Indian Startups on a Down Note with Funding Crunch

Indian startups on a down note for the first period of 2016 as the funding crunch bites.

Economic Times reports that a few months after Indian startups set records in hiring from premier engineering and management schools, some have begun to renege on their offers or are marking down salaries. Hiring by startups at college campuses during the November-January placement season had surged as emerging businesses competed to recruit the best talent, but the recent  funding crunch is forcing them to focus on profitability and paring costs. Investors weary of startups burning their cash too fast without building solid businesses have increased pressure on them to clean up and improve their strategies, and hiring has become a big casualty of this. 

Taxi aggregator  Ola and online marketplace Snapdeal, among India's most valuable Internet companies, were even absent from campus placements this academic year, a stark contrast from a few months back when leading startups lobbied with top engineering schools for top slots at campus placements rivalling global technology giants such as Google. "Student interest in joining startups is high and the number of offers from these companies made up around 50% of the total offers this year — the highest in three years," said TV Devi Prasad, head of placements at the International Institute of Information Technology in Hyderabad. "However, some companies have gone back on their commitments." 

Food delivery startup Swiggy dropped out of the placements round at the institute, he said. At the Indian School of Business in Hyderabad, budget stay aggregator Stayzilla delayed the joining date for the 39 students it had hired to July-August, from April-May, and lowered the annual compensation package to Rs 20 lakh, excluding stock options. The company did not disclose its original offer made to the students. "We had selected people keeping in mind a growth target of 8-10x. But given the current market  environment, we are capping the growth at 4x," said Yogendra Vasupal, cofounder of Matrix Partners-backed Stayzilla, which is in the market to raise a series-C round of funding. "Also, we are increasing efficiency on operations side and increasing automation." 

In some other cases, the salary 'corrections' caught the students as well as institutes unawares when the revisions came to their notice in the final offer letters. "Issues of non-compliance with packages or positions start usually after the students join in," said V Babu, adviser, training and placement at the Indian Institute of Technology-Madras. "Some of the startups that registered with us this year for placements did not turn up. In the last 2-3 years, the All-IIT Placement Committee has been increasingly discussing the action to be taken when startups do not live up to their commitments on compensation and job descriptions." The number of startups that recruited from the institute during the latest placements season more than doubled to 125 from 56 a year ago. But prominent startups including Grofers, TinyOwl, Ola and  Snapdeal that had registered for placements hiring at the institute dropped out. Grofers, however, visited other campuses for placements.

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