As funds dry up, hiring in tech startup sector expected to take a backseat

As funding in the Indian tech start-up ecosystem took a major dip, hiring in the segment is also expected to take a backseat. Tech startups are limiting their expenses on the operational front, especially with regard to hiring new talent. With a challenging funding environment, startups are hiring at a significantly reduced pace compared to the previous years. This slowdown is causing tech startups to be more cautious and deliberate in their hiring processes, often resulting in longer timelines for making decisions.

Funding has declined across all stages, with late-stage funding dropping over 73 per cent, followed by early-stage funding (70 per cent) and seed-stage funding (60 per cent) as per the 'Annual India Startup Report: 2023' which was released recently by Tracxn, a global market intelligence platform.

"The recent decline in funding for tech startups is a critical development with far-reaching implications for the hiring landscape in tech companies. This reduction in funding signifies a shift towards more sustainable business models and prudent financial management. For tech startups, it means prioritising efficiency and productivity over rapid expansion. Consequently, the hiring scenario is becoming more strategic, focusing on acquiring talent that drives value and innovation rather than mere workforce expansion,” said Krishna Kumar, founder and CEO, Learnbay.

Kumar said from a talent perspective, this scenario encourages a more competitive environment where skill and adaptability become paramount. “Professionals in the tech sector must now focus on diversifying their skill sets, particularly in emerging technologies like AI and machine learning, to stay relevant and valuable in a more selective job market. For tech companies, especially startups, this funding shift demands a recalibration of their growth strategies. It is about balancing scaling effectively and maintaining a lean operational model. Regarding hiring, there is a growing emphasis on roles directly contributing to the company's core competencies and long-term objectives. Ultimately, this period could lead to a more resilient tech sector, driven by sustainable growth and a workforce that is agile, skilled, and aligned with the industry's evolving demands,” added Kumar.

Experts point out that adaptable startups will thrive by adjusting their business models to align with evolving investor expectations, demonstrating a keen awareness of market dynamics and a commitment to building resilient, customer-centric enterprises. The funding reduction is poised to prompt a shift from rapid expansion to operational efficiency, leading to a more discerning approach to talent acquisition.

“Instead of hiring, firms will look at upskilling their existing talent with new age skills and integrate technologies such generative AI and related tools to optimise productivity. The current industry situation is temporal at best; we are optimistic about the coming year. Startups, once driven by ambitious growth plans, are likely to recalibrate their hiring strategies, becoming more discerning in talent acquisition. Job seekers should anticipate a more competitive market, where showcasing knowledge and adaptability becomes crucial. Ultimately, the employment landscape is evolving toward selectivity and complexity, demanding a strategic approach from both companies and job seekers navigating the shifting dynamics of the digital industry,” observed Bhavesh Goswami, Founder and CEO, CloudThat.

He further added that from a job market perspective, a trend is anticipated where tech talents gravitate towards roles in more established enterprises, where stability and long-term growth prospects are more pronounced.

“There will also be an uptick in demand for professionals adept in emerging technologies and those who can contribute to automation and process optimisation—skills crucial for startups aiming to do more with less,” said Goswami.

Experts observed that though there are funding constraints for the tech startups, the impact may only be a temporary affair. “The employment scenario is likely to pick momentum in the coming quarters of FY24, as economic conditions stabilize. Some of the niche skills like AI/ML, cybersecurity, data science, cloud computing, and Blockchain have not been impacted significantly and continue to witness a 10-12 per cent increased demand through the current fiscal. In the coming fiscal, skills across AI/ML, DevOps specialists, full stack developers, data science, cybersecurity, blockchain, cloud computing, and other emerging technologies are expected to bring new opportunities for tech start up aspirants. Companies will persistently prioritise skills, intensifying the competitiveness of the talent market,” remarked Sachin Alug, CEO, NLB Services.

Though the opportunities for tech graduates may be limited it may present a new opportunity for players who are planning to hire. "Unlike before, where options were plentiful, quality tech professionals are finding fewer opportunities available. However, this presents a unique advantage for startups that are still in a position to hire. These companies now face less competition for top talent. This allows them to potentially build a high-quality team that might have otherwise been out of reach in a more healthy market. For candidates, this period should be seen as an opportunity for self-improvement. Upskilling themselves will be crucial. As the market eventually rebounds, those who have invested in their skills will be well-positioned to leverage new opportunities. Overall, while the decrease in startup funding has brought challenges, it also opens doors for strategic hiring and personal development within the tech community,” said Karthik Sridharan, co-founder and CEO of Flexiple.