Inside India’s startup hiring frenzy: A tale of premium salaries, bidding wars, dropouts, and desperation
Tech hiring mania has peaked in India in the last six to nine months. YourStory’s conversations with founders, function heads, recruiters, and staffing agencies show that an existing talent problem has been compounded by excess VC money, remote working, and the rising demand for niche skills.
About two weeks before Ola Electric’s mega launch in August, Founder Bhavish Aggarwal tweeted: “Engineering hiring situation in Bengaluru - thinking of offshoring some work to a lower cost center in SF, Bay Area!”
While his tongue-in-cheek remark drew a lot of ire from people who highlighted the dollar-rupee disparity in salaries, Bhavish’s concern on the increasingly competitive tech hiring scenario in India didn’t go unnoticed.
Over the last six to nine months, hiring for engineering and product roles has become a nightmare for most startups, especially early-stage ones that do not have as much capital at their disposal as unicorns or late-stage firms.
Not only is there a massive talent crunch, but the employability costs for worthy candidates are also prohibitive. Hence, talent acquisition and retention have become a bit of an adventure sport for startups: They never know what lies ahead.
This has led to companies doling out “reckless” pay packages, extravagant perks, joining bonuses, and referral goodies ranging from BMW superbikes and Dubai vacations to iPhones and Amazon vouchers, etc.
There were 70,000+ active job openings in key tech roles as of August 2021
Even traditional IT firms are feeling the pinch. HCL recently announced that it would reward top performers with Mercedes-Benz cars.
“Perks are a clear desperation move that tells you that the company is struggling to hire,” the head of employer branding at a Bengaluru-based startup tells YourStory, “But premium engineers will never look at a superbike and get excited about joining.”
Sanket Shah, Co-founder and CEO, InVideo (which announced iPhones as referral prizes), tells YourStory,
“It’s just playing with people’s psychology. If you’re hiring someone at Rs 35 LPA, you pay 8.3 percent to your hiring agency. AirPods and iPhones cost less than that. It’s not a magic wand, but definitely one of the ways to do it [get good leads].”
Despite the irrational offers on display, startups continue to deal with negotiations, re-negotiations, bidding wars, ghosting, candidate dropouts, and more.
InVideo, for instance, is unimpressed by the results of its extravagant referral prize. “We got enough applications post the tweet. But the application-to-hiring ratio was 62:2 [or 31:1]. It should've been higher,” Sanket says.
But Sequoia-backed InVideo, one of the world’s fastest-growing creator economy startups, isn’t the only one struggling with tech recruitment.
YourStory’s conversations with over a dozen founders, function heads, recruiters, staffing agencies, and hiring consultants show that an already existing talent problem has been compounded by excess venture capital, remote working, borderless hiring, and the fast-growing demand for new tech skills (Golang, Hadoop, C Sharp, etc.)
Many open roles, but many dropouts
This year, post-offer dropout rates have been steadily climbing for all startups.
Data from specialist staffing agency Xpheno indicates that dropout rates stood at 42-47 percent for the top six roles: full-stack engineers, data analysts, front-end developers, SRE/DevOps, data scientists, and backend engineers.
The average dropout rate has, in fact, more than doubled from 14-27 percent last year.
As of August 2021, there were over 70,000 active openings for these top skills, which collectively contribute 30 percent to job openings in the overall IT sector.
Overall, the sector is seeing the highest number of active job openings since March 2020 due to the large-scale “digitisation and virtualisation of enterprises” amid the pandemic.
Despite India having one of the largest tech talent pools (over 4.5 million engineers) in the world, most companies are struggling to fill key positions as the demand for niche new-age skills has multiplied in volume and value. “You know the tech hiring situation is pretty dire when companies are advertising jobs on Swiggy's order completion page,” Scaler Academy’s Arnav Gupta tweeted recently.
Infographic: YS Design
The talent crunch is so acute that startups are scouting for leads everywhere. In late August, Khatabook founder Ravish Naresh announced his company’s Series C funding and active job openings on the same Twitter thread.
“We've lots of open roles in engineering, analytics, product and growth. Apply here and come be part of the fastest small business SaaS company in the world,” he said.
The constraints have been further magnified because India has ceased to be the back office for the world. Instead, full-fledged R&D, product development, and idea-to-implementation is happening on Indian shores now.
Shailaz Nag, Co-founder and CEO, DotPe, tells YourStory,
“Good developers are always under-available in the market — yesterday, today, tomorrow. If there are 100 good engineers, 25 will go for an MBA, 35-40 will move to the US because Facebook or Google will hire them or they will pursue higher education. For the remaining 25-30, if there are so many tech companies in the country, there will always be constraints.”
Founders and VCs have now taken to Twitter to share their dropout stories.
Stellaris Venture Partners Co-founder Ritesh Banglani tweeted recently, “I love how candidates always go to their ‘native place with limited connectivity’ right after receiving the offer, and are unable to respond for a week.”
Razorpay Founder Shashank Kumar has a different take on it. “When people ghost us post offer acceptance, I am always relieved that we dodged a bullet. It’s a short term impact on bandwidth but long term impact on culture,” he tweeted.
What led to the hiring frenzy
Surely, the madness wasn’t created in a day. Quality tech talent was always in short supply. But, why did this constraint blow up in the last few quarters?
A slew of reasons, including multiple MNCs setting up offshore offices in India and creating thousands of new tech jobs, Indian startups raising large rounds of VC funding and growing their teams, candidates leveraging the convenience of WFH and playing the market, and borderless hiring slowly becoming a reality.
Kamal Karanth, Co-founder of Xpheno, tells YourStory, “There are four types of organisations looking to hire Indian engineers right now: 1) Indian IT and MNC IT (IBM, Accenture, etc.); 2) GICs or offshore units of large multinationals (Walmart, Target, Goldman Sachs, etc.); 3) Product companies (Amazon, Google, Apple, Facebook, etc.); and 4) Indian startups. All are hiring from the same talent pool. Last year, they didn’t hire too many freshers because of potential automation. In a way, the IT bench was thin. Now, all hiring has peaked at the same time.”
“Then the funding madness happened in the first half of the year. All these companies are collectively boiling the ocean by growing salaries,” he states.
The average engineer at unicorns and late-stage startups has a pay package of Rs 35-60 LPA
Indian startups raised a record $26 billion in VC funding in the first eight months of 2021, with close to 65 rounds of over $100 million. “There is a lot of liquidity in the market now. And that capital has to be deployed somewhere,” says one founder.
Sidu Ponnappa, SVP Engineering, Internal Products, GoJek, elaborates,
“VCs are getting larger pools of capital but there are fewer avenues to deploy them. Most traditional places they would earlier put money in are delivering very low or negative yields. Hence, they are trying to find new avenues and are almost doubling their portfolio of venture-backed tech companies.”
But even big money cannot solve the acute talent crunch that exists in the market.
Sanket of InVideo says, “Broadly, everyone is bullish on the Indian market. There is VC money flowing in. But to speed up from X to 5X, you need engineers. Several companies are getting funded together, and they are outbidding candidates when the fundamental supply problem has not been solved.”
GoJek’s Sidu shares that despite tonnes of empty positions in companies, “talent is getting added at a fraction of that”.
He says, “Smaller startups will hire five people and the bigger ones will get 50-100. But there are 5,000 new positions getting created every year at the entry and mid-level. At the senior/VP level, there is a 10:1 ratio for openings to hires. Because senior talent cannot be manufactured.”
Anonymous professional network Blind is a hotbed of salary comparisons and discussions
Candidate shopping and borderless hiring
The pandemic-led acceleration in digitisation coupled with the convenience of remote working has opened up the job market to the world. Borderless hiring is becoming a reality with international tech companies, from Silicon Valley to Southeast Asia, dipping into the same talent pool of Indian engineers as homegrown startups are.
The talent acquisition director at a Bengaluru-based unicorn tells YourStory,
“Coinbase is hiring remotely and they are offering a premium. An engineer with five years of experience can get Rs 70 LPA (nearly $100,000) and that is still cheaper than tech salaries in the US [average of $200,000]. Twitter has big hiring plans in India and it’s paying in Twitter equity, which is at par with what a Valley engineer gets. So, everyone is hunting for the same set of people.”
The recruiter goes on to reveal that every candidate he speaks to has 4-7 job offers on an average “without them having to do any hard work”.
Outliers can even have up to 8-9 offers at any given point. “One guy came to us with seven offers. He did three interviews in a week, and his Rs 45 LPA went to Rs 75 LPA. It is so easy to do a job interview today. You don’t even have to put on pants. The effort to join is so minimal, which has also heated up the market,” he explains.
Add to that there are enough desperate recruiters telling candidates that they can outbid their offers, and are willing to offer even 80-100 percent hikes. “Candidates are in a bidding war just by interviewing at 4-5 different places,” adds the above recruiter.
Recruiters are desperate enough to offer 80-100% hikes to attract top talent
Indonesian startups and legacy MNCs (also known as ‘captives’) setting up offices in India are among the biggest recruiters of Bengaluru engineers.
Hitesh Gupta, Founder of vcBytes, recently tweeted, “[We] lost one candidate to an Indonesian startup. Hired her by giving [a] 100% hike which she asked. She ended up joining at [an] insane 500% hike. Bootstrapping isn't happening anymore in BLR.”
Staffing agents say Bengaluru pays 10-15 percent more than other Indian cities for the same job, and is now comparable to Eastern Europe in terms of tech salaries.
A senior executive at an Indonesian startup tells YourStory, “India is cheaper than the Valley but not Southeast Asia or Europe. If you’re heading a particular function, you’re definitely looking at a crore and above. At Flipkart, the top 38-40 employees earn more than a crore. It is no longer such a big metric to crack.”
“In the last one year, engineers have realised that they are the kingmakers,” he says.
According to estimates from staffing agencies, MNCs such as DE Shaw & Co. are hiring 100 engineers in India and offering an average compensation of Rs 80 LPA to Rs 1 crore. Other top MNC recruiters include Goldman Sachs in Hyderabad, Walmart in Chennai, and Target in Bengaluru. Even Silicon Valley unicorns like Airbnb are hiring for tech roles in India.
“Today, an engineer sitting in Patna can find a job anywhere in the country or world. Every company is trying to reach him, he has multiple offers, and his price will naturally go up,” says DotPe’s Shailaz.
Even though fintech, edtech, and ecommerce are creating the maximum jobs this year, “the frenzy is sector-agnostic because Java engineers can work anywhere,” Xpheno’s Karanth says. “All companies are willing to give them 50-80 percent hikes.”
Lakhs of new tech jobs are being created every year by Indian startups, Silicon Valley companies as well as legacy MNCs
The madness of offers and counter offers
According to staffing and talent acquisition firms, with more offers to juggle, candidates are shopping both with their current and prospective employers.
The founder of a Series A-healthtech startup tells YourStory, “Everyone asks for a 50 percent hike to start with. They get an offer and take it back to their company. If they get a lakh on top of that, they are retained. Then they take it to another company and they want a 50 percent hike on that. Sometimes, they get hired at 100 percent hikes.”
Anonymous professional network Blind is flooded with Indian engineers — mostly in the 3-8 years of experience bracket who are considered most “mobile” in the job market — comparing offers and inviting suggestions from peers on their pay packages. The most FAQ is: What should the base salary-ESOPs-bonus mix look like?
The founder of another tech staffing firm tells YourStory,
“One engineer we know was at Rs 31 LPA. Hotstar offered her Rs 40 LPA; Swiggy offered her Rs 40 LPA and ESOPs worth another Rs 40 lakh. The ESOPs were valued at Rs 1 crore because Swiggy raised a billion-dollar round by the time the hiring closed. The top 4-5 funds SoftBank, Tiger Global, Sequoia, Nexus, and Lightspeed have upped the startups’ ability to pay. Today, the average salary for Indian engineers is Rs 40 LPA.”
Candidates have 4-7 job offers on an average and are at the centre of an intense bidding war involving prospective employers
Another recruiter at a unicorn reveals, “Swiggy has fantastic talent. They are willing to pay a much higher premium than anybody else. For PM roles, Flipkart will offer Rs 70 LPA, Unacademy will give Rs 90 LPA, while Swiggy would go up to Rs 1.2 crore.”
Even GICs are upping their game. Some are offering joining bonuses worth 1-2 month salaries. “Some companies are also buying out notice periods for candidates because they want people who can join in 15 days,” says the above staffer.
The buzz around ESOPs started growing last year and has reached a peak now. With share buybacks and expanding ESOPs pools hitting headlines every week, anybody in product, tech, and design roles at unicorns and growth-stage startups are in the salary band of Rs 35-60 LPA, and entitled to handsome stock options.
Deepak Abbot, Co-founder, Indiagold, says,
“Startups use ESOPs as a mode of compensation to attract top talent. But the average engineer will not care about ESOPs. They want cash in their bank accounts. We won’t give ESOPs to someone who doesn’t value them. They have to be used selectively to sweeten the offer. With ESOPs, companies are trying to reduce their monthly burn.”
He shares that startups typically prepare a hiring budget and have a 40-45 percent “negotiation window”. Beyond that, they don’t get into bidding wars.
“The panic in the market is created by the top 10 percent. They are driving the salary budgets higher,” Deepak states, adding, “But we’re looking to hire people who are not a part of this frenzy. We conduct HackerEarth tests for most of our engineers. Whoever gets above 75 percent, we are desperate to hire that person.”
Recruiters are offering high base salaries with attractive joining bonuses and ESOPs (that grow in value when the company raises a large round)
Several other startups are also shying away from the madness at the top.
Kulin Shah, Co-founder, Onsurity, shares with YourStory,
“We have a policy of getting on board people who have been laid off [in the pandemic]. They get the first chance. We don’t pick people who already have a job. We might bring them as consultants and if they work out well, we bring them in full-time.”
Despite a variety of measures adopted by startups to attract and retain talent, hiring has become one of the top cost components for them. “There is the cost of acquisition plus the cost of retention. There is a hunger to absorb talent. Startups are a black hole right now; they will suck any talent available,” Kulin says.
Some might even look at hiring expensive talent as a long-term investment.
PineLabs CEO Amrish Rau was among the first to tweet about this trend in March. “Salary expectation is at an all-time high. Young talent with good work ethics are getting amazing offers. It’s better to hire expensive, great talent and be tough in their evaluation, than, hire average and end up never letting them go because you can't find talent at that salary,” he said.
Looking ahead: Will this frenzy sustain?
The short answer is yes. At least, in the near future.
Even though India’s startup ecosystem went through a similar bull phase in 2014-15, followed by a lull in 2016-17 (reversed by Walmart’s Flipkart buyout in 2018) with companies shutting down or being massively downsized, founders believe that situation wouldn’t be repeated.
Varun Khona, Co-founder and CEO, Headout, tells YourStory, “That period is not comparable. Because pre and post-Jio, it’s a different story [of consumption]. The sophistication of talent has changed. The baseline for remuneration has been reset. And this will continue. Talent is a real problem statement in India. I don't see demand going away anytime soon. Every company worth its salt will hire actively."
“And the pandemic has made borders porous and irrelevant. The world is essentially a single market now. The days of each country having its own ecosystem are dissipating. From a 10-year horizon, this is a good development,” he adds.
Recruiters believe that for tech companies scouting for talent anywhere in the world, India becomes a sweet spot. “In Silicon Valley, salaries are insane because loyalties are challenged, and people leave to start up on their own. The Valley has a severe shortage of talent. Hence, India is becoming a hotspot," according to them.
InVideo’s Sanket says there could be minor corrections but it won’t be like 2015-16. “Because startups no longer make large mistakes on unit economics. There are lots of good companies too that are raising large amounts and hiring talent,” he says.
Experts believe the hiring frenzy will continue for the next year at least as VCs continue to cut large cheques
Sidu of GoJek, meanwhile, believes this trend will continue until something changes at the core. “The absence of investment avenues for VCs is going to continue. And that will drive more and more money to startups [which will hire more]. Every time a certain skill set becomes really rare, this happens. The question to ask is: how can no-code solve the problem? Will all these people get automated?” he says.
Interestingly, many Indian companies have now started hiring from other territories because the competition is so intense in the domestic market. Some early-stage founders have begun hiring from Nepal, Sri Lanka, Philippines, and Vietnam at “reasonable costs”.
DotPe, for instance, is recruiting talent from Poland and Ukraine, where the compensation for engineers is on par with India.
Shailaz says, “Now, if you roll out an offer to 10 people, only 1 is joining. Earlier, there were 5 people joining. To have 5 people joining today, you have to offer 50 people. So, we have increased our hiring funnel and number of recruiters to attract talent.”
“At the end of the day, it is a demand-and-supply game. The tech boom will continue in India for the next 10-15 years. So, the supply has to increase,” he adds.
With funding unlikely to dry up anytime soon, and the pandemic accelerating growth of internet startups, this decade could see India becoming a prized talent factory for the world.
A Twitter user summed it up well, “In an era of financial capital, human capital will determine the success of businesses.”
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Edited by Saheli Sen Gupta