“If they’re looking at tech startups for CXO roles, probably none—unless they’re willing to take pay cuts and lower their designations,” said Siddharth Gopi, the co-founder of TopHire, a staffing solutions firm primarily focussed on tech companies.
“Overall, the number of openings is a lot lower in startups. And senior roles, especially, are even more affected than junior roles. Companies are preferring mid and junior folks that are hands-on rather than senior managerial folks who don’t get their hands dirty as much,” Gopi added.
Industry estimates suggest that 27,000-28,000 people have been laid off in the past two years across startups. Of this, about 5-8% are CXOs, while mid-level executives account for 40-50%, and the remainder are junior-level positions, according to estimates by executive search firm Native.
“Most CXOs of tech startups who are not in action are finding it extremely difficult to find relevant new opportunities in today’s macroeconomic situation. The sudden tectonic shift in the market conditions is to be blamed,” said Sai Gopal, partner for engineering and digital technology at Native.
High-burn startups have slashed their spending strategies to prioritize profitability and boost unit economics to secure capital as investors have become more cautious with their funds.
The layoffs have been the direct result of the funding downturn that the early-stage companies are witnessing. According to data from Venture Intelligence, total venture capital funding dropped by 79% to $3.8 billion in the six months to 30 June from $18.4 billion in the year earlier.
The funding winter is giving the top-level talent a chill. “The top engineers have it more difficult than the juniors. Demand for expensive seniors has dropped,” Gopi of Tophire wrote in a post on X, formerly known as Twitter.
The firm has seen a 40% drop in job postings on its platform and a 25% drop in monthly active companies recruiting, indicating a broader downtrend.
Xpheno, a staffing solutions company, estimates that in the last 18 months, about 40-50 CXOs have been laid off across startups. “In some cases, the founders stayed back, but CXOs got fired while in some, the top talent realized the low visibility and quit before they were retrenched,” said Prasadh M.S., the head of workforce research at Xpheno. Prasadh said a product head of a tech-comm startup joined a more established product company by taking a pay cut from ₹96 lakh to ₹50 lakh last year for the lack of offers within the ecosystem at the same salary bracket that he was at.
The funding frenzy of 2021 led companies, flush with liquidity, to go into an aggressive hiring mode, driving up compensations. The average hike offered across levels was around 73.3%, TopHire data shows. Founders who raised capital in 2021 were spending as much as 30-40% of the funding on hiring talent, and a large part of it went to the CXOs. Hence, when it is time to cut the flab, even the top talent faced the brunt, these founders said on condition of anonymity.
“The young CXOs who have only been part of the startup ecosystem typically don’t possess the skill sets to operate in large steady state and complex businesses. The transition for them is not easy, and many companies now look at CXOs who have foundational experience in larger companies and few years in a disruptive startup environment,” said K. Sudarshan, the managing director of executive search firm EMA Partners India.
While funding is still happening in early-stage startups, those in growth and late stages are unable to tap investments. A lot of early-stage startups that were funded in 2021 and have not been able to raise follow-on rounds due to plateauing growth are now winding down and laying off employees.
According to Navnit Singh, chairman and regional managing director, Korn Ferry India, a lot depends on which stage the startup is in. “CXOs of series A funded or pre-series funded startups will have a tougher time to get a job in an established company, but those who have worked with mature startups should not find it difficult.”
Although companies want CXOs who have worked in startups, sectors such as industrial manufacturing won’t prefer them. CXOs from startups are typically getting placed in consumer retail and IT firms.
“CXOs looking for their next role should also look outside the startup ecosystem, specifically towards global capability centres (GCCs). GCCs are aggressively expanding their presence in India. So, they could look at opportunities as a senior member of the GCC’s India management team,” Gopi of TopHire added.
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Updated: 15 Aug 2023, 12:57 AM IST