Swiggy dismisses 380 employees as the startup winter gets worse.
The food tech business Swiggy has sacked 380 employees as the most recent in a wave of layoffs that have shaken India’s startup ecosystem to streamline operations in the face of a difficult venture capital market.
Employees were notified of the choice, which will affect around 3% of its 6,000-person workforce, at a town hall meeting on January 20. As part of a reorganisation process, we have chosen to dramatically reduce the size of our employees. 380 great Swiggsters will bid their farewells as a result of this strategy.
After carefully analysing all of the choices, a tough decision was made, and I apologise to you all for having to implement it. Sriharsha Majety, the founder and CEO of Swiggy, sent this statement to team members through email after the town hall. Majety said that it will be discontinuing its meat marketplace and would have to take a closer look at several of its present verticals.
“We’ve gone through many versions and the team has done fantastic work, but we still haven’t found product-market fit. From the perspective of the customer, we will continue sending meat via Instamart. We’ll continue to invest in any other new industries, “said he.
The dismissed employees will get a monetary compensation equivalent to three to six months of wages, depending on their grade and term of employment. Complete payment of variable pay and incentives is also included in this. There will be no cash joining incentive or retention bonus.
The annual vesting cliff for employee stock options is also waived for the affected employees. As of the final working date, the vesting period will be extended to the next quarter. Additionally, the company announced that it would be qualified to take part in the ESOP liquidity programme, which would begin in July 2023.
The SoftBank-backed business has raised $700 million in its most recent funding round in January 2022, giving it a valuation of $10.7 billion.
No signs of thawing in the temperature have been noticed.
Competitor Zomato, which operates similarly to Swiggy, let go of 100 employees in November to cut costs and turn a profit. The firm announced a 4% reduction in the workforce.
ShareChat’s owner, Mohalla Tech Pvt, recently let go of 600 of its 2,100 employees, joining an increasing number of unicorns who have followed suit. Employees have been let go at Byju’s, Ola, Unacademy, Vedantu, 530, and Meesho in recent weeks.
Overhiring was a poor choice, and food delivery growth has slowed down: The company’s profitability goals had to be reconsidered, Swiggy founder Sriharsha Majety wrote in an email to colleagues, because the growth of food delivery was slowing. The communication also disclosed the 380-employee layoffs.
The growing pace of food delivery has slowed vs our projections (along with many peer companies globally ). We had to analyse all of our indirect costs as a result to meet our profitability goals, he added in the email.
“Even though we had already begun to handle several indirect costs, such as infrastructure, office/facilities charges, etc., we still needed to accurately quantify our overall human costs to keep up with future forecasts. I should have handled this better, and our overhiring was a bad decision,” he concluded.
The initial investment was made in response to the increase in demand for food delivery during the second phase of Covid-19 in 2021, said the company’s founder. However, in light of the difficult economic conditions of the previous year, they are currently reevaluating their goals. In addition, the business is looking at its other divisions, and the meat market has been closed.
The majority emphasised that scale-up resulted in the hiring of multiple additional pockets of personnel over the preceding year, increasing the company’s “communication overheads” and decreasing its agility.
Because we compete in several highly competitive industries, we wanted to construct an organisation that was more intentional in its design to be more agile, effective, and efficient at the same time. We have already put the lessons we’ve learnt from this org-effectiveness endeavour into practice to stop this mistake from happening again, he said.
Prosus, one of Swiggy’s major investors, asserted that the company’s overall sales and order volume had improved dramatically during the first half of 2022. The number of orders placed and the gross order value for its meal delivery service increased by 38% and 40%, respectively, in the first half of the year.
According to the Proses analysis, restaurant meal delivery had a GMV of $1.3 billion by the end of the first half of 2022 compared to quick commerce’s $257 million GMV. However, as evidenced by the slower rate of growth of companies like Zomato and Delhivery in the second half of 2022, price increases had an impact on consumer desire for online shopping.
For instance, the gross order value for Zomato’s food division only climbed by 3% in the September quarter compared to the prior quarter. The listed meal delivery service’s development has slowed as it has become larger; its quarterly sales rose by only 22%, from Rs 5,410 crore in Q2 of FY21 to Rs 6,631 crore in Q2 of FY22.
Swiggy hired investment bankers at the beginning of last year to raise $1 billion. Swiggy intends to list on stock markets as well. Despite the stock market collapses of its tech rivals Zomato, Paytm, Nykaa, and Delhivery, nothing has changed on that front either.
Swiggy recently revealed a net loss of Rs 3,628.9 crore for FY22. The operating revenue of the business increased 125 per cent to Rs 5,704.9 crore in FY22, according to financial information published by the business intelligence platform Tofler.
edited and proofread by nikita sharma