India's Startups Struggle with Stress and Profitability Challenges During Funding Winter

India's Startups Struggle with Stress and Profitability Challenges During Funding Winter

In the face of a prolonged funding winter and mounting pressure to turn profits, India’s startup landscape is undergoing a significant transformation. Gone are the days of lavish perks and extravagant spending, replaced by a hard, performance-driven culture. Nearly a dozen employees, speaking anonymously to Hindusthan Samachar, shed light on the shift from a once young, peppy, and flexible environment to one that is now described as “hostile” and “toxic” at times.

A 28-year-old product designer at a fintech company, who experienced a twofold jump in salary in 2021 during the hiring spree, revealed, “I didn’t know it actually meant doing the job of two (people). We work with clients and partners in the US, and most days I work during both Indian and US days.” Despite the attractive salary package, sustaining the workload has proven tough for many.

Employees across various startups are reporting rising stress and anxiety levels due to unrealistic work overload, a lack of respect for personal or family time, constant threats of job loss, and a culture described as often brash and overbearing. This challenging environment is driving some to explore other opportunities, although the slow job market poses its own challenges.

Prasadh MS, Head of Workforce Research at Xpheno, a specialist staffing firm, highlighted, “Burnout, stress, and missing work-life balance are among the most often stated reasons to look out.”

This downturn follows the dream run of 2021 when startups, in a hiring spree, offered massive pay packages, lucrative stock options, and exotic perks to attract and retain top talent. However, for some employees, the allure of a 3-4X jump in pay turned out to be a financial trap, leading to heavy work pressure and impacting health.

Ashish Sanganeria, Senior Partner at Transearch, a global executive search firm, noted, “The funding winter has created a strain on profitability, leading to a challenging work environment for employees.” The pressure extends to startups, with boards and investors demanding improved operating efficiencies and profits.

Pranav Pai, Managing Partner at 3one4 Capital, a venture capital firm, acknowledged the challenges, stating, “Startups are always optimizing to retain their best-performing team members, and the time frame to demonstrate wins is always tightening…so yes, it is a challenging category to work in.”

Amidst this scenario, employees who once demanded non-standard pay scales are now facing a more cautious job market. Employers, still mindful of the unpredictable behavior seen during the 2021 hiring spree, have become less tolerant of excessive spending or unprofessional behavior.

Ankur Pahwa, Managing Partner of venture capital fund PeerCapital, emphasized the importance of recognizing the limits of individual work pressure, warning of the potential for psychological breakdowns.

Psychologists note an increase in young professionals seeking counseling for stress and relationship issues, reflecting the toll this challenging environment is taking on mental health. Amit Malik, Founder and CEO of mental health organization Amaha, shared, “Across our client and partner portfolio, the past year has seen an increasing number of startup team members seeking support for their mental health.”

Impact on MSMEs and Businesses:

The current challenges faced by India’s startups could have a cascading effect on MSMEs and businesses in the region. As startups tighten their belts to navigate the funding winter, there may be a ripple effect on the broader business ecosystem, influencing cost optimization measures and HR practices. Small and medium-sized enterprises (MSMEs) may find themselves operating in an environment where startup collaborations, hiring patterns, and overall market dynamics are influenced by the prevailing startup culture. This shift underscores the interconnectedness of various business sectors, with potential implications for businesses in the given territory.

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