Used-car marketplace Gozoomo has joined the ranks of startups like Tinyowl, Grabhouse and Foodpanda that have resorted to mass layoffs. It has reduced its workforce by over 35 per cent in December. The Bengaluru-based company confirmed to YourStory that it has laid off 130 employees.
Image credit: ShutterStock
Data collection and on-boarding agents for Gozoomo in all cities were affected, but the company claims there was no layoffs across other department and functions, Arnav Kumar, Co-founder, Gozoomo, says:
Restructuring was a strategic decision. We iterated with four different business models over the past two quarters. Some were operation-intensive, others product-focussed. Currently, product innovation is a major focus and, consequently, we stopped some manual processes that won’t scale well.
Launched in December 2014, Gozoomo secured $7 million risk capital across two rounds, including a $5-million Series A round. The company claims to have facilitated over 2,500 transactions on the platform in 2015.
This winter, several startups had done restructuring and massive layoffs to curb burn rate. Last week, food delivery major Foodpanda had laid off over 300 people, or about 15 per cent of its headcount, and shut operation in six cities. Info Edge-funded Zomato did mass layoffs in October last year.
The Gurgaon-based company said that restructuring happened because it achieved efficient automation rate in order processing.
Mumbai-based food ordering app Tinyowl had to deal with a hostage kind of situation in Pune after the company fired over 200 employees in November last year. Softbank-backed Housing and Delhi-based Helpchat also resorted to mass layoffs to improve bottomline. Recently, Sequoia-backed real estate startup Grabhouse reportedly laid off over 170 employees.
Gozoomo claims to have outplaced 60 per cent of the laid off employees. Arnav adds,
Everyone was financially secured through two months' advance severance and continued health insurance.
Experts believe that layoffs executed by startups are largely because of over-hiring and increased focus on profitability. Now, startups are shifting their focus from growth at any cost, to profitability.
Access to follow-on funding on the basis of growth looks very difficult now and experts say that the trend of mass layoffs will continue in the coming months. YourStory believes such layoffs are the need of the hour for startups that have hired recklessly and done multiple product iterations. The key learnings for startups in this context are: hire diligently, keep a hawk eye on the burn rate, and make strong business fundamentals.