Former Flipkart CEO’s Employee Clash Shows Indian Startup Trauma

• India’s largest startups are starting to let people go
• Job cuts point to belt-tightening as funding starts to fizzle

India’s largest online shopping service is heating up, and not in a good way. Flipkart’s regular Friday townhall grew tense after employees incensed by hundreds of job cuts openly accused management of betrayal. Taken aback, chairman Sachin Bansal countered that the departures stemmed from poor performance and he lost his job as chief executive for the same reason.

The co-founder admitted the company had missed financial targets in recent months, prompting an overhaul of its top rungs, according to employees who attended the meeting. He didn’t elaborate but recent moves -- including a brief decision to go mobile app-only after ditching its fashion site -- may have granted an opening to a hard-charging Amazon.com Inc.

Bansal’s unusual candor, which drew applause, underscores the plight of the country’s technology sector as competition intensifies and funding begins to dry up. Flipkart Online Services Pvt and Ola --  two of India’s largest startups -- have jettisoned staff and tightened their belts to sustain a bruising battle with Amazon and Uber Technologies Inc. Following in Flipkart’s footsteps, ANI Technologies PVT’s Ola has shuttered smaller brand TaxiForSure, acquired over a year ago for $200 million, and let go of staff. It’s offered severance benefits and “outplacement” to those discharged, the company said without specifying numbers.

“Call it by whatever name, Flipkart, Ola and several smaller startups like Snapdeal and Zomato are cleaning up their operations to cut costs,” said Satish Meena, an analyst at Forrester Research Inc,’s e-commerce and consumer devices practice. “There will be further job reductions as they encounter an increasingly tight funding scenario and no clear funding picture in the coming quarters.”

As Flipkart and Ola contract, Amazon and Uber are expanding. Amazon said in May its Indian headcount grew 40 percent last year and it would continue to “hire aggressively” to scale up. It’s also spending lavishly on advertising and marketing. Uber, which has brought several top-level Indian executives into the fold recently, said hiring is “picking up pace” to support its growing operations.

Fundraising and deals in India’s thriving technology ecosystem hit records in 2014 and 2015, fuelled by the promise of a fast-expanding internet and smartphone population. Nearly $8.9 billion of venture capital flowed into startups via 965 deals last year, according to data provided by London-based research firm Preqin. 

Certain segments remain attractive. Hike Messenger became India’s newest internetunicorn after securing a round of funding at a valuation of almost $1.4 billion from investors including Tencent Holdings Ltd. But Preqin’s numbers show the pace of funding is faltering, as investors grow wary of valuations and begin to focus on profitability. In the first two quarters of 2016, only $3.3 billion flowed into startups through 644 deals, it said.

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Flipkart has seen multiple executive exits in past months, including that of its chief people officer and its chief product officer Punit Soni, a former Google executive from Silicon Valley. Bansal himself was replaced by younger co-founder Binny Bansal (no relation) in January. The company’s also put off recruiting from the Indian Institute of Management in Ahmedabad, a branch of the prestigious management school that’s long been a favorite wellspring of talent.

“For many startups, growth is flattening and investors too are asking them to face up to the new realities,” Meena said.