giant Ola too laid off around 500 employees or 20% of its staff to cut costs as they get set to launch a public offering in the next few years. On the other hand, digital payment giant PayTm also reportedly laid off nearly 500 employees, late last year.

Growth versus losses equals to job cuts

As per experts, this is the beginning of an era where startups have entered a phase of maturity. It means they might have left their state of extremely high-growth behind to chase stability. Most of them, even the most popular ones, have been reeling under losses.

“With increasing competition, startups are finding it difficult to keep costs down, laying off staff is one of the solutions that they are choosing to stay in the system. Startups want to offer the best products and services at the most competitive price resulting in these decisions. There would be consolidation and mergers which would result in some lay offs so we might not see hyper growth per se,” Ajay Shah, VP of Recruitment at Teamlease Services told Business Insider.

Layoffs in startups are not an aberration or a one-time event but are a part of fundamental corporate strategy as they move towards profitability. It is also an offset of saturation within an organisation as a result of slump in growth.

Uber, which forayed in the food delivery business in 2017, was banking on heavy discounting to gain and retain customers. But it failed to make a mark. Soon, its operational losses amounted to as much as ₹2,197 crore, that was much higher than its mainstream ride-hailing business at ₹1,645 crore. This is what resulted in a sell out. The platform had over 10 million users — compared to 40 million users of Zomato and 42 million of Swiggy.

Oyo, on the other hand, was focussed at bringing in fast growth and profitability. But it reported a mounting loss of ₹2,384.7 crore in 2019. Added to that, it had many complications like contractual and legal troubles that led to terminations.

See also:
Uber couldn’t do what Ola did – instead joins hands with Zomato to leave behind Swiggy

Inside OYO’s offices ⁠— how a 'high pressure' work environment broke a promising startup brand