ShareChat parent lays off 20% employees to cut costs
ShareChat parent Mohalla Tech has fired around 500 employees or 20% of their staff, months after the homegrown startup raised around $255 million in funding from a clutch of investors. The prime reason for lay offs is said to be the dearth of the availability of fresh capital. The affected employees are from junior, middle as well as senior teams and they will receive 100% of their variable pay until December 2022, and a payout for the notice period and an additional 15 days of monthly gross salary.
Besides, the company will pay two weeks’ payout as ex-gratia for every year served with the company. Other benefits extended to the departed employees are health insurance policy cover until June-end 2023; the choice to retain work assets like laptops; ESOPS will continue to vest until April 30, 2023; employees will retain all vested ESOPs; and unused leave balance of up to 45 days will be encashed as per the current gross salary.
ShareChat said there have been several external macro factors that have impacted the cost and availability of capital, forcing the company to shed the workforce. "Therefore, we’ve had to take some of the most difficult and painful decisions in our history as a company and had to let go of around 20% of our incredibly talented employees who have been with us in this start-up journey," a ShareChat spokesperson said.
The company said as capital becomes expensive, companies need to prioritise bets and invest in the highest-impact projects only. "Over the last six months, we have aggressively optimised costs across the board, including in marketing and infrastructure, among other cost heads and ramped up our monetisation efforts."
According to ShareChat, the decision to reduce employee costs was taken after much deliberation and in light of the growing market consensus that investment sentiments will remain very cautious throughout this year. "At the same time, we are doubling down on our efforts behind advertising and live-streaming revenues. With these changes, we aim to sail through the uncertain global economic conditions over 2023 and 2024 and come out stronger.”
The year 2022 has been a rather tough year for startups. Amid the rising cost of capital on the back of a spike in interest rates amid global central banks’ attempt to tame unruly inflation, investors tightened purse strings, refusing to cut cheques for companies that failed to demonstrate healthy growth. As per market research firm Tracxn, funding for the sector dipped to $24.7 billion in the January-November period of 2022, down 35% YoY.
Mohalla Tech, which also owns the short video entertainment app Moj, reported a more than two-fold fall in its consolidated net loss to ₹2,988 crore in FY 2021-22 as compared to losses worth ₹1,460 crore in FY21, the consolidated annual financial statement filed with the Registrar of Companies (RoC) shows. The company's total income for the fiscal year stood at ₹419 crore, recording more than a four-time jump from ₹96 crore income in FY21.
The ShareChat parent also acquired Jeet11, a fantasy sports gaming platform, which allows its registered users to play fantasy sports like cricket, football, kabaddi, etc, in February 2020. Interestingly, the company shut down the entity in December 2022 amid intense competition in the segment.
The Moj and ShareChat parent had secured $255 million during Q2 FY22, closing a larger $520 million funding round. The company raised $520 million via a multi-tranche funding round at a $5-billion valuation in June 2022. In the first part of the funding round, ShareChat raised $266 million in December 2021 while in the final tranche, it raised $255 million.