As the market continues to see rising inflation and maceoeconomic concerns, investors, wary of high valuations in an uncertain stock market, continue to push tech companies to diminish costs. In a latest episode od tech layoffs, social media platform ShareChat today became the latest to downsize in anticipation of an impending recession. The company, backed by tech giants like Google and Temasek, announced it will let go of 20 per cent of its workforce as it needs to prepare the company to sustain “several external macro factors that impact the cost and availability of capital”.
Owned by Bangalore based Mohalla Tech Pvt Ltd., ShareChat and its short video app Moj is expected to lay-off around 500 people. ShareChat is valued at $5 billion, and has more than 2,200 employees.
A company spokesperson said today, “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, as capital becomes expensive, companies need to prioritise their bets and invest in the highest-impact projects only”.
This major decision comes in lieu of Mohalla Tech shutting down its online fantasy gaming platform Jeet11 in December 2022, following which nearly 100 employees were slacked off.
The company said it has deliberately optimised costs across the board over the last six months, and sped up monetisation efforts.
“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,” the spokesperson said.
It said it’s doubling down on advertising and live-streaming revenues, and aims to sail through “uncertain economic conditions” over the next two years and come out stronger.
The company’s severance package will comprise the total salary for the notice period, two weeks’ pay for every year served at the company, full variable pay till December 2022, and health insurance cover to remain active until June 2023.
ShareChat app is a major contributer to the revenue of Mohalla Tech through advertisements, which increased 30% year-on-year in FY22. Mohalla Tech’s total expenses increased up nearly 119% to Rs 3,407.5 crore from Rs 1,557.5 crore in financial year 2021. This was all due to the increase in marketing, employee benefits, and IT expenses.
The losses of Mohalla Tech widened further from Rs 2498.6 crore to Rs 2,988.6 crore due to “non-operating expenses”.
