SoftBank-backed Indian startups take cost cutting measures, lay off over 5,000 people

The Indian companies that SoftBank Group Corp. has made investments in have adopted a “total defence” strategy in the past 15 months, following the example of the Japanese investor, and have taken a number of cost-cutting measures to get around the much-discussed funding slowdown.

As per the reports, Indian startups in SoftBank’s portfolio have cut costs by 50 to 75 per cent since the beginning of 2022 in order to increase their runway by at least 12 months. Additionally,  startups have achieved this by firing thousands of employees, cutting employee benefits, and reducing expenses like advertising.

Reportedly, the median cost cut among SoftBank’s portfolio companies, according to the most recent available data, is 70%. Some of the unicorns that received the most funding from SoftBank, including Unacademy, Meesho, Swiggy, and Cars24, were among the businesses that cut costs the most.

For technology startups, employee benefits are frequently one of the biggest expense categories, if not the biggest. Companies supported by SoftBank have collectively reduced their workforce by over 5,000 employees over the past 15 months, resulting in significant cost savings.

The companies have undertaken a number of operational cost-saving measures in addition to layoffs. Free lunches in the workplace were eliminated by Unacademy, and top management and the company’s founders, among others, received pay reductions. In the meantime, Meesho integrated its grocery business unit into its core application, while Cars24 shut down operations in non-core nations like Saudi Arabia and Indonesia.

Unacademy’s monthly burn has decreased from over Rs 200 crore in 2021 to about Rs 20 crore as a result of these cost-cutting measures. Swiggy’s monthly burn rate has decreased to $20 million from roughly $45–50 million, and Cars24’s monthly burn rate has decreased to $6–8 million from over $22 million a year ago. Meesho has decreased its monthly burn from peak 2021’s $40–45 million to $4–5 million.

As per the reports, some of SoftBank’s profitable portfolio companies have also significantly cut expenses to improve operating and net margins, even though the majority of the companies that cut costs had enormous losses on their books.