Startup bubble burst pain spills over to media outreach

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By S Jha

New Delhi, March 30: Even before the Silicon Valley Bank went burst in 48-hour, startup bubble burst has begun showing clear signs in India. A leading media outreach company had 21 startup clients on board, and in the last four months six of them have closed the accounts.

The startups are under severe financial stress with hot money exiting them fast on the back of the US Federal Reserve raising rates steeply in the last one year. There is no cheap money available and the risky assets are being clearly avoided, said market insiders.

“We had 21 clients from the startup ecosystems. They had been driving our public relations business robustly. The company had hired over 50 youngsters to serve them as well. But six of them have closed their accounts with us, stating business losses and lack of funds for spending in publicity,” said a senior executive of a Gurugram-based PR firm with global footprints.

Incidentally, the company is also facing problem with the remaining startup clients. “The situation is grim. The startups are all of a sudden finding financial drought. We have almost 26 people who were servicing the startups without work now,” added the top ranking executive.

The SVB was reckoned as leading US-based financial institution running the funding pipeline of the startups world over. But the SVB collapsed like a quicksand after the depositors rushed to withdraw their money after the first sign of stress emerged in the financial institution. “Earlier the startups made headlines for breaking into unicorn club or fetching the new round of funding. But now the startups are making headlines for laying off employees,” said a senior executive working with a Bengaluru-based startup.

Ed-tech startups in India led the bleeding in the ecosystem after their fancied projections of virtual education came a cropper after India re-opened after the lockdown following the Covid-19 outbreak. With the children showing signs of screen addictions, parents are also growing wary of exposing them to the online mode of education. The wave of layoffs in startups began with Byjus and now it has become a today wave.

The downturn in the startups also affected their IPOs, which dried after disastrous performances of some of the market leaders such as PaytM, Nyakka, Policy Bazar, and others, which bombed on bourses, eroding three-fourth of the investments of the investors.